EXHIBIT 10.5
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of May 24, 2002, between Metropolitan Health
Networks, Inc. (the "Company") and Global Capital Funding Group, L.P.
("Purchaser").
RECITALS:
WHEREAS, the Company desires to sell and issue to Purchaser, and
Purchaser desires to purchase from the Company a $1,200,000 principal amount
12% Promissory Note due May 24, 2004 (the "Promissory Note") in accordance with
the terms and conditions as set forth in the form of Promissory Note attached
hereto as Exhibit A;
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue to the
Purchaser an aggregate of 500,000 warrants to purchase shares of Common Stock
upon the Closing (as defined herein) on the terms and conditions described in
the form of the common stock purchase warrant attached hereto as Exhibit E (the
"Warrants"); and
WHEREAS, Purchaser will have certain registration rights with respect
to such shares of Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares,") as set forth in the Registration Rights Agreement in the
form attached hereto as Exhibit B;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1. DEFINITIONS
ARTICLE 1.1 DEFINITIONS. The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which is Controlled by or is under common Control with a
Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Asset Sale" has the meaning set forth in Section 8.4.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by the
Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York and Palm Beach, Florida are
authorized or required by law to close.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to such
sections) other than Purchaser or by a merger as permitted by this agreement
shall have acquired beneficial ownership (within the meaning of Rules 13d-3 and
13d-5 promulgated by the Commission pursuant to the Exchange Act) of 40% or
more of the outstanding shares of Common Stock of the Company without the prior
written consent of Purchaser and (ii) any sale or other disposition (other than
by reason of death or disability) to any Person by any executive officer and/or
employee director of the Company of more than 10% of the Common Shares
beneficially owned by such officer of director in a 12-month period, without
the prior written consent of Purchaser.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. ("Bloomberg") on the
principal securities exchange or trading market where such security is listed
or traded or, if the foregoing does not apply, the lowest closing bid price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no lowest trading price is
reported for such security by Bloomberg, then the average of the bid prices of
any market makers for such securities as reported in the "Pink Sheets" by the
National Quotation Bureau, Inc. If the lowest closing bid price cannot be
calculated for such security on such date on any of the foregoing bases, the
lowest closing bid price of such security on such date shall be the fair market
value as mutually determined by Purchaser and the Company for which the
calculation of the closing bid price requires, and in the absence of such
mutual determination, as determined by the Board of Directors of the Company in
good faith.
"Closing Date" means the date on which all of the conditions set forth
in Sections 6.1 and 6.2 shall have been satisfied and the Promissory Note in
the aggregate principal amount of $1,200,000 is issued by the Company to
Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
entity succeeding to all of its material functions.
"Common Stock" means common stock, $.001 par value per share, of the
Company.
"Company" means Metropolitan Health Networks, Inc., a Florida
corporation, and its successors.
"Company Corporate Documents" means the certificate of incorporation
and bylaws of the Company.
"Consolidated Net Worth" means at any date the total shareholder's
equity which would appear on a consolidated balance sheet of the Company
prepared as of such date.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit, (v) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is otherwise an obligation of such Person
and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivative Securities" has the meaning set forth in Section 8.6.
"Discounted Equity Offerings" has the meaning set forth in Section
8.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of
a controlled group of corporation and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing" means a public or private financing consummated (meaning
closing and funding) through the issuance of debt or equity securities (or
securities convertible into or exchangeable for debt or equity securities) of
the Company, other than Permitted Financings.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain a minimum
net worth, financial ratio or similar requirements, or otherwise) any Debt of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or (ii) entered into for the purpose of assuring in any other manner
the holder of such Debt of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term Guarantee used as a verb has a
corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
or otherwise.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction,
security interest or other adverse claim, whether arising by contract or under
law (including, without limitation, any financing lease having substantially
the same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Majority Holders" means (i) as of the Closing Date, Purchaser and
(ii) at any time thereafter, the holders of more than 50% in aggregate
principal amount of the Promissory Note dated May 24, 2002 outstanding at such
time.
"Market Price" shall mean the Closing Bid Price of the Common Stock on
the date immediately preceding the date on which a determination of Market
Price is required to be made in accordance with any section of this Agreement
or any other Transaction Agreement.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Promissory
Note.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market
System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap
Market, the New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
reasonable underwriters' fees, brokerage commissions, reasonable professional
fees and other customary out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual
transfer taxes (but not income taxes) payable with respect to such
dispositions, and (B) the amount of Debt, if any, secured by a Lien on the
asset or assets disposed of and required to be, and actually repaid by the
Company or any Subsidiary in connection therewith, and any trade payables
specifically relating to such asset or assets sold by the Company or any
Subsidiary that are not assumed by the purchaser of such asset or assets.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company substantially
in the form of Exhibit A to the Warrant.
"Officer's Certificate" shall mean a certificate executed by the
president, chief executive officer or chief financial officer of the Company in
the form of Exhibit D attached hereto.
"OTC Bulletin Board" means the over-the-counter bulletin board
operated by the NASD.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary
to own, lease and operate the properties of, and to carry on the business of
the Company and the Subsidiaries.
"Permitted Financings" has the meaning set forth in Section 8.6(a).
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock Company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
the Code and either (i) is maintained, or contributed to, by any member of the
ERISA group for employees of any member of the ERISA group or (ii) has at any
time within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA group for employees of the
Person which was at such time a member of the ERISA Group.
"Promissory Note" means the Company's 12% Promissory Note
substantially in the form set forth as Exhibit A hereto.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means the entity listed on the signature page hereto and
its successors and assigns, including holders from time to time of the
Promissory Note.
"Recourse Financing" means Debt of the Company or any Subsidiary
which, by its terms, does not bar the lender thereof from action against the
Company or any Subsidiary, as borrower or guarantor, if the security value of
the project or asset pledged in respect thereof falls below the amount required
to repay such Debt.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
"Registration Rights Agreement" means the agreement between the
Company and Purchaser dated the date hereof substantially in the form set forth
in Exhibit B attached hereto.
"Reserved Amount" has the meaning set forth in Section 7.10(a).
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of capital stock of such Person
(except dividends payable on the Company's Preferred Stock outstanding as of
the date of this Agreement, dividends payable solely in shares of capital stock
of the same or junior class of such Person, dividends payable in connection
with any Permitted Financing or securities issued pursuant to Section 8.6(a)(v)
and (vi) and dividends from a wholly-owned direct or indirect Subsidiary of the
Company to its parent corporation), (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of such
Person's capital stock or (b) any option, warrant or other right to acquire
shares of such Person's capital stock or (iii) any loan, or advance or capital
contribution to any Person (a "Stockholder") owning any capital stock of such
Person other than
relocation, travel or like advances to officers and employees in the ordinary
course of business, or other than reasonable compensation as determined by the
Board of Directors, except such loans or advances outstanding on the date
hereof.
"Sale Event" has the meaning set forth in Section 3.4.
"SEC Reports" has the meaning set forth in Section 7.1(a).
"Securities" means the Promissory Note, the Warrants and, as
applicable, the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Solvency Certificate" shall mean a certificate executed by the chief
financial officer or treasurer of the Company as to the solvency of the
Company, the adequacy of its capital and its ability to pay its debts, all
after giving effect to the issuance and sale of the Promissory Note and the
completion of the offering (including without limitation the payment of any
fees or expenses in connection therewith), which such Solvency Certificate
shall be in the form of Exhibit C attached hereto.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person or (y) the results of operations,
the assets and the liabilities of which are consolidated with such Person under
GAAP.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulletin
Board, National Market or other automated quotation system or exchange on which
the Common Stock is then traded is open for trading for at least four (4)
hours.
"Transaction Agreements" means this Agreement, the Promissory Note,
the Warrants, the Registration Rights Agreement, and the other agreements
contemplated by this Agreement.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all benefits under Plan
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of a member of the ERISA Group to
the PBGC or any other Person under Title IV of ERISA.
"Warrant" means the Common Stock Purchase Warrant substantially in the
form set forth in Exhibit E hereto.
"Warrant Shares" has the meaning set forth in the Recitals.
ARTICLE 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a consistent basis (except for changes concurred in by the
Company's independent public accountants) ("GAAP") and Regulation S-X
promulgated under the Securities Act ("Regulation S-X"). All references to
"dollars," "Dollars" or "$" are to United States dollars unless otherwise
indicated.
ARTICLE 2. PURCHASE AND SALE OF SECURITIES
ARTICLE 2.1 PURCHASE AND SALE OF PROMISSORY NOTE.
(a) Subject to the terms and conditions set forth
herein, the Company agrees to issue and sell to Purchaser, and Purchaser agrees
to purchase from the Company, the Promissory Note.
(b) Purchaser shall acquire the Promissory Note on the
Closing Date in an aggregate principal amount of One Million Two Hundred
Thousand Dollars ($1,200,000.00).
(c) In connection with the Purchaser's agreement to
purchase the Promissory Note specified in this Article II, the Company shall
issue and deliver to the Purchaser on the Closing Date Warrants to purchase an
aggregate of 500,000 shares of Common Stock. ARTICLE 2.2 PURCHASE PRICE. The
purchase price (the "Purchase Price") for the Promissory Note and the Warrants
on the Closing Date shall be $1,200,000.00 and shall be allocated as set forth
on Schedule 2.2.
ARTICLE 2.3 CLOSING AND MECHANICS OF PAYMENT.
