INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of July 21, 2003 by
and between On The Go Healthcare, Inc, a Delaware corporation (the "COMPANY"),
and Dutchess Private Equities Fund, L.P., a Delaware limited partnership
(the "INVESTOR").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $2,500,000 to
purchase the Company's common stock, .0001 par value per share
(the "COMMON STOCK");
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) under the Securities Act of 1933, as amended (the "1933 ACT"),
Rule 506 of Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the 1933
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder; 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 A
(the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has
agreed to provide certain registration rights under the 1933 Act, and the
rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, in consideration of the foregoing recitals, which
shall be considered an integral part of this Agreement, the covenants and
agreements set forth hereafter, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and
the Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings specified or indicated, and such meanings
shall be equally applicable to the singular and plural forms of the defined
terms.
"1933 ACT" shall mean the Securities Act of 1933, as it may be amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as it may be
amended.
"AFFILIATE" shall have the meaning specified in Section 5(h).
"AGREED UPON PROCEDURES REPORT" shall have the meaning specified in
Section 2(o).
"AGREEMENT" shall mean this Investment Agreement.
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"BEST BID" shall mean the highest quoted bid for the Company's common shares
among all competing market makers.
"BRING DOWN COLD COMFORT LETTER" shall have the meaning specified in
Section 2(n).
"BUY-IN" shall have the meaning specified in Section 6.
"BUY-IN ADJUSTMENT AMOUNT" shall have the meaning specified in Section 6.
"CLOSING" shall have the meaning specified in Section 2(h).
"CLOSING DATE" shall mean, as defined in Section 2(h), the date which is the
earlier of: seven (7) Trading Days following the Put Notice Date or when the
Investor deems the Put closed.
"COMMON STOCK" shall mean the Common Stock of the Company.
"CONTROL" or "CONTROLS" shall have the meaning specified in Section 5(h).
"COVERING SHARES" shall have the meaning specified in Section 6.
"EFFECTIVE DATE" shall mean the date the SEC declares effective under the 1933
Act the Registration Statement covering the Securities.
"ENVIRONMENTAL LAWS" shall have the meaning specified in Section 4(m).
"EXECUTION DATE" shall mean the date all Transaction Documents are executed
by the Company and Investor.
"INDEMNITEES" shall have the meaning specified in Section 10.
"INDEMNIFIED LIABILITIES" shall have the meaning specified in Section 10.
"INEFFECTIVE PERIOD" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use
for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason
(or in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.
"INVESTOR" shall mean Dutchess Private Equities Fund, L.P., a Delaware
limited partnership.
"MAJOR TRANSACTION" shall have the meaning specified in Section 2(g).
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"MATERIAL ADVERSE EFFECT" shall have the meaning specified in Section 4(a).
"MATERIAL FACTS" shall have the meaning specified in Section 2(m).
"MAXIMUM COMMON STOCK ISSUANCE" shall have the meaning specified in
Section 2(j).
"MINIMUM ACCEPTABLE PRICE" with respect to any Put Notice Date shall mean 75%
of the average of the closing best bid prices for the ten (10) Trading Day
period immediately preceding such Put Notice Date.
"OPEN PERIOD" shall mean the period beginning on and including the Trading
Day immediately following the Effective Date and ending on the earlier to
occur of (i) the date which is 36 (thirty-six) months from the Effective
Date and (ii) termination of the Agreement in accordance with Section 9.
"PAYMENT AMOUNT" shall have the meaning specified in Section 2(p).
"PARTIAL RELEASE FORM" shall have the meaning specified in Section 2(i).
"PRICING PERIOD" shall mean the period beginning on the Put Notice Date and
ending on and including the date which is five (5) Trading Days after such
Put Notice Date.
"PRINCIPAL MARKET" shall mean the American Stock Exchange, Inc., the National
Association of Securities Dealer's, Inc. OTC-BB, the Nasdaq National Market
System or the Nasdaq SmallCap Market, whichever is the principal market on
which the Common Stock is listed.
"PROSPECTUS" shall mean the prospectus, preliminary prospectus and supplemental
prospectus used in connection with the Registration Statement.
"PURCHASE AMOUNT" shall mean the total amount being paid by the Investor on a
particular Closing Date to purchase the Securities.
"PURCHASE PRICE" shall mean 94% (ninety-four percent) of the average three
lowest closing best bid prices of the Common Stock during the Pricing Period.
"PUT AMOUNT" shall have the meaning set forth in Section 2(b) hereof.
"PUT NOTICE" shall mean a written notice sent to the Investor by the Company
stating the Put Amount of Shares the Company intends to sell to the Investor
pursuant to the terms of the Agreement and stating the current number of Shares
issued and outstanding on such date.
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"PUT NOTICE DATE" shall mean the Trading Day immediately following the day on
which the Investor receives a Put Notice, however a Put Notice shall be deemed
delivered on (x) the Trading Day it is received by facsimile or otherwise by
the Investor if such notice is received prior to 9:00 am Eastern Time, or (y)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 9:00 am Eastern Time on a Trading Day. No Put Notice may be
deemed delivered on a day that is not a Trading Day.
"PUT RESTRICTION" shall mean the days between the end of the Pricing Period
and the date on which the Investor deems the Put closed. During this time,
the Company shall not be entitled to deliver another Put Notice.
"REGISTRATION OPINION" shall have the meaning specified in Section 2(m).
"REGISTRATION OPINION DEADLINE" shall mean the date that is three (3) Trading
Days prior to each Put Notice Date.
"REGISTRATION PERIOD" shall have the meaning specified in Section 5(c).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Agreement entered into by the
Company with Investor for the registration of the Securities.
"REGISTRATION STATEMENT" means the registration statement of the Company filed
under the 1933 Act covering the Common Stock issuable hereunder.
"RELATED PARTY" shall have the meaning specified in Section 5(h).
"REPURCHASE EVENT" shall have the meaning specified in Section 2(p).
"RESOLUTION" shall have the meaning specified in Section 8(f).
"SEC" shall mean the U.S. Securities & Exchange Commission.
"SEC DOCUMENTS" shall have the meaning specified in Section 4(f).
"SECURITIES" shall mean the shares of Common Stock issued pursuant to the
terms of the Agreement.
"SHARES" shall mean the shares of common stock of the Company having .0001 par
value per share.
"SOLD SHARES" shall have the meaning specified in Section 6.
"SUBSIDIARIES" shall have the meaning specified in Section 4(a).
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"TRADING DAY" shall mean any day on which the Principal Market for the
Company's common stock is open for trading, from the hours of 9:30 am until
4:00 pm.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Registration Rights
Agreement and each of the other agreements entered into by the parties hereto
in connection with this Agreement.
"VALUATION EVENT" shall have the meaning specified in Section 2(k).
2. PURCHASE AND SALE OF COMMON STOCK
a. Purchase and Sale of Common Stock. Subject to the terms
and conditions set forth herein, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, up to that
number of Shares having an aggregate Purchase Price of $2,500,000.
b. Delivery of Put Notices. (i) Subject to the terms
and conditions of the Transaction Documents, and from time to time during
the Open Period, the Company may, in its sole discretion, deliver a Put Notice
to the Investor which states the Put Amount (designated in shares of Common
Stock) which the Company intends to sell to the Investor on a Closing Date.