(a) The Purchase Price shall be paid on the Closing Date
by wire transfer of immediately available funds.
(b) The Promissory Note and Warrants issued on the
Closing Date shall be dated the date thereof.
ARTICLE 3. PAYMENT TERMS OF PROMISSORY NOTE
ARTICLE 3.1 PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT
MECHANICS. The Company will pay all amounts due on each Promissory Note by the
method and at the address specified for such purpose by Purchaser in writing,
without the presentation or surrender of any Promissory Note or the making of
any notation thereon, except that upon written request of the Company made
concurrently with or reasonably
promptly after payment or prepayment in full of this Promissory Note, the
holder shall surrender the Promissory Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office. Prior to any sale or other disposition of any Promissory Note which
transfer will not occur without the prior written consent of the Company, the
holder thereof will, at its election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid
thereon or surrender the Promissory Note to the Company in exchange for a new
Promissory Note or Promissory Note. The Company will afford the benefits of
this Section 3.1 to any direct or indirect transferee of the Promissory Note
purchased under this Agreement and that has made the same agreement relating to
this Promissory Note as Purchaser has in this Section 3.1; provided that such
transferee is an "accredited investor" under Rule 501 of the Securities Act and
that such transfer has been made in compliance with applicable securities laws.
ARTICLE 3.2 PAYMENT OF INTEREST. Interest shall accrue on the
outstanding principal amount of each Promissory Note as of the date of issuance
and shall be payable as specified therein.
ARTICLE 3.3 VOLUNTARY PREPAYMENT. For so long as no Event of
Default shall have occurred and is continuing, the Company may, at its option,
repay, in whole or in part, the Promissory Note, per the formula set forth in
Section 4 of Exhibit A hereto, thereof following at least five (5) Business
Days prior written notice to Purchaser (the expiration of such five (5)
Business Day period being referred to as the "prepayment date"); provided,
however, that if such date is not a Business Day, the prepayment date shall be
the next Business Day thereafter.
ARTICLE 3.4 MANDATORY PREPAYMENTS.
(a) Upon (i) the occurrence of a Change in Control of
the Company or (ii) a transfer of all or substantially all of the assets of the
Company to any Person in a single transaction or series of related
transactions, or (iii) a merger in which the surviving entity is not a
reporting company under the Exchange Act or which does not have its common
stock listed on a National Market (each of items (i) through (iii) being
referred to as a "Sale Event"), then, in each case, the Company shall, upon
request of the Majority Holders, redeem the Promissory Note, subject to the
provisions of Section 6 of the Promissory Note. The redemption price payable
upon any such redemption shall be the Redemption Price in Section 6 of the
Promissory Note (referred to herein as the "Formula Price").
(b) At the option of Purchaser, upon the consummation of
one or more Financings (other than financings permitted by Section 8.6 (a)(v)
and (vi)), the Company shall use 25% of the Net Cash Proceeds therefrom (unless
such Net Cash Proceeds from each such Financing is less than $1,000,000) to
redeem the Promissory Note.
ARTICLE 3.5 PREPAYMENT PROCEDURES.
(a) Any permitted prepayment or redemption of the
Promissory Note as applicable pursuant to Sections 3.3 or 3.4 above shall be
deemed to be effective and consummated (for purposes of determining the
Prepayment Price, the Formula Price and the time at which Purchaser shall
thereafter not be entitled to deliver a Notice of Conversion for the Promissory
Note) as follows:
(i) A prepayment pursuant to Section 3.3, the
"prepayment date" specified therein;
(ii) A redemption pursuant to Section 3.4(a),
the date of consummation of the applicable Sale Event; and
(iii) A redemption pursuant to Section 3.4(b),
following the date of consummation of the applicable Financing (meaning closing
and funding).
(b) On the Maturity Date and on the effective date of a
prepayment or redemption of the Promissory Note as specified in Section 3.5(a)
above, the Company shall deliver by wire transfer of funds the
prepayment/redemption price to Purchaser of the Promissory Note subject to
redemption. Should Purchaser not receive payment of any amounts due on
redemption of its Promissory Note by reason of the Company's failure to make
payment at the times prescribed above for any reason, the Company shall pay to
the applicable holder on demand (x) interest on the sums not paid when due at
an annual rate equal to 14%, until the applicable holder is paid in full and
(y) all costs of collection, including, but not limited to, reasonable
attorneys' fees and costs, whether or not suit or other formal proceedings are
instituted.
ARTICLE 3.6 PAYMENT OF ADDITIONAL AMOUNTS.
(a) Any and all payments by the Company hereunder or
under the Promissory Note to Purchaser and each "qualified assignee" thereof
shall be made free and clear of and without deduction or withholding for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto (all such taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes") unless such Taxes are required by law or the
administration thereof to be deducted or withheld. If the Company shall be
required by law or the administration thereof to deduct or withhold any Taxes
from or in respect of any sum payable under the Promissory Note (i) the holders
of the Promissory Note subject to such Taxes shall have the right, but not the
obligation, for a period of thirty (30) days commencing upon the day it shall
have received written notice from the Company that it is required to withhold
Taxes to transfer all or any portion of the Promissory Note to a qualified
assignee to the extent such transfer can be effected in accordance with the
other provisions of this Agreement and applicable law; (ii) the Company shall
make such deductions or withholdings; (iii) the sum payable shall be increased
as may be necessary so that after making all required deductions or
withholdings (including deductions or withholdings applicable to additional
amounts paid under this Section 3.6) Purchaser receives an amount equal to the
sum it would have received if no such deduction or withholding had been made;
and (iv) the Company shall forthwith pay the full amount deducted or withheld
to the relevant taxation or other authority in accordance with applicable law;
provided, however the Company shall not be required to pay any taxes owed by
Purchaser or any qualified assignee resulting from (x) the payment of interest
on the Promissory Note by the Company or (y) any gain recognized from the
transfer of the Promissory Note by the Purchaser or any qualified assignee. A
"qualified assignee" of a Purchaser is a Person that is organized under the
laws of (i) the United States or (ii) any jurisdiction other than the United
States or any political subdivision thereof and that (y) represents and
warrants to the Company that payments of the Company to such assignee under the
laws in existence on the date of this Agreement would not be subject to any
Taxes and (z) from time to time, as and when requested by the Company, executes
and delivers to the Company and the Internal Revenue Service forms, and
provides the Company with any information necessary to establish such
assignee's continued exemption from Taxes under applicable law.
(b) The Company shall forthwith pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies applicable under the tax laws of the United States
(all such taxes, charges and levies hereinafter referred to as "Other Taxes")
which arise from any payment made under any of the Transaction Agreements or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement other than Taxes payable solely as a result of the transfer from
Purchaser to a Person of any Security.
(c) The Company shall indemnify Purchaser, or qualified
assignee, for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 3.6) paid by Purchaser, or qualified assignee, and
any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days from the date Purchaser or
assignee makes written demand therefor. A certificate as to the amount of such
Taxes or Other Taxes submitted to the Company by Purchaser or assignee shall be
conclusive evidence of the amount due from the Company to such party.
(d) Within 30 days after the date of any payment of
Taxes, the Company will furnish to Purchaser the original or a certified copy
of a receipt evidencing payment thereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser, as of the Closing
Date, the following:
ARTICLE 4.1 ORGANIZATION AND QUALIFICATION. The Company and each
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own, lease, use and operate its
properties and to carry on its business as and where now owned, leased, used,
operated and conducted. The Company is qualified to conduct business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except where such failure would not have a Material Adverse Effect. A "Material
Adverse Effect" means any material adverse effect on the operations, results of
operations, properties, assets or financial condition of the Company or the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith.
ARTICLE 4.2 AUTHORIZATION AND EXECUTION.
(a) The Company has all requisite corporate power and
authority to enter into and perform each Transaction Agreement and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities in accordance with the terms hereof and thereof.
(b) The execution, delivery and performance by the
Company of each Transaction Agreement and the issuance by the Company of the
Securities have been duly and validly authorized and no further consent or
authorization of the Company, its Board of Directors or its shareholders is
required.
(c) This Agreement has been duly executed and delivered
by the Company.
(d) This Agreement constitutes, and upon execution and
delivery thereof by the Company, each of the Transaction Agreements will
constitute, a valid and binding agreement of the Company, in each case
enforceable against the Company in accordance with its respective terms subject
to (i) applicable bankruptcy, insolvency or similar laws affecting the
enforceability of creditor's rights generally and (ii) equitable principles of
general applicability.
ARTICLE 4.3 CAPITALIZATION . As of the date hereof, the
authorized, issued and outstanding capital stock of the Company is as set forth
on Schedule 4.3 hereto and except as set forth on Schedule 4.3 no other shares
of capital stock of the Company will be outstanding as of the Closing Date. All
of such outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights of the stockholders of
the Company or any liens or encumbrances imposed through the actions or failure
to act of the Company. Other than as set forth on Schedule 4.3 hereto, as of
the date hereof, (i) there are no outstanding options, warrants, scrip, rights
to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries are obligated
to register the sale of any of its or their securities under the Securities Act
(except pursuant to the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Promissory Note or Warrant Shares. The
Company has furnished to Purchaser true and correct copies of the Company's
Corporate Documents, and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
ARTICLE 4.4 GOVERNMENTAL AUTHORIZATION. The execution and
delivery by the Company of the Transaction Agreements does not and will not,
the issuance and sale by the Company of the Securities does not and will not,
and the consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, require any action by or in respect of, or
filing with, any governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior to the date
hereof and that will be in full force and effect (or as to which all applicable
waiting periods have expired) on and as of the date hereof or which are not
required to be filed on or prior to the Closing Date, (b) such actions or
filings that, if not obtained, would not result in a Material Adverse Effect,
(c) the filing of a "Form D" as described in Section 7.13 below, (d) the filing
of one or more registration statements covering the Securities and such
registration statement being declared effective and (e) compliance with
applicable state securities laws provisions.