The Put Notice shall be in the form attached hereto as Exhibit "F" and
incorporated herein by reference. The Put Amount designated by the Company
in the form of a Put Notice shall be as follows:
The amount that the Company shall be entitled to Put to the
Investor shall be equal to, at the Company's election, either: a) 200% of the
average daily volume (U.S. market only) of the Common Stock for the 10 (ten)
Trading Days prior to the applicable Put Notice Date multiplied by the average
of the three (3) daily closing best bid prices immediately preceding the Put
Date, or b) $20,000. In no event shall the amount of the Put be more
than $1,000,000.
During the Open Period, the Company shall not be entitled to
submit a Put Notice until after the previous Closing has been completed. The
Purchase Price for the Common Stock identified in the Put Notice shall be
equal to 94% (ninety-four percent) of the three lowest closing best bid
prices of the Common Stock during the Pricing Period.
(ii) If the closing best bid price during the applicable
Pricing Period with respect to that Put Notice is less than 75% (seventy-five
percent) of the closing best bid prices of the Common Stock for the ten (10)
Trading Days prior to the Put Notice Date ("MINIMUM ACCEPTABLE PRICE") the
Put Notice will terminate, only at the Company's request, sent via FACSIMILE
to the Investor, the Investor will continue the Put until the FACSIMILE is
received by the Investor. In the event that the closing best bid price for
the applicable Pricing Period is less than the Minimum Acceptable Price, the
Company may elect, by sending written notice to the Investor via facsimile
with a copy to the Investor, to cancel that portion of the Put Notice remaining
for that number of Trading Days remaining after the written cancellation
notice is received by the Investors. The written notice shall be deemed
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received by the Investors on (i) the Trading Day it is actually received by
facsimile or otherwise by the Investors if such notice is received on or
prior to 9:00 A.M. New York time, or (ii) the immediately succeeding Trading
Day if it is received by facsimile after 9:00 A.M. New York time on a Trading
Day or at anytime on a day which is not a Trading Day. Notwithstanding the
foregoing, there shall be a closing with respect to, and the Company shall be
responsible for delivering, that number of shares of Common Stock to the
Company that were sold by the Investors through and including the end of the
Trading Day the written cancellation notice is received by the Investor.
(iii) Within Thirteen (13) calendar days after the commencement
of each calendar quarter occurring subsequent to the commencement of the Open
Period, the Company undertakes to notify Investor as to its reasonable
expectations as to the Put Amount it intends to raise during such calendar
quarter, if any, through the issuance of Put Notices. Such notification shall
constitute only the Company's good faith estimate with respect to such calendar
quarter and shall in no way obligate the Company to raise such amount during
such calendar quarter or otherwise limit its ability to deliver Put Notices
during such calendar quarter. The failure by the Company to comply with this
provision can be cured by the Company's notifying Investor at any time as to
its reasonable expectations with respect to the current calendar quarter.
c. Interest. It is the intention of the parties that any interest
that may be deemed to be payable under this Agreement shall not exceed the
maximum amount permitted under any applicable law. If a law, which applies to
this Agreement which sets the maximum interest amount, is finally interpreted
so that the interest in connection with this Agreement exceeds the permitted
limits, then: (1) any such interest shall be reduced by the amount necessary
to reduce the interest to the legally permitted limit; and (2) any sums already
collected (if any) from the Company which exceed the legally permitted limits
will be refunded to the Company. The Investor may choose to make this refund
by reducing the amount that the Company owes under this Agreement or by making
a direct payment to the Company. If a refund reduces the amount that the
Company owes the Investor, the reduction will be treated as a partial payment.
In case any provision of this Agreement is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it
is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Agreement will not in any
way be affected or impaired thereby.
d. reserved.
e. Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the Investor be required to purchase, and the Company shall in no event sell
to the Investor, that number of Shares, which when added to the sum of the
number of Shares "beneficially owned" (as such term is defined under
Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as may
be amended, (the "1934 ACT")), by the Investor, would exceed 4.99% of the
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number of Shares outstanding on the Put Notice Date for such Pricing Period,
as determined in accordance with Rule 13d-1(j) promulgated under the 1934 Act.
In no event shall the Investor purchase Shares other than pursuant to this
Agreement until such date as this Agreement is terminated. Each Put Notice
shall include a representation of the Company as to the number of Shares
outstanding on the related Put Notice Date. In the event that the number of
Shares outstanding is different on any date during a Pricing Period than the
number of Shares outstanding on the Put Notice Date associated with such
Pricing Period, then the number of Shares outstanding on such date during such
Pricing Period shall govern for purposes of determining whether the Investor
would be acquiring beneficial ownership of more than 4.99% of the number of
Shares outstanding during such period.
f. Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the Company shall
not be entitled to deliver a Put Notice and the Investor shall not be obligated
to purchase any Shares at a Closing (as defined in Section 2(h)) unless each
of the following conditions are satisfied:
(i) a Registration Statement shall have been declared effective
and shall remain effective and available for the resale of all
the Registrable Securities (as defined in the Registration
Rights Agreement) at all times until the Closing with respect
to the subject Put Notice;
(ii) at all times during the period beginning on the related
Put Notice Date and ending on and including the related
Closing Date, the Common Stock shall have been listed on the
Principal Market and shall not have been suspended from
trading thereon for a period of five (5) consecutive Trading
Days during the Open Period and the Company shall not have
been notified of any pending or threatened proceeding or
other action to delist or suspend the Common Stock;
(iii) the Company has complied with its obligations and is
otherwise not in breach of a material provision of, or in
default under, this Agreement, the Registration Rights
Agreement or any other agreement executed in connection
herewith which has not been corrected prior to delivery of
the Put Notice Date; with the exception of immaterial breach
or noncompliance that does not adversely affect parties to
this agreement.
(iv) no injunction shall have been issued and remain in force,
or action commenced by a governmental authority which has not
been stayed or abandoned, prohibiting the purchase or the
issuance of the Securities; and
(v) the issuance of the Securities will not violate the
shareholder approval requirements of the Principal Market.
If any of the events described in clauses (i) through (v) above
occurs during a Pricing Period, then the Investor shall have
no obligation to purchase the Put Amount of Common Stock set
forth in the applicable Put Notice.
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g. For purposes of this Agreement, a "MAJOR TRANSACTION" shall be
deemed to have occurred upon the closing of any of the following events: (i)
the consolidation, merger or other business combination of the Company with or
into another person (other than pursuant to a migratory merger effected solely
for the purposes of changing the jurisdiction of incorporation of the Company
or other than a transaction in which the Company is the surviving corporation)
(ii) the sale or transfer of all or substantially all of the Company's assets;
or (iii) the consummation of a purchase, tender or exchange offer made to, and
accepted by, the holders of more than 30% of the economic interest in, or the
combined voting power of all classes of voting stock of, the Company.
h. Mechanics of Purchase of Shares by Investor. Subject to the
satisfaction of the conditions set forth in Sections 2(f), 7 and 8, the closing
of the purchase by the Investor of Shares or the Investor deeming a Put closed
(a "CLOSING") shall occur on the date which is no later than Seven (7) Trading
Days following the applicable Put Notice Date or when the Investor deems a Put
closed (each a "CLOSING DATE"). Prior to each Closing Date, (i) the Company
shall deliver to the Investor, certificates representing the Shares to be
issued to the Investor on such date and registered in the name of the Investor
and (ii) the Investor shall deliver to the Company the Purchase Price to be
paid for such Shares, determined as set forth in Section 2(b) and (d), by wire
transfer. In lieu of delivering physical certificates representing the
Securities and provided that the Company's transfer agent then is participating
in The Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the Investor, the Company shall use its
commercially reasonable efforts to cause its transfer agent to electronically
transmit the Securities by crediting the account of the Investor's prime broker
(which shall be specified by the Investor a reasonably sufficient time in
advance) with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system.