ARTICLE 4.5 ISSUANCE OF SHARES. Upon exercise in accordance with
the terms of the Warrants, the Warrant Shares shall be duly and validly issued
and outstanding, fully paid and nonassessable, free and clear of any Taxes,
Liens other than applicable securities law encumbrances and charges with
respect to issuance and shall not be subject to preemptive rights of any other
stockholders of the Company. Assuming the representations and warranties of
Purchaser herein are true and correct in all material respects, each of the
Securities will have been issued in material compliance with all applicable
U.S. federal and state securities laws. The Company understands and
acknowledges that, in certain circumstances, the issuance of Warrant Shares
could dilute the ownership interests of other stockholders of the Company.
Subject to the provisions of this Agreement and the Transaction Agreements, the
Company further acknowledges that its obligation to issue Warrant Shares upon
exercise of the Warrants is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
ARTICLE 4.6 NO CONFLICTS. The execution and delivery by the
Company of the Transaction Agreements to which it is a party did not and will
not, the issuance and sale by the Company of the Securities did not and will
not and the consummation of the transactions contemplated hereby and by the
other Transaction Agreements will not, contravene or constitute a default under
or violation of (i) any provision of applicable law or regulation, (ii) the
Company Corporate Documents, (iii) any material agreement, judgment,
injunction, order, decree or other material instrument binding upon the Company
or any Subsidiary or any of their respective assets, or result in the creation
or imposition of any Lien on any asset of the Company or any Subsidiary. The
Company and each Subsidiary is in compliance with and conforms to all statutes,
laws, ordinances, rules, regulations, orders, restrictions and all other legal
requirements of any domestic or foreign government or any instrumentality
thereof having jurisdiction over the conduct of its businesses or the ownership
of its properties, except where such failure would not have a Material Adverse
Effect.
ARTICLE 4.7 FINANCIAL INFORMATION. Since December 31, 2001 (the
"Balance Sheet Date"), except as disclosed in Schedule 4.7, or in the Company's
SEC filings there has been (x) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects, of the Company and its Subsidiaries,
whether as a result of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, act of God, public force or
otherwise and (y) no material adverse change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations or prospects, of the Company and its subsidiaries except in the
ordinary course of business; and no fact or condition exists or is contemplated
or threatened which might cause such a change in the future. The audited and
unaudited consolidated balance sheets of the Company and its Subsidiaries for
the periods ending December 31, 2001 and March 31, 2002, respectively, and the
related consolidated statements of income, changes in stockholders' equity and
changes in cash flows for the periods then ended, including the footnotes
thereto, except as indicated therein, (i) complied in all material respects
with applicable accounting requirements and (ii) have been prepared in
accordance with GAAP consistently applied throughout the periods indicated,
except that the unaudited financial statements do not contain notes and may be
subject to normal audit adjustments and normal annual adjustments. Such
financial statements fairly present the financial condition of the Company and
its Subsidiaries at the dates indicated and the consolidated results of their
operations and cash flows for the periods then ended and, except as indicated
therein, reflect all claims against and all Debts and liabilities of the
Company and its Subsidiaries, fixed or contingent except those claims against
and all Debts and liabilities of the Company which would not have a Material
Adverse Effect.
ARTICLE 4.8 LITIGATION. Except as set forth on Schedule 4.8,
there is no action, suit or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary, before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, financial condition, operations, performance, properties
or prospects of the Company or which challenges the validity of any Transaction
Agreements.
ARTICLE 4.9 COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS.
(a) Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any required contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which as resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Code or (iii) incurred any liability under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA.
(b) The benefit plans not covered under clause (a) above
(including profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the
"Benefit Plans") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under, all
applicable laws. All required employer and employee contributions and premiums
under the Benefit Plans to the date hereof have been made, the respective fund
or funds established under the Benefit Plans are funded in accordance with
applicable laws, and no past service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities,
either on a "going concern" or "winding up" basis and determined in accordance
with all applicable laws and actuarial practices and using actuarial
assumptions and methods that are reasonable in the circumstances. No event has
occurred and no condition exists with respect to any Benefit Plans that has
resulted or could reasonably be expected to result in any pension plan having
its registration revoked or wound up (in whole or in part) or refused for the
purposes of any applicable laws or being placed under the administration of any
relevant pension benefits regulatory authority or being required to pay any
taxes or penalties (in any material amounts) under any applicable laws.
ARTICLE 4.10 ENVIRONMENTAL MATTERS. The costs and liabilities
associated with Environmental Laws (including the cost of compliance therewith)
are unlikely to have a Material Adverse Effect on the business, financial
condition, operations, performance, properties or prospects of the Company or
any Subsidiary. Each of the Company and the Subsidiaries conducts its
businesses in compliance in all material respects with all applicable
Environmental Laws.
ARTICLE 4.11 TAXES. Except as set forth in Schedule 4.11, all
United States federal, state, county, municipality, local or foreign income tax
returns and all other material tax returns (including foreign tax returns) which
are required to be filed by or on behalf of the Company and each Subsidiary have
been filed and all material taxes due pursuant to such returns or pursuant to
any assessment received by the Company and each Subsidiary have been paid except
those being disputed in good faith and for which adequate reserves have been
established. The charges, accruals and reserves on the books of the Company and
each Subsidiary in respect of taxes and other governmental charges have been
established in accordance with GAAP and Regulation S-X.
ARTICLE 4.12 INVESTMENTS, JOINT VENTURES. Other than as set forth
in Schedule 4.12, the Company has no Subsidiaries or other direct or indirect
Investment in any Person, and the
Company is not a party to any partnership, management, shareholders' or joint
venture or similar agreement.
ARTICLE 4.13 NOT AN INVESTMENT COMPANY. Neither the Company nor
any Subsidiary is an "Investment Company" within the meaning of Investment
Company Act of 1940, as amended.
ARTICLE 4.14 FULL DISCLOSURE. The information heretofore
furnished by the Company to Purchaser for purposes of or in connection with
this Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company or any Subsidiary to Purchaser
will not (in each case taken together and on the date as of which such
information is furnished), contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they are made,
not misleading.
ARTICLE 4.15 NO SOLICITATION; NO INTEGRATION WITH OTHER
OFFERINGS. No form of general solicitation or general advertising was used by
the Company or, to the best of its actual knowledge, any other Person acting on
behalf of the Company, in connection with the offer and sale of the Securities.
The issuance of the Securities to Purchaser will not be integrated with any
other issuance of the Company's securities (past, current or future) which
requires stockholder approval under the rules of the OTC Bulletin Board.
ARTICLE 4.16 PERMITS. (a) Each of the Company and its
Subsidiaries has all material Permits; (b) all such Permits are in full force
and effect, and each of the Company and its Subsidiaries has fulfilled and
performed all material obligations with respect to such Permits; (c) to its
knowledge, no event has occurred which allows, or after notice of lapse of time
would allow, revocation or termination by the issuer thereof or which results
in any other material impairment of the rights of the holder of any such
Permit; and (d) to its knowledge, the Company has no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such Permit.
ARTICLE 4.17 LEASES. Neither the Company nor any Subsidiary is a
party to any capital lease obligation with a value greater than $250,000 or to
any operating lease with an aggregate annual rental greater than $250,000
during the life of such lease.
ARTICLE 4.18 ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL
CALLS. There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a liability,
other than (i) those liabilities provided for in the financial statements
delivered pursuant to Section 4.7 and (ii) other undisclosed liabilities which,
individually or in the aggregate, would not have a Material Adverse Effect.
ARTICLE 4.19 PUBLIC UTILITY HOLDING COMPANY. Neither the Company
nor any Subsidiary is, or will be upon issuance and sale of the Securities and
the use of the proceeds described herein, subject to regulation under the
Public Utility Holding Company Act of 1935, as amended, the Federal Power Act,
the Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to issue and perform its obligations under any Transaction
Agreement.
ARTICLE 4.20 INTELLECTUAL PROPERTY RIGHTS. Each of the Company
and its Subsidiaries owns, or is licensed under, and has the rights to use, all
material patents, trademarks, trade names, copyrights, technology, know-how and
processes (collectively, "Intellectual Property") used in, or necessary for the
conduct of its business; no claims have been asserted by any Person
to the use of any such Intellectual Property or challenging or questioning the
validity or effectiveness of any license or agreement related thereto. To the
best of Company's and its Subsidiaries' knowledge, there is no valid basis for
any such claim and the use of such Intellectual Property by the Company and its
Subsidiaries will not knowingly infringe upon the rights of any Person.
ARTICLE 4.21 INSURANCE. The Company and its Subsidiaries
maintain, with financially sound and reputable insurance companies, insurance
in at least such amounts and against such risks such that any uninsured loss
would not have a Material Adverse Effect. All insurance coverages of the
Company and its Subsidiaries are in full force and effect and there are no past
due premiums in respect of any such insurance.