The Company understands that a delay in the issuance of Securities
beyond the Closing Date could result in economic loss to the Investor. After
the Effective Date, as compensation to the Investor for such loss, the Company
agrees to pay late payments to the Investor for late issuance of Securities
(delivery of Securities after the applicable Closing Date) in accordance
with the following schedule (where "No. of Days Late" is defined as the number
of days beyond the Closing Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
Over 10 $1,000 + $200 for each
Business Day late beyond 10
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The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Investor's right
to pursue actual damages for the Company's failure to issue and deliver the
Securities to the Investor, except to the extent that such late payments shall
constitute payment for and offset any such actual damages alleged by the
Investor, and any Buy In Adjustment Amount.
i. Partial Release of Shares. After Investor has received
a Put Notice, but prior to the related Closing Date, the Investor may authorize
the Company to release, every five (5) Trading Days, a portion of the Purchase
Amount to the Company in exchange for a fixed number of Shares, subject to the
following conditions:
(i) The Investor shall fill out and sign a Partial Release
of Purchase Amount and Shares (the "Partial Release
Form"). The Partial Release Form shall set forth the
number of Shares to be released to Investor and the
dollar amount the Investor shall wire to the Company.
(ii) The Partial Release Form shall be filled out and signed
by the Investor and faxed to the Company prior to
12:00 p.m. New York City time.
The number of Shares stated in the Partial Release Form shall be equal
to the dollar amount to be released divided by 94% (ninety-four percent) of the
lowest closing best bid price during that number of Trading Days of the Pricing
Period that have expired.
The Company and Investor agree that on the related Closing Date, an
adjustment shall be made so that the terms set forth in this Agreement shall be
honored with the balance of the Purchase Amount being released to the Company
and the balance of the Shares owed to the Investor being released to Investor.
j. Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, if during the Open Period the Company becomes
listed on an exchange that limits the number of shares of Common Stock that may
be issued without shareholder approval, then the number of Shares issuable by
the Company and purchasable by the Investor, including the shares of Common
Stock issuable to the Investors pursuant to Section 11(b), shall not exceed
that number of the shares of Common Stock that may be issuable without
shareholder approval, subject to appropriate adjustment for stock splits,
stock dividends, combinations or other similar recapitalization affecting
the Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the issuance
of Shares, including any Common Stock to be issued to the Investors pursuant
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to Section 11(b), in excess of the Maximum Common Stock Issuance shall first
be approved by the Company's shareholders in accordance with applicable law
and the By-laws and Articles of Incorporation of the Company, if such issuance
of shares of Common Stock could cause a delisting on the Principal Market.
The parties understand and agree that the Company's failure to seek or obtain
such shareholder approval shall in no way adversely affect the validity and
due authorization of the issuance and sale of Securities or the Investor's
obligation in accordance with the terms and conditions hereof to purchase a
number of Shares in the aggregate up to the Maximum Common Stock Issuance
limitation, and that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section 2(j).
k. "VALUATION EVENT" means the Company taking any of the following
actions at any time during a "Pricing Period":
(i) subdivides or combines its Common Stock;
(ii) pays a dividend in Common Stock or makes any other
distribution of its Common Stock, except for dividends
paid with respect to the Preferred Stock;
(iii) issues any options or other rights to subscribe for or
purchase Common Stock ("Options")and the price per share
for which Common Stock may at any time thereafter be
issuable pursuant to such Options shall be less than
the Best bid Price in effect immediately prior to such
issuance of such Options;
(iv) issues any securities convertible into or exchangeable
for Common Stock ("Convertible Securities") and the
consideration per share for which shares of Common
Stock may at any time thereafter be issuable pursuant
to the terms of such Convertible Securities shall be
less than the Best bid Price in effect immediately
prior to such issuance of the Convertible Securities;
(v) issues shares of Common Stock otherwise than as provided
in the foregoing subsections (i) through (iv), at a
price per share less, or for other consideration lower,
than the Best bid Price in effect immediately prior to
such issuance, or without consideration;
(vi) makes a distribution of its assets or evidences of
indebtedness to the holders of Common Stock as a
dividend in liquidation or by way of return of capital
or other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable
law or any distribution to such holders made in respect
of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for
in the foregoing subsections (i) through (v); or
(vii) takes any action affecting the number of shares of
Common Stock outstanding, other than an action described
in any of the foregoing subsections (i) through (vi)
hereof, inclusive, which in the opinion of the Company's
Board of Directors, determined in good faith, would have
a materially adverse effect upon the rights of Investor
at the time of a Put Notice is delivered to Investor.
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l. The Company agrees that it shall not take any action that would
result in a Valuation Event occurring during a Pricing Period.
m. Accountant's Letter and Registration Opinion. Whenever reasonably
requested by Investor, the Company shall cause to be delivered to the Investor,
on or prior to each Registration Opinion Deadline, an opinion of the Company's
independent counsel (the "REGISTRATION OPINION"), addressed to the Investor
stating, inter alia, that no material facts ("MATERIAL FACTS") have come to
such counsel's attention that have caused it to believe that the Registration
Statement is subject to an Ineffective Period or to believe that the
Registration Statement, any supplemental Registration Statement (as each may
be amended, if applicable), and any related prospectuses, contain an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. If a Registration Opinion cannot be delivered by
the Company's independent counsel to the Investor on the Registration Opinion
Deadline, the Company shall promptly notify the Investor and as promptly as
possible amend each of the Registration Statement and any supplemental
Registration Statements, as applicable, and any related prospectus or cause
such Ineffective Period to terminate, as the case may be, and deliver such
Registration Opinion and updated prospectus as soon as possible thereafter.
If at any time after a Put Notice shall have been delivered to Investor but
before the related Closing Date, the Company acquires knowledge of such
Material Facts or any Ineffective Period occurs, the Company shall immediately
notify the Investor in writing.
n. (i) Whenever reasonably requested by Investor, the Company
shall engage its independent auditors to prepare in accordance with the
provisions of Statement on Auditing Standards No. 71, as amended, such
written report (the "BRING DOWN COLD COMFORT LETTERS") with respect to the
financial information contained in the Registration Statement and shall
have delivered to the Investor such a report addressed to the Investor, on
or prior to each Registration Opinion Deadline;
(ii) in the event that the Investor shall have requested
delivery of an Agreed Upon Procedures Report pursuant to Section 2(o), the
Company shall engage its independent auditors to perform certain agreed upon
procedures and report thereon as shall have been reasonably requested by the
Investor with respect to certain financial information of the Company and the
Company shall deliver to the Investor a copy of such report addressed to the
Investor. In the event that the report required by this Section 2(n) cannot
be delivered by the Company's independent auditors, the Company shall, if
necessary, promptly revise the Registration Statement and the Company shall
not deliver a Put Notice to Investor until such report is delivered.