ARTICLE 4.22 TITLE TO PROPERTIES. Except as set forth in Schedule
4.22, the Company and its Subsidiaries have good and marketable title to all
their respective properties individually valued in excess of $250,000 free and
clear of all Liens.
ARTICLE 4.23 INTERNAL ACCOUNTING CONTROLS. The Company and each
of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's Board of Directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
managements' general or specific authorizations and (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability.
ARTICLE 4.24 FOREIGN PRACTICES. Neither the Company nor any of
its Subsidiaries nor, to the Company's knowledge, any employee or agent of the
Company or any Subsidiary has made any payments of funds of the Company or
Subsidiary, or received or retained any funds, in each case in violation of any
law, rule or regulation.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
ARTICLE 5.1 PURCHASER. Purchaser hereby represents and warrants
to the Company that:
(a) Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and the Securities to be
acquired by it pursuant to this Agreement are being acquired for its own
account and, as of the date hereof, not with a view toward, or for sale in
connection with, any distribution thereof except in compliance with applicable
United States federal and state securities law;
(b) the execution, delivery and performance of this
Agreement and the purchase of the Securities pursuant thereto are within
Purchaser's corporate or partnership powers, as applicable, and have been duly
and validly authorized by all requisite corporate or partnership action; and no
further consent or authorization by the Purchaser, or its partners is required;
(c) this Agreement has been duly executed and delivered
by Purchaser;
(d) the execution and delivery by Purchaser of the
Transaction Agreements to which it is a party does not, and the consummation of
the transactions contemplated hereby and thereby will not, contravene or
constitute a default under or violation of (i) any provision of applicable law
or regulation, or (ii) any agreement, judgment, injunction, order, decree or
other instrument binding upon Purchaser;
(e) Purchaser understands that the Securities have not
been registered under the Securities Act and may not be transferred or sold
except as specified in this Agreement or the remaining Transaction Agreements;
(f) this Agreement constitutes a valid and binding
agreement of Purchaser enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency or similar laws affecting the enforceability
of creditors rights generally and (ii) equitable principles of general
applicability;
(g) Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Securities and Purchaser is capable of bearing
the economic risks of such investment;
(h) Purchaser is knowledgeable, sophisticated and
experienced in business and financial matters; Purchaser fully understands the
limitations on transfer described herein; Purchaser has been afforded access to
information about the Company and the financial condition, results of
operations, property, management and prospects of the Company sufficient to
enable it to evaluate its investment in the Securities; Purchaser has been
afforded the opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and the
risks of investing in the Securities; and Purchaser has been afforded the
opportunity to obtain such additional information which the Company possesses
or can acquire that is necessary to verify the accuracy and completeness of the
information given to Purchaser concerning the Company. The foregoing does not
in any way relieve the Company of its representations and other undertakings
hereunder, and shall not limit Purchaser's ability to rely thereon;
(i) no part of the source of funds used by Purchaser to
acquire the Securities constitutes assets allocated to any separate account
maintained by Purchaser in which any employee benefit plan (or its related
trust) has any interest; and
ARTICLE 6. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
ARTICLE 6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO
PURCHASE. The obligation of Purchaser hereunder to purchase the Promissory Note
at the Closing is subject to the satisfaction, on or before the Closing Date,
of each of the following conditions, provided that these conditions are for
Purchaser's sole benefit and may be waived by Purchaser at any time in its sole
discretion:
(a) The Company shall have duly executed this Agreement,
the Registration Rights Agreement and the Escrow Agreement and delivered the
same to Purchaser;
(b) The Company shall have delivered to Purchaser a duly
executed Promissory Note and Warrants in accordance with Section 2.3 hereof;
(c) The Company shall have delivered the Solvency
Certificate;
(d) The representations and warranties of the Company
contained in each Transaction Agreement shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as of a
specified date) and the Company shall have performed, satisfied and complied
with all covenants, agreements and conditions required by such Transaction
Agreements to be performed, satisfied or complied with by it at or prior to the
Closing Date. Purchaser shall have received an Officer's Certificate executed
by the chief executive officer of the Company, dated as of the Closing Date, to
the foregoing effect and as to such other matters as may be reasonably
requested by Purchaser, including but not limited to certificates with respect
to the Company Corporate Documents, resolutions relating to the transactions
contemplated hereby and the incumbencies of certain officers and directors of
the Company. The form of such certificate is attached hereto as Exhibit D;
(e) Except as set forth in Section 4.4 of this
Agreement, the Company shall have received all governmental, Board of
Directors, shareholders and third party consents and approvals necessary or
desirable in connection with the issuance and sale of the Securities and the
consummation of the transactions contemplated by the Transaction Agreements;
(f) All applicable waiting periods in respect to the
issuance and sale of the Securities shall have expired without any action
having been taken by any competent authority that could restrain, prevent or
impose any materially adverse conditions thereon or that could seek or threaten
any of the foregoing;
(g) Purchaser shall have received an opinion, dated the
Closing Date, of counsel to the Company, in form and substance reasonably
satisfactory to Purchaser;
(h) All fees and expenses due and payable by the Company
as set forth in this Agreement prior to the Closing Date shall have been paid;
provided that, all fees and expenses due and payable on the Closing Date shall
be subtracted from the payment of the Purchase Price;
(i) The Company Corporate Documents and the Subsidiary
Corporate Documents, if any, shall be in full force and effect and no term or
condition thereof shall have been amended, waived or otherwise modified without
the prior written consent of Purchaser;
(j) Purchaser shall have confirmed the receipt of the
Promissory Note and the Warrants to be issued, duly executed by the Company and
registered in the name of Purchaser;
(k) There shall not have occurred any disruption or
adverse change in the financial or capital markets generally, or in the market
for the Common Stock (including
but not limited to any suspension or delisting), which Purchaser reasonably
deems material in connection with the purchase of the Securities;
(l) Immediately before and on the Closing Date, no
Default or Event of Default shall have occurred and be continuing;
(m) Company shall have delivered to Purchaser the Use of
Proceeds Schedule 7.8;
ARTICLE 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The
obligations of the Company to issue and sell the Securities to Purchaser
pursuant to this Agreement are subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) The representations and warranties of Purchaser
contained herein shall be true and correct in all material respects on the
Closing Date and Purchaser shall have performed and complied in all material
respects with all agreements required by this Agreement to be performed or
complied with by Purchaser at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company
shall not be prohibited by any applicable law, court order or governmental
regulation;
(c) Receipt by the Company of duly executed counterparts
of this Agreement, the Escrow Agreement, and the Registration Rights Agreement
signed by Purchaser;
(d) The Company shall have received payment of Purchase
Price, less the applicable transaction fees.
ARTICLE 7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as at least 15% of the principal amount of Promissory Note remains
outstanding and for the benefit of Purchaser:
ARTICLE 7.1 INFORMATION. The Company will deliver or make
available to each holder of the Promissory Note:
(a) promptly upon the filing thereof, copies of (i) all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent), and (ii) all reports of Forms 10-K,
10-Q and 8-K (or other equivalents) which the Company or any Subsidiary has
filed with the Commission (collectively, "SEC Reports");
(b) simultaneously with the delivery of each item
referred to in clause (a) above, a certificate from the chief financial officer
of the Company certifying the accuracy of the financial statements contained in
the Company's reports on Forms 10-K and 10-Q (or other equivalents) and stating
that no Default or Event of Default has occurred and is continuing, or, if as
of the date of such delivery a Default shall have
occurred and be continuing, a certificate from the Company setting forth the
details of such Default or Event of Default and the action which the Company is
taking or proposes to take with respect thereto;
(c) within two (2) business days after any executive
officer of the Company obtains knowledge of a Default or Event of Default, or
that any Person has given any notice or taken any action with respect to a
claimed Default hereunder, a certificate of the chief financial officer of the
Company setting forth the details thereof and the action which the Company is
taking or proposed to take with respect thereto;
(d) promptly upon the mailing thereof to the
shareholders of the Company generally, copies of all financial statements,
reports and proxy statements so mailed and any other document generally
distributed to shareholders;
(e) at least two (2) Business Days prior to the
consummation of any Financing or other event requiring a repayment of the
Promissory Note under Section 3.4, notice thereof together with a summary of
all material terms thereof and copies of all documents and instruments
associated therewith;
(f) notice promptly upon the occurrence of any event by
which the Reserved Amount becomes less than the maximum number of Warrant
Shares issuable pursuant to the Transaction Agreements; and
(g) promptly following the commencement thereof, notice
and a description in reasonable detail of any litigation or proceeding to which
the Company or any Subsidiary is a party in which the amount involved is
$250,000 or more and not covered by insurance or in which injunctive or similar
relief is sought.
ARTICLE 7.2 PAYMENT OF OBLIGATIONS. The Company will, and will
cause each Subsidiary to, pay and discharge, at or before maturity, all their
respective material obligations, including, without limitation, tax
liabilities, except where the same may be contested in good faith by
appropriate proceedings and will maintain, in accordance with GAAP, appropriate
reserves for the accrual of any of the same.
ARTICLE 7.3 MAINTENANCE OF PROPERTY; INSURANCE. The Company
will, and will cause each Subsidiary to, keep all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted. In addition, the Company and each Subsidiary will maintain insurance
in at least such amounts and against such risks as it has insured against as of
the Closing Date.