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o. Procedure if Material Facts are Reasonably believed to be
untrue or are omitted. In the event after such consultation the Investor or
the Investor's counsel reasonably believes that the Registration Statement
contains an untrue statement or a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which
they were made, not misleading, (i) the Company shall file with the SEC an
amendment to the Registration Statement responsive to such alleged untrue
statement or omission and provide the Investor, as promptly as practicable,
with copies of the Registration Statement and related Prospectus, as so
amended, or (ii) if the Company disputes the existence of any such material
misstatement or omission, (x) the Company's independent counsel shall provide
the Investor's counsel with a Registration Opinion or (y) in the event the
dispute relates to the adequacy of financial disclosure and the Investor shall
reasonably request, the Company's independent auditors shall provide to the
Company a letter ("AGREED UPON PROCEDURES REPORT") outlining the performance
of such "agreed upon procedures," which shall not require any more than the
SAS 71 review described above as shall be reasonably requested by the Investor
and the Company shall provide the Investor with a copy of such letter.
p. Delisting; Suspension. If at any time during the Open Period or
within thirty (30) calendar days after the end of the Open Period, (i) the
Registration Statement, after it has been declared effective, shall not remain
effective and available for sale of all the Registrable Securities for a
period exceeding 10 calendar days, (ii) the Common Stock shall not be listed
on the Principal Market or shall have been suspended from trading thereon
(excluding suspensions of not more than one trading day resulting from business
announcements by the Company) or the Company shall have been notified of any
pending or threatened proceeding or other action to delist or suspend the
Common Stock, (iii) there shall have occurred a Major Transaction (as defined
in Section 2(g)) or the public announcement of a pending Major Transaction
which has not been abandoned or terminated, or (iv) the Registration Statement
is no longer effective or stale for a period of more than five (5) Trading
Days as a result of the Company's failure to timely file its financial
statements or for any other reason, the Company shall repurchase within
thirty (30) calendar days of the occurrence of one of the events listed in
clauses (i), (ii), (iii) or (iv) above (each a "REPURCHASE EVENT") and subject
to the limitations imposed by applicable federal and state law, all or any
part of the Securities issued to the Investor within the sixty (60) Trading
Days preceding the occurrence of the Repurchase Event and then held by the
Investor at a price per Share equal to the highest closing best bid price
during the period beginning on the date of the Repurchase Event and ending on
and including the date on which the Investor is paid by the Company for the
repurchase of the Shares (the "PAYMENT AMOUNT"). If the Company fails to pay
to the Investor the full aggregate Payment Amount within ten (10) calendar
days of the occurrence of a Repurchase Event, the Company shall pay to the
Investor, on the first Trading Day following such tenth (10th) calendar day,
in addition to and not in lieu of the Payment Amount payable by the Company
to the Investor, an amount equal to two (2%) percent of the aggregate Payment
Amount then due and payable to the Investor, in cash by wire transfer, plus
compounded annual interest of 18% on such Payment Amount during the period,
beginning on the day following such tenth calendar day, during which such
Payment Amount, or any portion thereof, is outstanding.
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3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Investor represents and warrants to the Company, and covenants,
that:
a. Sophisticated Investor. The Investor has, by reason of its
business and financial experience, such knowledge, sophistication and
experience in financial and business matters and in making investment decisions
of this type that it is capable of (A) evaluating the merits and risks of an
investment in the Securities and making an informed investment decision,
(B) protecting its own interest and (C) bearing the economic risk of such
investment for an indefinite period of time.
b. Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Investor and
is a valid and binding agreement of the Investor enforceable against the
Investor in accordance with its terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
c. Section 9 of the 1934 Act. During the Open Period, the
Investor will comply with the provisions of Section 9 of the 1934 Act, and the
rules promulgated thereunder, with respect to transactions involving the Common
Stock. The Investor agrees not to short, either directly or indirectly
through its affiliates, principals or advisors, the Company's common stock
during the term of this Agreement, however, it shall not be deemed a short
if the Investor sells common stock after the delivery of the Put Notice from
the Company.
d. Accredited Investor. Investor is an "Accredited Investor" as
that term is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor of
the transactions contemplated hereby and thereby will not result in a violation
of the Articles of Incorporation, the By-laws or other organizational
documents of the Investor.
f. The Investor has received all materials relating to the business,
finance and operations of the Company which have been requested by the
Purchaser. The Investor has had an opportunity to discuss the business,
management and financial affairs of the Company with the Company's management;
g. The Investor is a Limited Partnership duly organized, validly
existing and in good standing under the law of Delaware.
h. The Investor understand it is responsible for its own tax
liabilities.
The Investor is purchasing the Securities for its own account for
investment purposes and not with a view towards distribution; provided,
however, that by making the representations herein, the Investor does not
agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption
under applicable state and/or federal securities law;
13
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, the Company
represents and warrants to the Investor that:
a. Organization and Qualification. The Company is a corporation
duly organized and validly existing in good standing under the laws of its
jurisdiction, and has the requisite corporate power and authorization to own
its properties and to carry on its business as now being conducted. Each of
the Company and its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
As used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material
adverse effect on the business, properties, assets, operations, results of
operations, financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 1 and
4(b)below). The Company has no subsidiaries.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement and each of the
other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof
and thereof, (ii) the execution and delivery of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated
hereby and thereby, including without limitation the reservation for issuance
and the issuance of the Securities pursuant to this Agreement, have been duly
and validly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors,
or its shareholders, (iii) the Transaction Documents have been duly and
validly executed and delivered by the Company, and (iv) the Transaction
Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 50,000,000 shares of Common Stock,
..0001 par value per share, of which as of the date hereof, 36,548,500 shares
are issued and outstanding; and approximately 650,000 (as of April 30th, 2003)
14
shares of Common Stock are issuable upon the exercise of options, warrants and
conversion rights. All of such outstanding shares have been, or upon issuance
will be, validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 4(c) which is attached hereto and made a part hereof,
(i) no shares of the Company's capital stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or permitted
by the Company, (ii) there are no outstanding debt securities, (iii) there
are no outstanding shares of capital stock, options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may
become bound to issue additional shares of capital stock of the Company or
any of its Subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company or
any of its Subsidiaries, (iv) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding securities of the Company or
any of its Subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to redeem
a security of the Company or any of its Subsidiaries, (vi) there are no
securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in
this Agreement, (vii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or
agreement and (viii) there is no dispute as to the class of any shares of
the Company's capital stock. The Company has furnished to the Investor, or
the Investor has had access through XXXXX to, true and correct copies of
the Company's Articles of Incorporation, as in effect on the date hereof
(the "ARTICLES OF INCORPORATION"), and the Company's By-laws, as in effect
on the date hereof (the "BY-LAWS '), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights
of the holders thereof in respect thereto.
d. Issuance of Shares. A sufficient number of Shares issuable
pursuant to this Agreement has been duly authorized and reserved for issuance
(subject to adjustment pursuant to the Company's covenant set forth in
Section 5(f) below) pursuant to this Agreement. Upon issuance in accordance
with this Agreement, the Securities will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof. In the event the Company cannot register a sufficient number
of Shares, due to the remaining number of authorized shares of Common Stock
being insufficient, the Company will use its best efforts to register the
maximum number of shares it can based on the remaining balance of authorized
shares and will use its best efforts to increase the number of its authorized
shares as soon as reasonably practicable.
15
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the Articles of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws or (ii) conflict with, or constitute a material default
(or an event which with notice or lapse of time or both would become a
material default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, contract,
indenture mortgage, indebtedness or instrument to which the Company or any
of its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and
state securities laws and regulations and the rules and regulations of the
Principal Market or principal securities exchange or trading market on
which the Common Stock is traded or listed) applicable to the Company or any
of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected. Except as disclosed in Schedule
4(e), neither the Company nor its Subsidiaries is in violation of any term
of, or in default under, the Articles of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or their organizational charter or
by-laws, respectively, or any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the aggregate
have a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation
of any law, statute, ordinance, rule, order or regulation of any governmental
authority or agency, regulatory or self-regulatory agency, or court, except
for possible violations the sanctions for which either individually or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization, permit or order of, or
make any filing or registration (except the filing of a registration statement)
with, any court, governmental authority or agency, regulatory or
self-regulatory agency or other third party in order for it to execute,
deliver or perform any of its obligations under, or contemplated by, the
Transaction Documents in accordance with the terms hereof or thereof. All
consents, authorizations, permits, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof and are in full
force and effect as of the date hereof. Except as disclosed in Schedule 4(e),
the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not, and will
not be, in violation of the listing requirements of the Principal Market as
in effect on the date hereof and on each of the Closing Dates and is not aware
of any facts which would reasonably lead to delisting of the Common Stock by
the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since at least
January 1999, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC DOCUMENTS"). The Company has delivered
to the Investor or its representatives, or they have had access through XXXXX
to, true and complete copies of the SEC Documents. As of their respective
16
dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and
the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents,
including, without limitation, information referred to in Section 4(d) of
this Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
Neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Investor with any material,
nonpublic information which was not publicly disclosed prior to the date
hereof and any material, nonpublic information provided to the Investor by
the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed
by the Company prior to such Closing Date.
g. Absence of Certain Changes. Except as disclosed in Schedule
4(g), the Company does not intend to change the business operations of the
Company. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. Except as set forth in Schedule
4(h), there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive officers
of Company or any of its Subsidiaries, threatened against or affecting the
Company, the Common Stock or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in their
capacities as such, in which an adverse decision could have a Material Adverse
Effect.
i. Acknowledgment Regarding Investor's Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents
17
and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and
thereby and any advice given by the Investor or any of its respective
representatives or agents in connection with the Transaction Documents
and the transactions contemplated hereby and thereby is merely incidental
to the Investor's purchase of the Securities. The Company further
represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation
by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Since April 30, 2003, no event, liability, development or
circumstance has occurred or exists, or to the Company's knowledge is
contemplated to occur, with respect to the Company or its Subsidiaries or
their respective business, properties, assets, prospects, operations or
financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced.
k. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge
of the Company or any of its Subsidiaries, is any such dispute threatened.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that
relations with their employees are good. No executive officer (as defined
in Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company's employ or otherwise terminate such officer's
employment with the Company.
l. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth on Schedule
4(l), none of the Company's trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets
or other intellectual property rights necessary to conduct its business as
now or as proposed to be conducted have expired or terminated, or are
expected to expire or terminate within two years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of trademark, trade
name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as
set forth on Schedule 4(l), there is no claim, action or proceeding being
made or brought against, or to the Company's knowledge, being threatened
against, the Company or its Subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their
intellectual properties.
18
m. Environmental Laws. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each
of the three foregoing cases, the failure to so comply would have,
individually or in the aggregate, a Material Adverse Effect.
n. Title. The Company and its Subsidiaries good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, free and clear of all liens, encumbrances
and defects except such as are described in Schedule 4(n) or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
o. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company reasonably
believes to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary
has been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
p. Regulatory Permits. The Company and its Subsidiaries have in
full force and effect all certificates, approvals, authorizations and permits
from the appropriate federal, state, local or foreign regulatory authorities
and comparable foreign regulatory agencies, necessary to own, lease or operate
their respective properties and assets and conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, approval, authorization or permit, except for such certificates,
approvals, authorizations or permits which if not obtained, or such revocations
or modifications which, would not have a Material Adverse Effect.
19
q. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
r. No Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have
a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is a party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
s. Tax Status. The Company and each of its Subsidiaries has
made or filed all United States federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and
each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
t. Certain Transactions. Except as set forth on Schedule
4(t) and in the SEC Documents filed at least ten days prior to the date hereof
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 4(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
20
u. Dilutive Effect. The Company understands and acknowledges that
the number of shares of Common Stock issuable upon purchases pursuant to this
Agreement will increase in certain circumstances including, but not necessarily
limited to, the circumstance wherein the trading price of the Common Stock
declines during the period between the Effective Date and the end of the Open
Period. The Company's executive officers and directors have studied and fully
understand the nature of the transactions contemplated by this Agreement and
recognize that they have a potential dilutive effect. The board of directors
of the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that, subject to such limitations as are expressly set forth in
the Transaction Documents, its obligation to issue shares of Common Stock
upon purchases pursuant to this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
v. Right of First Refusal. The Company shall not, directly or
indirectly, without the prior written consent of Investor, which will not be
unreasonably withheld, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition) any of its Common Stock or securities convertible into
Common Stock at a price that is less than the market price of the Common Stock
at the time of issuance of such security or investment
(a "SUBSEQUENT FINANCING") for a period of one year after the Effective Date,
except (i) the granting of options or warrants to employees, officers,
directors and consultants, and the issuance of shares upon exercise of options
granted, under any stock option plan heretofore or hereafter duly adopted by
the Company, (ii) shares issued upon exercise of any currently outstanding
warrants or options and upon conversion of any currently outstanding
convertible debenture or convertible preferred stock, in each case disclosed
pursuant to Section 4(c), (iii) securities issued in connection with the
capitalization or creation of a joint venture with a strategic partner, (iv)
shares issued to pay part or all of the purchase price for the acquisition
by the Company of another entity (which, for purposes of this clause (iv),
shall not include an individual or group of individuals), and (v) shares
issued in a bona fide public offering by the Company of its securities,
unless (A) the Company delivers to Investor a written notice (the "SUBSEQUENT
FINANCING NOTICE") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be
raised thereunder, the person with whom such Subsequent Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) Investor shall not have notified the Company by
5:00 p.m. (New York time) on the fifth (5th) Trading Day after its receipt
of the Subsequent Financing Notice of its willingness to provide, subject to
completion of mutually acceptable documentation, financing to the Company on
substantially the terms set forth in the Subsequent Financing Notice,
(vi) to enter into a loan, credit or leas facility with a bank or other
financing institution. If Investor shall fail to notify the Company of
its intention to enter into such negotiations within such time period,
then the Company may effect the Subsequent Financing substantially upon
the terms set forth in the Subsequent Financing Notice; PROVIDED THAT the
Company shall provide Investor with a second Subsequent Financing Notice,
and Investor shall again have the right of first refusal set forth above
in this Section, if the Subsequent Financing subject to the initial
Subsequent Financing Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Financing Notice within
thirty (30) Trading Days after the date of the initial Subsequent Financing
Notice. The rights granted to Investor in this Section are not subject to
any prior right of first refusal given to any other person except as
disclosed on Schedule 4(c).
21
w. Lock-up. The Company shall cause its officers, insiders,
directors to refrain from selling Common Stock during each Pricing Period.
The Company shall use its best efforts to cause affiliates or other related
parties to refrain from selling Common Stock during each Pricing Period.
x. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its behalf, 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 Common Stock
offered hereby.
5. COVENANTS OF THE COMPANY
a. Best Efforts. The Company shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in
Section 7 of this Agreement.
b. Blue Sky. The Company shall, at its sole cost and expense, on
or before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Investor at each of the Closings
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
such states of the United States, as reasonably specified by Investor, and
shall provide evidence of any such action so taken to the Investor on or prior
to the Closing Date. The Company shall, at its sole cost and expense, make all
filings and reports relating to the offer and sale of the Securities required
under the applicable securities or "Blue Sky" laws of such states of the United
States following each of the Closing Dates.
c. Reporting Status. Until the earlier to occur of (i) the first
date which is after the date this Agreement is terminated pursuant to Section 9
and on which the Holders (as that term is defined in the Registration Rights
Agreement) may sell all of the Securities without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), and
(ii) the date on which (A) the Holders shall have sold all the Securities and
(B) this Agreement has been terminated pursuant to Section 9 (the "REGISTRATION
PERIOD"), the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as a
reporting company under the 1934 Act.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Shares (excluding amounts paid by the Company for fees as set forth
in the Transaction Documents) for general corporate and working capital
purposes, or for other purposes that the Board of Directors deem to be in the
best interests of the Company.