ARTICLE 7.4 MAINTENANCE OF EXISTENCE. The Company will use its
commercially reasonable efforts, and will cause each Subsidiary to, continue to
engage in business of the same general type as now conducted by the Company and
such Subsidiaries, and will preserve, renew and keep in full force and effect
its respective corporate existence and their respective material rights,
privileges and franchises necessary or desirable in the normal conduct of
business, provided, the Company may merge as provided in Section 8.3 hereof.
ARTICLE 7.5 COMPLIANCE WITH LAWS. The Company will, and will
cause each Subsidiary to, comply, in all material respects, with all federal,
state, municipal, local or foreign
applicable laws, ordinances, rules, regulations, municipal by-laws, codes and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) except
(i) where compliance therewith is contested in good faith by appropriate
proceedings or (ii) where non-compliance therewith could not reasonably be
expected, in the aggregate, to have a Material Adverse Effect on the Company or
such Subsidiary.
ARTICLE 7.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Company will, and will cause each Subsidiary to, keep books of record and
account in which true and correct entries shall be made of all dealings and
transactions in relation to their respective businesses and activities; and
will permit, during normal business hours, Purchaser' Representative or an
affiliate thereof, as representatives of Purchaser, and representatives of the
Small Business Administration to visit and inspect any of their respective
properties, upon reasonable prior notice, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective executive officers and
independent public accountants (and by this provision the Company authorizes
its independent public accountants to disclose and discuss with Purchaser the
affairs, finances and accounts of the Company and its Subsidiaries in the
presence of a representative of the Company; provided, however, that such
discussions will not result in any unreasonable expense to the Company, without
Company consent), all at such reasonable times.
ARTICLE 7.7 INVESTMENT COMPANY ACT. The Company will not be or
become an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act of 1940, as amended.
ARTICLE 7.8 USE OF PROCEEDS. The proceeds from the issuance and
sale of the Promissory Note by the Company shall be used in accordance with
Schedule 7.8 attached hereto. None of the proceeds from the issuance and sale
of the Promissory Note by the Company pursuant to this Agreement will be used
directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.
ARTICLE 7.9 COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL
CONTRACTS. The Company will, and will cause each Subsidiary to use its
reasonable best efforts to, comply, in all respects, with all terms and
conditions of all material contracts to which it is subject; provided, it may
in its sole judgment, terminate or otherwise cancel such contract in compliance
with the terms of such contract.
ARTICLE 7.10 RESERVED SHARES AND LISTINGS.
(a) The Company shall at all times have authorized, and
reserved for the purpose of issuance, a sufficient number of shares of Common
Stock to provide for the full exercise of the Warrants and issuance of the
Warrant Shares (based on the exercise price of the Warrants) (the "Reserved
Amount"). The Company shall not reduce the Reserved Amount without the prior
written consent of Purchaser. If at any time the number of shares of Common
Stock authorized and reserved for issuance is below the number of Warrant
Shares issued or issuable upon exercise of the Warrants, the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares, in the case of an
insufficient number of authorized shares.
(b) The Company will maintain the listing and trading of
its Common Stock on the OTC Bulletin Board or a similar exchange. The Company
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers, Inc. (the "NASD") and such exchanges, as applicable. The Company shall
promptly provide to Purchaser copies of any notices it receives regarding the
continued eligibility of the Common Stock for listing on the OTC Bulletin Board
or any National Market.
ARTICLE 7.11 IRREVOCABLE AGENT INSTRUCTIONS. Upon receipt of a
Notice of Exercise, the Company shall immediately issue irrevocable
instructions to its transfer agent to issue certificates, registered in the
name of Purchaser or its nominee, for the Warrant Shares, in such amounts as
specified from time to time by Purchaser to the Company upon proper exercise of
the Warrants. Upon exercise of any Warrants in accordance with their terms, the
Company will, and will use its best lawful efforts to cause its transfer agent
to, issue one or more certificates representing shares of Common Stock in such
name or names and in such denominations specified by a Purchaser in a Notice of
Exercise. As long as the registration statement contemplated by the
Registration Rights Agreement shall remain effective, the shares of Common
Stock issuable upon exercise of the Warrants shall be issued to any transferee
of such shares from Purchaser without any restrictive legend upon appropriate
evidence of transfer in compliance with the Securities Act and the rules and
regulations of the Commission; provided that for so long as the registration
statement is effective, no opinion of counsel will be required to effect any
such transfer. The Company further warrants and agrees that no instructions
other than these instructions have been or will be given to its transfer agent.
Nothing in this Section 7.11 shall affect in any way a Purchaser's obligation
to comply with all securities laws applicable to Purchaser upon resale of such
shares of Common Stock, including any prospectus delivery requirements.
ARTICLE 7.12 MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL
INFORMATION. So long as any of the Securities are outstanding, the Company
shall timely file all reports required to be filed with the Commission pursuant
to the Exchange Act. The Company shall not terminate its status as an issuer
required to file reports under the Exchange Act, even if the Exchange Act or
the rules and regulations thereunder would permit such termination. If at
anytime the Company is not subject to the requirements of Section 13 or 15(d)
of the Exchange Act, the Company will promptly furnish at its expense, upon
request, for the benefit of the holders from time to time of Securities, and
prospective purchasers of Securities, information satisfying the information
requirements of Rule 144 under the Securities Act, subject in all cases to the
ability of the Company to merge as provided in Section 8.3.
ARTICLE 7.13 FORM D; BLUE SKY LAWS. The Company agrees to file a
"Form D" with respect to the Securities as required under Regulation D of the
Securities Act and to provide a copy thereof to Purchaser promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to Purchaser at the Closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to Purchaser on or prior to the Closing Date.
ARTICLE 8. NEGATIVE COVENANTS
The Company hereby agrees that after the date hereof for so long as at
least 15% of the principal amount of the Promissory Note remains outstanding
and for the benefit of Purchaser:
ARTICLE 8.1 LIMITATIONS ON DEBT OR OTHER LIABILITIES. Neither
the Company nor any Subsidiary will create, incur, assume or suffer to exist
(at any time after the Closing Date, after giving effect to the application of
the proceeds of the issuance of the Securities), without the prior written
consent of Purchaser, any Debt except (w) Debt incurred in a Permitted
Financing or as otherwise contemplated in Section 8.6(a), (x) Debt incurred in
connection with equipment leases to which the Company or its Subsidiaries are a
party incurred in the ordinary course of business; (y) Debt incurred in
connection with trade accounts payable, imbalances and refunds arising in the
ordinary course of business; and (z) a conventional bank debt facility (not
having any equity features) which facility will not have outstanding drawn
amounts greater than 30% of stockholders' equity on any date during which this
negative covenant is in effect.
ARTICLE 8.2 TRANSACTIONS WITH AFFILIATES. The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for the
account of, make any investment (whether by acquisition or stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, and Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except, (1) pursuant to those agreements specifically identified on
Schedule 8.2 attached hereto (with a copy of such agreements annexed to such
Schedule 8.2) or (2) on terms to the Company or such Subsidiary no less
favorable than terms that could be obtained by the Company or such Subsidiary
from a Person that is not an Affiliate of the Company upon negotiation at arms'
length, as determined in good faith by the Board of Directors of the Company;
provided that no determination of the Board of Directors shall be required with
respect to any such transactions entered into in the ordinary course of
business.
ARTICLE 8.3 MERGER OR CONSOLIDATION. Without the prior written
consent of Purchaser, which consent will not be unreasonably withheld, Company
will not, in a single transaction or a series of related transactions (i)
consolidate with or merge with or into any other Person, or (ii) permit any
other Person to consolidate with or merge into it, unless (w) the directors
representing two-thirds of the Board of Directors immediately prior to such
transaction continue to be directors of the surviving company immediately
thereafter, (x) the individuals set forth on Schedule 8.3 shall have executed
employment agreements requiring them to maintain positions as executive
officers with the surviving entity for a period of two years following the
transaction, (y) immediately before and immediately after given effect to such
transaction (including any indebtedness incurred or anticipated to be incurred
in connection with the transaction), no Default or Event of Default shall have
occurred and be continuing; and (z) the Company has delivered to Purchaser an
Officer's Certificate stating that such consolidation, merger or transfer
complies with this Agreement, and that all conditions precedent in this
Agreement relating to such transaction have been satisfied. Notwithstanding the
foregoing, the Company may not consummate a merger or consolidation wherein the
surviving company in such transaction (i) is not a reporting company under the
Exchange Act or (ii) does not maintain listing of its Common Stock on a
National Market, the OTC Bulletin Board or a similar exchange, without the
prior written consent of Purchaser.
ARTICLE 8.4 LIMITATION ON ASSET SALES. Neither the Company nor
any Subsidiary will consummate an Asset Sale of material assets of the Company
or any Subsidiary without the
prior written consent of Purchaser, which consent shall not be unreasonably
withheld. As used herein, "Asset Sale" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) or
sales of capital stock of a Subsidiary (other than directors' qualifying
shares), property or other assets (each referred to for the purpose of this
definition as a "disposition"), including any disposition by means of a merger,
consolidation or similar transaction other than a disposition of property or
assets at fair market value in the ordinary course of business.
ARTICLE 8.5 RESTRICTIONS ON CERTAIN AMENDMENTS. Neither the
Company nor any Subsidiary will waive any provision of, amend, or suffer to be
amended, any provision of such entity's existing Debt, any material contract or
agreement previously or hereafter filed by the Company with the Commission as
part of its SEC Reports, any Company Corporate Document or Subsidiary Corporate
Document if such amendment, in the Company's reasonable judgment, would
materially adversely affect Purchaser or the holders of the Securities without
the prior written consent of Purchaser.