22
e. Financial Information. The Company agrees to make available
to the Investor via XXXXX or other electronic means the following to the
Investor during the Registration Period: (i) within five (5) Trading Days
after the filing thereof with the SEC, a copy of its Annual Reports on
Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on
Form 8-K and any Registration Statements or amendments filed pursuant to
the 1933 Act; (ii) on the same day as the release thereof, facsimile copies
of all press releases issued by the Company or any of its Subsidiaries,
unless otherwise publicly available (iii) copies of any notices and other
information made available or given to the shareholders of the Company
generally, contemporaneously with the making available or giving thereof
to the shareholders unless otherwise publicly available and (iv) within two
(2) calendar days of filing or delivery thereof, copies of all documents
filed with, and all correspondence sent to, the Principal Market, any
securities exchange or market, or the National Association of Securities
Dealers, Inc., unless such information is material nonpublic information.
f. Reservation of Shares. Subject to the following sentence,
the Company shall take all action necessary to at all times have authorized,
and reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the issuance of the Securities hereunder. In the
event that the Company determines that it does not have a sufficient number
of authorized shares of Common Stock to reserve and keep available for
issuance as described in this Section 5(f), the Company shall use its best
efforts to increase the number of authorized shares of Common Stock by seeking
shareholder approval for the authorization of such additional shares.
g. Listing. The Company will maintain the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon the Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, such
listing of all Registrable Securities from time to time issuable under the
terms of the Transaction Documents. The Company shall maintain the Common
Stock's authorization for quotation on the Principal Market. Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market (excluding suspensions of not more than one
trading day resulting from business announcements by the Company). The Company
shall promptly provide to the Investor copies of any notices it receives from
the Principal Market regarding the continued eligibility of the Common Stock
for listing on such automated quotation system or securities exchange at the
same time as the information is made public. The Company shall pay all fees
and expenses in connection with satisfying its obligations under this
Section 5(g).
h. Transactions With Affiliates. The Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, persons who were officers or directors at
any time during the previous two years, shareholders who beneficially own 5%
or more of the Common Stock, or affiliates or with any individual related by
23
blood, marriage or adoption to any such individual or with any entity in which
any such entity or individual owns a 5% or more beneficial interest (each a
"RELATED PARTY"), except for (i) customary employment arrangements and benefit
programs on reasonable terms, (ii) any agreement, transaction, commitment or
arrangement on an arms-length basis on terms no less favorable than terms
which would have been obtainable from a person other than such Related Party,
or (iii) any agreement, transaction, commitment or arrangement which is
approved by a majority of the disinterested directors of the Company. For
purposes hereof, any director who is also an officer of the Company or any
Subsidiary of the Company shall not be a disinterested director with respect
to any such agreement, transaction, commitment or arrangement. "AFFILIATE" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a 5% or more equity interest in
that person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) is under common control
with that person or entity. "CONTROL" or "CONTROLS" for purposes hereof means
that a person or entity has the power, direct or indirect, to conduct or govern
the policies of another person or entity.
i. Filing of Form 8-K. On or before the date which is three (3)
Trading Days after the Execution Date, the Company shall file a Current Report
on Form 8-K with the SEC describing the terms of the transaction contemplated
by the Transaction Documents in the form required by the 1934 Act, if such
filing is required.
j. Corporate Existence. The Company shall use its best efforts
to preserve and continue the corporate existence of the Company.
k. Notice of Certain Events Affecting Registration; Suspension of
Right to Make a Put. The Company shall promptly notify Investor upon the
occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of the Securities:
(i) receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of
any of the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any
event that makes any statement made in such Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes in the Registration Statement, related prospectus or
documents so that, in the case of a Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and (v) the Company's reasonable determination that a post-effective amendment
to the Registration Statement would be appropriate, and the Company shall
promptly make available to Investor any such supplement or amendment to the
related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events.
24
l. Reimbursement. If (i) Investor, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, or (ii) Investor, other
than by reason of its gross negligence or willful misconduct, becomes involved
in any capacity in any action, proceeding or investigation brought by the SEC
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents,
or if Investor is impleaded in any such action, proceeding or investigation by
any person, then in any such case, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith, as such expenses are
incurred. In addition, other than with respect to any matter in which Investor
is a named party, the Company will pay to Investor the charges, as reasonably
determined by Investor, for the time of any officers or employees of Investor
devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement. The reimbursement obligations of the Company under
this section shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees, attorneys,
accountants, auditors and controlling persons (if any), as the case may be,
of Investor and any such affiliate, and shall be binding upon and inure to the
benefit of any successors of the Company, Investor and any such affiliate and
any such person.
6. COVER. If the number of Shares represented by any Put Notices
become restricted or are no longer freely trading for any reason, and after
the applicable Closing Date, the Investor purchases, in an open market
transaction or otherwise, the Company's Common Stock (the "Covering Shares")
in order to make delivery in satisfaction of a sale of Common Stock by the
Investor (the "Sold Shares"), which delivery such Investor anticipated to make
using the Shares represented by the Put Notice (a "Buy-In"), the Company
shall pay to the Investor the Buy-In Adjustment Amount (as defined below).
The "Buy-In Adjustment Amount" is the amount equal to the excess, if any, of
(a) the Investor's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (b) the net proceeds (after brokerage
commissions, if any) received by the Investor from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Investor
in immediately available funds immediately upon demand by the Investor. By
way of illustration and not in limitation of the foregoing, if the Investor
purchases Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to the Common Stock it
sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the
Company will be required to pay to the Investor will be $1,000.
25
7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the
Securities to the Investor is further subject to the satisfaction, at or before
each Closing Date, of each of the following conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
a. The Investor shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the Company.
b. The Investor shall have delivered to the Company the Purchase
Price for the Securities being purchased by the Investor at the Closing (after
receipt of confirmation of delivery of such Securities) by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Investor.
c. The representations and warranties of the Investor shall be
true and correct as of the date when made and as of the applicable Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and the Investor shall have performed, satisfied
and complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Investor at or prior to such Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
e. No Valuation Event shall have occurred since the applicable Put
Notice Date.
8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Investor.
b. The Common Stock shall be authorized for quotation on the
Principal Market and trading in the Common Stock shall not have been suspended
by the Principal Market or the SEC, at any time beginning on the date hereof
and through and including the respective Closing Date (excluding suspensions of
not more than one Trading Day resulting from business announcements by the
Company, provided that such suspensions occur prior to the Company's delivery
of the Put Notice related to such Closing).