ARTICLE 8.6 RESTRICTIONS ON ISSUANCES OF SECURITIES.
(a) From the Closing Date and continuing until 180 days
following the date on which the registration statement on which the Warrant
shares are registered for resale becomes effective the Company agrees that it
will not, without the prior written consent of Purchaser, issue any of its
equity securities (or securities convertible into or exchangeable or
exercisable for equity securities (the "Derivative Securities") on terms that
allow a holder thereof to acquire such equity securities (or Derivative
Securities) at a discount to the Market Price of the Common Stock at the time
of issuance or, in the case of Derivative Securities, at a conversion price
based on any formula (other than standard anti-dilution provisions) based on
the Market Price on a date later than the date of issuance which is below the
Market Price on the date of issuance (each such event, a "Discounted Equity
Offering") other than (i) borrowings under conventional credit facilities
existing as of the date hereof, (ii) stock issued or credit facilities to be
established in connection with acquisitions, (iii) equity securities or
Derivative Securities in connection with employee and director stock option and
stock purchase plans, (iv) securities issued under the Promissory Note or
Warrants, (v) up to $5,000,000 of the Company's securities on terms no more
favorable than those set forth in this Agreement and (vi) up to $7,000,000,
additional principal amount of the Company's 6% Promissory Note on the terms
set forth in this Agreement and exclusively raised by Reedland Capital Partners
acting as investment banker to the Company; provided, however, if Reedland is
unable to secure such financing within 60 days of the Closing Date, the Company
will be permitted to secure up to an aggregate of $7,000,000 on terms no more
favorable than those set forth in this Agreement in addition to any of the
financings permitted in this Section 8.6. In addition, the Company shall not
issue any equity securities in connection with a strategic alliance entered
into by the Company unless such securities are the subject of a one year
statutory or contractual hold period or, if not subject to such a hold period,
unless the Purchaser has fully converted all outstanding Promissory Note and
exercised all Warrants. As used herein, "discount" shall include, but not be
limited to, (i) any warrant, right or other security granted or offered in
connection with such issuance which, on the applicable date of grant, is
offered with an exercise or conversion price, as the case may be, at less than
the then current Market Price of the Common Stock or, if such security has an
exercise or conversion price based on any formula (other than standard
anti-dilution provisions) based on the Market Price on a date later than the
date of issuance, then at a price below the Market Price on such date of
exercise or conversion, as the case may be, or (ii) any commissions, fees or
other allowances paid in connection with such issuances (other than customary
underwriter or placement agent commissions, fees or allowances). For the
purposes of determining the Market Price at which Common Stock is acquired
under this Section, normal underwriting commissions and placement fees
(including underwriters' warrants) shall be excluded. Notwithstanding the
foregoing, the Company may enter into the following types of transactions
(collectively referred to as "Permitted Financings"): (1) "project financing"
which provide for the issuance of recourse debt instruments in connection with
the operation of the Company's business as presently conducted or as proposed
to be conducted; (2) an underwritten offering of Common Stock, provided that
such offering provides for the registration of the Warrant Shares if the
Registration Statement has not been declared effective; and (3) other financing
transactions specifically consented to in writing by the Purchaser.
(b) Notwithstanding the foregoing, the restrictions
contained in this Section 8.6 shall not apply to the issuance by the Company of
(or the agreement to issue) Common Stock or securities convertible into Common
Stock in connection with (i) the acquisition of a business or of assets
otherwise permitted under this Agreement, or (ii) Company or Subsidiary stock
option or other compensatory or employee benefit plans and up to any aggregate
of 500,000 additional shares of Common Stock (or Derivative securities
convertible into such number of shares of Common Stock ) issued to consultants
at or above Market Price on the day of issuance or (iii) any common stock to be
issued upon exercise or conversion of any options, warrants or other securities
outstanding on the date hereof.
ARTICLE 8.7 LIMITATION ON STOCK REPURCHASES. Except as otherwise
set forth in the Promissory Note and the Warrants, the Company shall not,
without the written consent of the Majority Holders, redeem, repurchase or
otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) any shares of capital stock of the Company or any
warrants, rights or options to purchase or acquire any such shares.
ARTICLE 9. RESTRICTIVE LEGENDS
ARTICLE 9.1 RESTRICTIONS ON TRANSFER. From and after their
respective dates of issuance, none of the Securities shall be transferable
except upon the conditions specified in this Article IX, which conditions are
intended to ensure compliance with the provisions of the Securities Act in
respect of the Transfer of any of such Securities or any interest therein.
Purchaser will use its best efforts to cause any proposed transferee of any
Securities held by it to agree to take and hold such Securities subject to the
provisions and upon the conditions specified in this Article IX.
ARTICLE 9.2 LEGENDS. The Promissory Note and Warrants shall bear
restrictive legends in accordance with applicable securities laws. The Warrant
Shares, upon resale by the Purchaser pursuant to the Registration Statement,
shall be freely tradeable and unrestricted.
ARTICLE 9.3 NOTICE OF PROPOSED TRANSFERS. Prior to any proposed
Transfer of the Securities (other than a Transfer (i) registered or exempt from
registration under the Securities Act, (ii) to an affiliate of a Purchaser
which is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act, provided that any such transferee shall agree to be bound by
the terms of this Agreement and the Registration Rights Agreement, or (iii) to
be made in reliance on Rule 144 under the Securities Act), the holder thereof
shall give written notice to the Company of such holder's intention to effect
such Transfer, setting forth the manner and circumstances of the proposed
Transfer, which shall be accompanied by (a) an opinion of counsel reasonably
acceptable to the Company, confirming that such transfer does not give rise to
a violation of the Securities Act, (B) representation letters in form and
substance reasonably satisfactory to the Company to ensure compliance with the
provisions of the Securities Act and (C) letters in form and substance
reasonably satisfactory to the Company from each such transferee stating such
transferee's agreement to be bound by the terms of this Agreement and the
Registration Rights Agreement. Such proposed Transfer may be effected only if
the Company shall have received such notice of transfer, opinion of counsel,
representation letters and other letters referred to in the immediately
preceding sentence, whereupon the holder of such Securities shall be entitled
to Transfer such Securities in accordance with the terms of the notice
delivered by the holder to the Company.
ARTICLE 10. ADDITIONAL AGREEMENTS AMONG THE PARTIES
ARTICLE 10.1 LIQUIDATED DAMAGES.
(a) The Company shall cause its transfer agent to, issue
and deliver shares of Common Stock consistent with Section 7.11 hereof within
three (3) New York Stock Exchange Trading Days of delivery of a Notice of
Exercise (the "Deadline") to Purchaser (or any party receiving Securities by
transfer from Purchaser) at the address of Purchaser set forth in the Notice of
Exercise. The Company understands that a delay in the issuance of such
certificates after the Deadline could result in economic loss to Purchaser.
(b) Without in any way limiting Purchaser's right to
pursue other remedies, including actual damages and/or equitable relief, the
Company agrees that if delivery of the Warrant Shares is more than one (1)
Business Day after the Deadline the Company shall pay to Purchaser, as
liquidated damages and not as a penalty, $500 for each $100,000 principal
amount Promissory Note then outstanding per day in cash, for each of the first
ten (10) days beyond the Deadline, and $1,000 for each $100,000 principal
amount Promissory Note then outstanding per day in cash for each day thereafter
that the Company fails to deliver such Common Stock. Such cash amount shall be
paid to Purchaser upon demand.
ARTICLE 10.2 EXERCISE NOTICE. The Company agrees that, in
addition to any other remedies which may be available to Purchaser, including,
but not limited to, the remedies available under Section 10.1, in the event the
Company fails for any reason (other than as a result of actions taken by a
Purchaser in breach of this Agreement) to effect delivery to a Purchaser of
certificates with or without restrictive legends as contemplated by Article IX
representing the shares of Common Stock on or prior to the Deadline after
exercise of the Warrants, Purchaser will be entitled, if prior to the delivery
of such certificates, to revoke the Notice of Exercise, by delivering a notice
to such effect to the Company whereupon the Company and Purchaser shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Exercise.
ARTICLE 10.3 RESERVED.
ARTICLE 10.4 REGISTRATION RIGHTS. The Company shall grant
Purchaser registration rights covering the Warrant Shares (the "Registrable
Securities") on the terms set forth in the Registration Rights Agreement.
ARTICLE 11. INTENTIONALLY OMITTED
ARTICLE 12. EVENTS OF DEFAULT
ARTICLE 12.1 EVENTS OF DEFAULT. If one or more of the following
events (each an "Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or repay when due, all
or any part of the principal of the Promissory Note (whether by virtue of the
agreements specified in this Agreement or the Promissory Note);
(b) failure by the Company to pay (i) within five (5)
Business Days of the due date thereof any interest on any Promissory Note or
(ii) within five (5) Business Days following the delivery of notice to the
Company of any fees or any other amount payable (not otherwise referred to in
(a) above or this clause (b)) by the Company under this Agreement or any other
Transaction Agreement;
(c) reserved;
(d) failure on the part of the Company to observe or
perform any covenant contained in Article VIII of this Agreement after the
receipt of written notice by the Purchaser of such default and failure of the
Company to cure such default within five days of such notice;
(e) failure on the part of the Company to observe or
perform any covenant or agreement contained in any Transaction Agreement (other
than those covered by clauses (a), (b), (c), or (d) above) after the receipt of
written notice by the Purchaser of such default and the failure of the Company
to cure such default within 30 days of its initial occurrence.