26
c. The representations and warranties of the Company shall be true
and correct as of the date when made and as of the applicable Closing Date as
though made at that time (except for (i) representations and warranties that
speak as of a specific date and (ii) with respect to the representations made
in Sections 4(g), (h) and (j) and the third sentence of Section 4(k) hereof,
events which occur on or after the date of this Agreement and are disclosed in
SEC filings made by the Company at least ten (10) Trading Days prior to the
applicable Put Notice Date) and the Company shall have performed, satisfied
and complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company on or before such Closing Date. The Investor may request an update
as of such Closing Date regarding the representation contained in Section
4(c) above.
d. Investor shall have received an opinion letter of the Company's
counsel on or before the Execution Date.
e. The Company shall have executed and delivered to the Investor
or Investor the certificates representing, or have executed electronic
book-entry transfer of, the Securities (in such denominations as such Investor
shall request) being purchased by the Investor at such Closing.
f. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 4(b)(ii) above (the "RESOLUTIONS") and such
Resolutions shall not have been amended or rescinded prior to such Closing
Date.
g. If requested by the Investor, the Investor shall receive
letters of the type, in the form and with the substance of the letters
described in Sections 2(m) and 2(n) of this Agreement from the Company's
auditors.
h. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by
any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
i. The Registration Statement shall be effective on each Closing
Date and no stop order suspending the effectiveness of the Registration
statement shall be in effect or to the Company's best knowledge, shall be
pending or threatened. Furthermore, on each Closing Date (i) neither the
Company nor Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to such Registration Statement or
that the SEC otherwise has suspended or withdrawn the effectiveness of such
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and Investor
is reasonably satisfied that the SEC no longer is considering or intends to
take such action), and (ii) no other suspension of the use or withdrawal of
the effectiveness of such Registration Statement or related prospectus shall
exist.
27
j. At the time of each Closing, the Registration Statement
(including information or documents incorporated by reference therein) and any
amendments or supplements thereto shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or which would
require public disclosure or an update supplement to the prospectus.
k. There shall have been no filing of a petition in bankruptcy,
either voluntarily or involuntarily, with respect to the Company and there
shall not have been commenced any proceedings under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness or reorganization of debtors, and there shall have been no
calling of a meeting of creditors of the Company or appointment of a committee
of creditors or liquidating agents or offering of a composition or extension
to creditors by, for, with or without the consent or acquiescence of the
Company.
l. If applicable, the shareholders of the Company shall have
approved the issuance of any Shares in excess of the Maximum Common Stock
Issuance in accordance with Section 2(j).
m. The conditions to such Closing set forth in Section 2(f) shall
have been satisfied on or before such Closing Date.
n. The Company shall have certified to the Investor the number of
shares of Common Stock outstanding as of a date within ten (10) Trading Days
prior to such Closing Date.
o. The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by this Agreement as such
Investor or its counsel may reasonably request upon reasonable advance notice.
p. On or before the execution of this Agreement, the Company shall
have a draft of the Registration Statement covering the Securities.
9. TERMINATION. This Agreement shall terminate upon any of the
following events:
(i) when the Investor has purchased an aggregate of $2,500,000
in the Common Stock of the Company pursuant to this Agreement;
provided that the Company's representations, warranties and
covenants contained in this Agreement insofar as applicable to
the transactions consummated hereunder prior to such
termination, shall survive the termination of this Agreement
for the period of any applicable statute of limitations,
28
(ii) on the date which is 36 (thirty-six) months after the
Effective Date;
(iii) if the Company shall file or consent by answer or
otherwise to the entry of an order for relief or approving a
petition for relief, reorganization or arrangement or any
other petition in bankruptcy for liquidation or to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or shall make an assignment for the benefit
of its creditors, or shall consent to the appointment of a
custodian, receiver, trustee or other officer with similar
powers of itself or of any substantial part of its property,
or shall be adjudicated a bankrupt or insolvent, or shall
take corporate action for the purpose of any of the foregoing,
or if a court or governmental authority of competent
jurisdiction shall enter an order appointing a custodian,
receiver, trustee or other officer with similar powers with
respect to the Company or any substantial part of its property
or an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or
insolvency law, or an order for the dissolution, winding
up or liquidation of the Company, or if any such petition
shall be filed against the Company;
(iv) if the Company shall issue or sell any equity
securities or securities convertible into, or exchangeable
for, equity securities or enter into any other equity
financing facility during the Open Period, other than in
compliance with Section 4(v);
(v) the trading of the Common Stock is suspended by
the SEC, the Principal Market or the NASD for a period of
five (5) consecutive Trading Days during the Open Period;
(vi) the Company shall not have filed with the SEC the
initial Registration Statement with respect to the resale
of the Registrable Securities in accordance with the terms
of the initial Registration Rights Agreement within sixty
(60) calendar days of the date hereof or the Registration
Statement has not been declared effective within one
hundred eighty (180) calendar days of the date hereof; or
(vii) The Common Stock ceases to be registered under the
1934 Act or listed or traded on the Principal Market; or
(viii) The Company requires shareholder approval under
Nasdaq rules to issue additional shares and such approval
is not obtained within 90 days from the date when the
Company has issued its 19.9% maximum allowable shares.
29
Upon the occurrence of one of the above-described events, the Company
shall send written notice of such event to the Investor.
10. INDEMNIFICATION. In consideration of the Investor's execution
and delivery of the this Agreement and the Registration Rights
Agreement and acquiring the Shares hereunder and in addition to all
of the Company's other obligations under the Transaction Documents,
the Company shall defend, protect, indemnify and hold harmless the
Investor and all of their shareholders, officers, directors, employees,
counsel, and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "INDEMNIFIED LIABILITIES'), incurred by any
Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made
by the Company in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby (ii) any breach
of any covenant, agreement or obligation of the Company contained in
the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (iii) any cause of action,
suit or claim brought or made against such Indemnitee by a third
party and arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby,
(iv) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the
Securities or (v) the status of the Investor or holder of the
Securities as an investor in the Company, except insofar as any
such misrepresentation, breach or any untrue statement, alleged
untrue statement, omission or alleged omission is made in reliance
upon and in conformity with written information furnished to the
Company by the Investor which is specifically intended by the Investor
for use in the preparation of any such Registration Statement,
preliminary prospectus or prospectus or based on illegal or alleged
illegal trading of the Shares by the Investor. To the extent that
the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained
herein shall be in addition to any cause of action or similar rights
the Investor may have, and any liabilities the Investor may be
subject to.
11. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts
without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of Boston, County of Suffolk, for the adjudication
30
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, 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 to such party
at the address for such 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. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
b. Legal Fees.
(i) Except as otherwise set forth in the Transaction
Documents, each party shall pay the fees and expenses of its
advisers, counsel, the accountants and other experts, if any,
and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance
of this Agreement. Any attorneys' fees and expenses incurred
by either the Company or by the Investor in connection with
the preparation, negotiation, execution and delivery of any
amendments to this Agreement or relating to the enforcement
of the rights of any party, after the occurrence of any breach
of the terms of this Agreement by another party or any default
by another party in respect of the transactions contemplated
hereunder, shall be paid on demand by the party which breached
the Agreement and/or defaulted, as the case may be. The Company
shall pay all stamp and other taxes and duties levied in
connection with the issuance of any Securities.
c. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were
an original, not a facsimile signature.
d. Headings; Singular/Plural. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include
the feminine.
31
e. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
f. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
(including the other Transaction Documents) contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
the Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the Investor, and
no provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement is sought.
g. Notices. Any notices or other communications required or
permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and kept on file
by the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
On The Go Healthcare, Inc.