(f) the trading in the Common Stock shall have been
suspended by the Commission, OTC Bulletin Board or any National Market (except
for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company and except if, at
the time there is any suspension on any National Market, the Common Stock is
then listed and approved for trading on another National Market within ten (10)
Trading Days thereof);
(g) reserved;
(h) the Company shall have its Common Stock delisted
from the OTC Bulletin Board or a National Market for at least ten (10)
consecutive Trading Days and is unable to obtain a listing on a National Market
within such ten (10) Trading Days;
(i) reserved;
(j) the Company or any Subsidiary has commenced a
voluntary case or other proceeding seeking liquidation, winding-up,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, or has
consented to any such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding commenced against
it, or has made a general assignment for the benefit of creditors, or has
failed generally to pay any of its material debts as they become due, or has
taken any corporate action to authorize any of the foregoing;
(k) an involuntary case or other proceeding has been
commenced against the Company or any Subsidiary seeking liquidation,
winding-up, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days, or an order for relief has
been entered against the Company or any Subsidiary under the federal bankruptcy
laws as now or hereafter in effect;
(l) default in any provision (including payment) or any
agreement governing the terms of any Debt (including the Company's 6%
Convertible Debentures issued on May 24, 2002) of the Company or any Subsidiary
in excess of $500,000, which has not been cured within any applicable period of
grace associated therewith;
(m) judgments or orders for the payment of money which
in the aggregate at any one time exceed $1,000,000 and are not covered by
insurance have been rendered against the Company or any Subsidiary by a court
of competent jurisdiction and such judgments or orders shall continue
unsatisfied and unstayed for a period of 60 days; or
(n) any representation, warranty, certification or
statement made by the Company in any Transaction Agreement or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with any Transaction Agreement
shall prove to have been untrue in any material respect when made.
then, and in every such occurrence, Purchaser may, with respect to an Event of
Default specified in paragraphs (a) or (b), and the Majority Holders may, with
respect to any other Event of Default which has not been cured, by notice to
the Company, declare the Promissory Note to be, and the Promissory Note shall
thereon become immediately due and payable; provided that in the case of any of
the Events of Default specified in paragraph (j) or (k) above with respect to
the Company or any Subsidiary, then, without any notice to the Company or any
other act by Purchaser, the entire amount of the Promissory Note shall become
immediately due and payable, provided, further, if any Event of Default has
occurred and is continuing, and irrespective of whether any Promissory Note has
been declared immediately due and payable hereunder, any Purchaser of
Promissory Note may proceed to protect and enforce the rights of Purchaser by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Promissory
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise, and provided further, in the case of any Event of Default,
the amount declared due and payable on the Promissory Note shall be the Formula
Price.
ARTICLE 12.2 POWERS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to Purchaser is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. Every power and remedy
given by the Promissory Note or by law may be exercised from time to time, and
as often as shall be deemed expedient, by Purchaser.
ARTICLE 13. MISCELLANEOUS
ARTICLE 13.1 NOTICES. All notices, demands and other
communications to any party hereunder shall be in writing (including telecopier
or similar writing) and shall be given to such party at its address set forth
on the signature pages hereof, or such other address as such party may
hereafter specify for the purpose to the other parties. Each such notice,
demand or other communication shall be effective (i) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified on the signature
page hereof, (ii) if given by mail, four days after such communication is
deposited in the mail with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified
in or pursuant to this Section.
ARTICLE 13.2 NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or waiver is
in writing and is signed by the Company and the Majority Holders; provided,
that without the consent of each holder of any Promissory Note affected
thereby, an amendment or waiver may not (a) reduce the aggregate principal
amount of Promissory Note whose holders must consent to an amendment or waiver,
(b) reduce the rate or extend the time for payment of interest on any
Promissory Note, (c) reduce the principal amount of or extend the stated
maturity of any Promissory Note or (d) make any Promissory Note payable in
money or property other than as stated in such Promissory Note. In determining
whether the holders of the requisite principal amount of Promissory Note have
concurred in any direction, consent, or waiver as provided in any Transaction
Agreement, Promissory Note which is owned by the Company or any other obligor
on or guarantor of the Promissory Note, or by any Person Controlling,
Controlled by, or under common Control with any of the foregoing, shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; and provided further that no such amendment, supplement or
waiver which affects the rights of Purchaser and their affiliates otherwise
than solely in their capacities as holders of Promissory Note shall be
effective with respect to them without their prior written consent.
ARTICLE 13.3 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
Purchaser, its Affiliates, and each Person, if any, who controls Purchaser, or
any of its Affiliates, within the meaning of the Securities Act or the Exchange
Act (each, a "Controlling Person"), and the respective partners, agents,
employees, officers and Directors of Purchaser, their Affiliates and any such
Controlling Person (each an "Indemnified Party") and collectively, the
"Indemnified Parties"), from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation and as incurred,
reasonable costs of investigating, preparing or defending any such claim or
action, whether or not such Indemnified Party is a party thereto, provided that
the Company shall not be obligated to advance such costs to any Indemnified
Party other than Purchaser unless it has received from such Indemnified Party
an undertaking to repay to the Company the costs so advanced if it should be
determined by final judgment of a court of competent jurisdiction that such
Indemnified Party was not entitled to indemnification hereunder with respect to
such costs) which may be incurred by such Indemnified Party in connection with
any investigative, administrative or judicial proceeding brought or threatened
that relates to or arises out of, or is in connection with any activities
contemplated by any Transaction Agreement; provided that the Company will not
be responsible for any claims, liabilities, losses, damages or expenses that
are determined by final judgment of a court of competent jurisdiction to result
from such Indemnified Party's gross negligence, willful misconduct or bad
faith.
(b) If any action shall be brought against an
Indemnified Party with respect to which indemnity may be sought against the
Company under this Agreement, such Indemnified Party shall promptly notify the
Company in writing and the Company, at its option, may, assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all reasonable fees and expenses. The failure
to so notify the Company shall not affect any obligations the Company may have
to such Indemnified Party under this Agreement or otherwise unless the Company
is materially adversely affected by such failure. Such Indemnified Party shall
have the right to employ separate counsel in such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party, unless (i) the Company has failed to assume
the defense and employ counsel or (ii) the named parties to any such action
(including any impleaded parties) include such Indemnified Party and the
Company, and such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the Company, in which case, if such
Indemnified Party notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, provided, however, that the Company shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be responsible hereunder for the
reasonable fees and expenses of more than one such firm of separate counsel, in
addition to any local counsel, which counsel shall be designated by Purchaser.
The Company shall not be liable for any settlement of any such action effected
without the written consent of the Company (which shall not be unreasonably
withheld) and the Company agrees to indemnify and hold harmless each
Indemnified Party from and against any loss or liability by reason of
settlement of any action
effected with the consent of the Company. In addition, the Company will not,
without the prior written consent of Purchaser, settle or compromise or consent
to the entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect to which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Party is a party thereto) unless such settlement, compromise,
consent or termination includes an express unconditional release of Purchaser
and the other Indemnified Parties, satisfactory in form and substance to
Purchaser, from all liability arising out of such action, claim, suit or
proceeding.
(c) If for any reason the foregoing indemnity is
unavailable (otherwise than pursuant to the express terms of such indemnity) to
an Indemnified Party or insufficient to hold an Indemnified Party harmless,
then in lieu of indemnifying such Indemnified Party, the Company shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such claims, liabilities, losses, damages, or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by Purchaser on the other from the transactions
contemplated by this Agreement or (ii) if the allocation provided by clause (i)
is not permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the one hand
and Purchaser on the other, but also the relative fault of the Company and
Purchaser as well as any other relevant equitable considerations.
Notwithstanding the provisions of this Section 13.3, the aggregate contribution
of all Indemnified Parties shall not exceed the amount of interest and fees
actually received by Purchaser pursuant to this Agreement. It is hereby further
agreed that the relative benefits to the Company on the one hand and Purchaser
on the other with respect to the transactions contemplated hereby shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of material fact or the omission or alleged omission to state
a material fact related to information supplied by the Company or by Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(d) The indemnification, contribution and expense
reimbursement obligations set forth in this Section 13.3 (i) shall be in
addition to any liability the Company may have to any Indemnified Party at
common law or otherwise; (ii) shall survive the termination of this Agreement
and the other Transaction Agreements and the payment in full of the Promissory
Note and (iii) shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of Purchaser or any other Indemnified
Party.
ARTICLE 13.4 APPLICATION FEE; EXPENSES; DOCUMENTARY TAXES. The
Company shall pay to Purchaser an application fee equal to 1% of the Principal
Amount of the Promissory Note
on the Closing Date. In addition, the Company agrees to pay to Global Capital
Advisors, Ltd., the investment advisor to Purchaser, on the Closing Date, a fee
of $10,000.00 (the "Out of Pocket Fee") in full satisfaction of its out of
pocket expenses and all obligations of the Company to Purchaser and its agents
in connection with the negotiation and preparation of the Transaction
Agreements, relevant due diligence, and fees and disbursements of legal
counsel. In addition, the Company agrees to pay any and all stamp, transfer and
other similar taxes, assessments or charges payable in connection with the
execution and delivery of any Transaction Agreement or the issuance of the
Securities to Purchaser, excluding their assigns.