Xxxxxx Xxxx
00 Xxxxxxxx Xxx, Xxxx 0
Xxxxxxx, XX, Canda
Tel: 000-000-0000
Fax: 000-000-0000
If to the Investor:
Dutchess Private Equities fund, LP
000 Xxxxxx Xx.
Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax:: (000) 000-0000
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
32
h. No Assignment. This Agreement may not be assigned.
i. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
j. Survival. The representations and warranties of the Company
and the Investor contained in Sections 2 and 3, the agreements and covenants
set forth in Sections 4 and 5, and the indemnification provisions set forth
in Section 10, shall survive each of the Closings and the termination of this
Agreement.
k. Publicity. The Company and Investor shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the
prior consent of the other parties, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name of Investor without the prior written consent of such Investor, except
to the extent required by law. Investor acknowledges that this Agreement and
all or part of the Transaction Documents may be deemed to be "material
contracts" as that term is defined by Item 601(b)(10) of Regulation S-K, and
that the Company may therefore be required to file such documents as exhibits
to reports or registration statements filed under the Securities 1933 Act or
the 1934 Act. Investor further agrees that the status of such documents and
materials as material contracts shall be determined solely by the Company,
in consultation with its counsel.
l. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
m. Placement Agent.The Company agrees to pay Pennaluna and Company
, ("Pennaluna") a registered broker dealer, $10,000. The $10,000 shall
be payable from .5% (one half of one percent) of the Put Amount on each draw
toward the fee. Pennaluna will also act as an unaffiliated broker dealer.
The Investor shall have no obligation with respect to any fees or with respect
to any claims made by or on behalf of other persons or entities for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents. The Company shall
indemnify and hold harmless the Investor, their employees, officers, directors,
agents, and partners, and their
33
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. The Investor and each holder of the Shares shall have
all rights and remedies set forth in this Agreement and the Registration Rights
Agreement and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any default
or breach of any provision of this Agreement, including the recovery of
reasonable attorneys fees and costs, and to exercise all other rights granted
by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor hereunder or the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
q. Pricing of Common Stock. For purposes of this Agreement, the
best bid price of the Common Stock in this Agreement shall be as reported on
Xxxxxxxxx.xxx.
34
On The Go Healthcare, Inc.
SIGNATURE PAGE
Your signature on this Signature Page evidences your agreement to be
bound by the terms and conditions of the Investment Agreement and the
Registration Rights Agreement.
1. The undersigned signatory hereby certifies that he/she has
read and understands the Investment Agreement, and the representations made
by the undersigned in this Investment Agreement are true and accurate.
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
July 21, 2003 By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------- ---------------------------------
Date Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
35
COMPANY ACCEPTANCE PAGE
This Investment Agreement accepted and agreed
to on July 21, 2003
On The Go Healthcare, Inc.
By: /s/ Xxxxxx Xxxx
-------------------------------
Xxxxxx Xxxx, CEO
36
LIST OF EXHIBITS
-----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Opinion of Company's Counsel
EXHIBIT C Omitted
EXHIBIT D Broker Representation Letter
EXHIBIT E Board Resolution
EXHIBIT F Put Notice
EXHIBIT G Put Settlement Sheet
EXHIBIT H Partial Release of Put Amount and Shares
LIST OF SCHEDULES
-----------------
Schedule 4(a) Subsidiaries
Schedule 4(c) Capitalization
Schedule 4(e) Conflicts
Schedule 4(g) Material Changes
Schedule 4(h) Litigation
Schedule 4(l) Intellectual Property
Schedule 4(n) Liens
Schedule 4(t) Certain Transactions
37
EXHIBIT A
38
EXHIBIT B
39
EXHIBIT C
40
EXHIBIT D
[BROKER'S LETTERHEAD]
Date
Via Facsimile
Attention:
______________________
______________________
______________________
Re: On The Go Healthcare, Inc.
Dear __________________:
It is our understanding that the Form______ Registration Statement bearing
SEC File Number ( ___-______) filed by On The Go Healthcare, Inc. on
Form _____ on __________, 2003 was declared effective on _________, 2003.
This letter shall confirm that ______________ shares of the common stock of
On The Go Healthcare, Inc. are being sold on behalf of __________________ and
that we shall comply with the prospectus delivery requirements set forth in
that Registration Statement by filing the same with the purchaser.
If you have any questions please do not hesitate to call.
Sincerely,
______________________
cc: .
41
EXHIBIT E
42
EXHIBIT F
Date:
RE: Put Notice Number __
Dear Xx. Xxxxxxxx,
This is to inform you that as of today, On The Go Healthcare, Inc.., a
Delaware corporation (the "Company"), hereby elects to exercise its right
pursuant to the Investment Agreement to require Dutchess Private Equities
Fund, LP. to purchase shares of its common stock. The Company hereby
certifies that:
The amount of this put is $__________.
The Pricing Period runs from ________ until _______.
The current number of shares issued and outstanding as of the Company are:
____________________
Regards,
________________________
Xxxxxx Xxxx
On The Go Healthcare, Inc.
43
EXHIBIT G
PUT SETTLEMENT SHEET
Date:
Stuart,
Pursuant to the Put given by On The Go Healthcare, Inc..to Dutchess Private
Equities Fund, L.P. on _________________ 200x, we are now submitting the
amount of common shares for you to issue to Dutchess.
Please have a certificate baring no restrictive legend totaling __________
shares issued to Dutchess Private Equities Fund, LP immediately and send via
DWAC to the following account:
XXXXXX
If not DWAC eligible, please send Fedex Priority Overnight to:
XXXXXX
Once these shares are received by us, we will have the funds wired to the
Company.
Regards,
Xxxxxxx X. Xxxxxxxx
44
Date Price
Date of Day 1 Closing Best bid of Day 1
Date of Day 2 Closing Best bid of Day 2
Date of Day 3 Closing Best bid of Day 3
Date of Day 4 Closing Best bid of Day 4
Date of Day 5 Closing Best bid of Day 5
Lowest 3 (three) Best Bids in Pricing Period
Put Amount
Less Pennaluna Fee (.5%)
Amount Wired to Company
Purchase Price (94% (ninety-four percent))
Amount of Shares Due
The undersigned has completed this Put as of this ___th day of _________, 20xx.
On The Go Healthcare, Inc.
________________________________
Xxxxxx Xxxx, CEO
45
EXHIBIT H
PARTIAL RELEASE OF PURCHASE AMOUNT AND SHARES
On The Go Healthcare, Inc.
Xxxxxx Xxxx
00 Xxxxxxxx Xxx, Xxxx 0
Xxxxxxx, XX, Canda
Tel: 000-000-0000
Fax: 000-000-0000
Pursuant to the terms of the Investment Agreement the Investor requests the
release from the Company of __________ shares of the Company's Common Stock
by overnight delivery or DWAC, if available, and the Investor, upon
confirmation of receipt of the Securities by the Investor, the Investor shall
wire $____________ to the Company within two (2) Trading Days of said
confirmation.
INVESTOR
By:___________________
Note: The number of Shares stated in this PARTIAL RELEASE OF PUT AMOUNT AND
SHARES Form shall be equal to the dollar amount to be released divided by 94%
(ninety-four percent) of the three lowest closing best bid prices during that
number of Trading Days that have elapsed in the specified Pricing Period.
46
SCHEDULE 4(a) SUBSIDIARIES
47
SCHEDULE 4(c) CAPITALIZATION
48
SCHEDULE 4(e) CONFLICTS
49
SCHEDULE 4(g) MATERIAL CHANGES
50
SCHEDULE 4(h) LITIGATION
51
SCHEDULE 4(l) INTELLECTUAL PROPERTY
52
SCHEDULE 4(n) LIENS
53
SCHEDULE 4(t) CERTAIN TRANSACTIONS
54