ARTICLE 13.5 PAYMENT. The Company agrees that, so long as
Purchaser shall own any Promissory Note purchased by it from the Company
hereunder, the Company will make payments to Purchaser of all amounts due
thereon by wire transfer by 4:00 P.M. (E.S.T.).
ARTICLE 13.6 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the Company and upon Purchaser and its respective successors and
assigns; provided that the Company shall not assign or otherwise transfer its
rights or obligations under this Agreement to any other Person without the
prior written consent of the Majority Holders. All provisions hereunder
purporting to give rights to Purchaser and its affiliates or to holders of
Securities are for the express benefit of such Persons and their successors and
assigns.
ARTICLE 13.7 BROKERS. Except as set forth in Schedule 13.7, the
Company represents and warrants that it has not employed any broker, finder,
financial advisor or investment banker who would be entitled to any brokerage,
finder's or other fee or commission payable by the Company or Purchaser in
connection with the sale of the Securities.
ARTICLE 13.8 FLORIDA LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; APPOINTMENT OF AGENT. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA. EACH PARTY
HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA AND OF ANY FEDERAL DISTRICT
COURT SITTING IN PALM BEACH COUNTY, FLORIDA FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET
FORTH HEREIN. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A
TRIAL BY JURY.
ARTICLE 13.9 ENTIRE AGREEMENT. This Agreement, the Exhibits or
Schedules hereto, which include, but are not limited to the Promissory Note,
the Warrant, the Registration Rights Agreement and the Security Agreement, set
forth the entire agreement and understanding of the parties relating to the
subject matter hereof and supercedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written
relating to the subject matter hereof. The terms and conditions of all Exhibits
and Schedules to this
Agreement are incorporated herein by this reference and shall constitute part
of this Agreement as is fully set forth herein.
ARTICLE 13.10 SURVIVAL; SEVERABILITY. The representations,
warranties, covenants and agreements of the parties hereto shall survive the
Closing hereunder. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it
materially changes the economic benefit of this Agreement to any party.
ARTICLE 13.11 TITLE AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
ARTICLE 13.12 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
and all Exhibits shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Purchaser and the Company shall be required to employ any
other reporting entity.
ARTICLE 13.13 PUBLICITY. The Company and the Purchaser 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 written 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 Purchaser without the prior written consent of Purchaser,
except to the extent required by law, in which case the Company shall provide
Purchaser with prior written notice of such public disclosure.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers, as of the date first
above written.
METROPOLITAN HEALTH NETWORKS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address: Metropolitan Health Networks, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx Xxxxx, XX 00000
Fax:
------------------------------
Telephone:
------------------------
GLOBAL CAPITAL FUNDING GROUP, L.P.
By: Global Capital Management Services, Inc.
its General Partner
By:
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
Address: 000 Xxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Fax: 000-000-0000
Tel.: 000-000-0000
Securities Purchase Agreement
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS...........................................................................................1
SECTION 1.1 DEFINITIONS.................................................................................1
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS.........................................................8
ARTICLE II. PURCHASE AND SALE OF SECURITIES......................................................................8
SECTION 2.1 PURCHASE AND SALE OF PROMISSORY NOTE........................................................8
SECTION 2.2 PURCHASE PRICE..............................................................................9
SECTION 2.3 CLOSING AND MECHANICS OF PAYMENT............................................................9
ARTICLE III. PAYMENT TERMS OF PROMISSORY NOTE....................................................................9
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS........................................9
SECTION 3.2 PAYMENT OF INTEREST.........................................................................9
SECTION 3.3 VOLUNTARY PREPAYMENT........................................................................9
SECTION 3.4 MANDATORY PREPAYMENTS......................................................................10
SECTION 3.5 PREPAYMENT PROCEDURES......................................................................10
SECTION 3.6 PAYMENT OF ADDITIONAL AMOUNTS..............................................................11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES......................................................................12
SECTION 4.1 ORGANIZATION AND QUALIFICATION.............................................................12
SECTION 4.2 AUTHORIZATION AND EXECUTION................................................................12
SECTION 4.3 CAPITALIZATION ............................................................................13
SECTION 4.4 GOVERNMENTAL AUTHORIZATION.................................................................13
SECTION 4.5 ISSUANCE OF SHARES.........................................................................14
SECTION 4.6 NO CONFLICTS...............................................................................14
SECTION 4.7 FINANCIAL INFORMATION......................................................................14
SECTION 4.8 LITIGATION.................................................................................15
SECTION 4.9 COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS..............................................15
SECTION 4.10 ENVIRONMENTAL MATTERS.....................................................................16
SECTION 4.11 TAXES.....................................................................................16
SECTION 4.12 INVESTMENTS, JOINT VENTURES...............................................................16
SECTION 4.13 NOT AN INVESTMENT COMPANY.................................................................16
SECTION 4.14 FULL DISCLOSURE...........................................................................16
SECTION 4.15 NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS......................................16
SECTION 4.16 PERMITS...................................................................................17
SECTION 4.17 LEASES....................................................................................17
SECTION 4.18 ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS...................................17
SECTION 4.19 PUBLIC UTILITY HOLDING COMPANY............................................................17
SECTION 4.20 INTELLECTUAL PROPERTY RIGHTS..............................................................17
SECTION 4.21 INSURANCE.................................................................................17
SECTION 4.22 TITLE TO PROPERTIES.......................................................................18
SECTION 4.23 INTERNAL ACCOUNTING CONTROLS..............................................................18
SECTION 4.24 FOREIGN PRACTICES.........................................................................18
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................................18
SECTION 5.1 PURCHASER..................................................................................18
ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES......................................................19
SECTION 6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO PURCHASE................................19
SECTION 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS....................................................21
ARTICLE VII. AFFIRMATIVE COVENANTS..............................................................................21
SECTION 7.1 INFORMATION................................................................................21
SECTION 7.2 PAYMENT OF OBLIGATIONS.....................................................................22
SECTION 7.3 MAINTENANCE OF PROPERTY; INSURANCE.........................................................22
SECTION 7.4 MAINTENANCE OF EXISTENCE...................................................................23
SECTION 7.5 COMPLIANCE WITH LAWS.......................................................................23
SECTION 7.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS..................................................23
SECTION 7.7 INVESTMENT COMPANY ACT.....................................................................23
SECTION 7.8 USE OF PROCEEDS............................................................................23
SECTION 7.9 COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL CONTRACTS.................................24
SECTION 7.10 RESERVED SHARES AND LISTINGS..............................................................24
SECTION 7.11 IRREVOCABLE AGENT INSTRUCTIONS............................................................24
SECTION 7.12 MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION.................................25
SECTION 7.13 FORM D; BLUE SKY LAWS.....................................................................25
ARTICLE VIII. NEGATIVE COVENANTS................................................................................25
SECTION 8.1 LIMITATIONS ON DEBT OR OTHER LIABILITIES...................................................25
SECTION 8.2 TRANSACTIONS WITH AFFILIATES...............................................................25
SECTION 8.3 MERGER OR CONSOLIDATION....................................................................26
SECTION 8.4 LIMITATION ON ASSET SALES..................................................................26
SECTION 8.5 RESTRICTIONS ON CERTAIN AMENDMENTS.........................................................26
SECTION 8.6 RESTRICTIONS ON ISSUANCES OF SECURITIES....................................................27
SECTION 8.7 LIMITATION ON STOCK REPURCHASES............................................................28
ARTICLE IX. RESTRICTIVE LEGENDS.................................................................................28
SECTION 9.1 RESTRICTIONS ON TRANSFER...................................................................28
SECTION 9.2 LEGENDS....................................................................................28
SECTION 9.3 NOTICE OF PROPOSED TRANSFERS...............................................................28
ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES..............................................................29
SECTION 10.1 LIQUIDATED DAMAGES........................................................................29
SECTION 10.2 EXERCISE NOTICE...........................................................................29
SECTION 10.3 RESERVED..................................................................................29
SECTION 10.4 REGISTRATION RIGHTS.......................................................................30
ARTICLE XI. INTENTIONALLY OMITTED...............................................................................30
ARTICLE XII. EVENTS OF DEFAULT..................................................................................30
SECTION 12.1 EVENTS OF DEFAULT.........................................................................30
SECTION 12.2 POWERS AND REMEDIES CUMULATIVE............................................................32
ARTICLE XIII. MISCELLANEOUS.....................................................................................32
SECTION 13.1 NOTICES...................................................................................32
SECTION 13.2 NO WAIVERS; AMENDMENTS....................................................................32
SECTION 13.3 INDEMNIFICATION...........................................................................33
SECTION 13.4 APPLICATION FEE; EXPENSES; DOCUMENTARY TAXES..............................................35
SECTION 13.5 PAYMENT...................................................................................35
SECTION 13.6 SUCCESSORS AND ASSIGNS....................................................................35
SECTION 13.7 BROKERS...................................................................................36
SECTION 13.8 FLORIDA LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; APPOINTMENT OF AGENT.......36
SECTION 13.9 ENTIRE AGREEMENT.........................................................................36
SECTION 13.10 SURVIVAL; SEVERABILITY...................................................................36
SECTION 13.11 TITLE AND SUBTITLES......................................................................36
SECTION 13.12 REPORTING ENTITY FOR THE COMMON STOCK. .................................................37
SECTION 13.13 PUBLICITY................................................................................37
LIST OF SCHEDULES
Schedule 2.2 Allocation of Purchase Price
Schedule 4.3 Capitalization
Schedule 4.7 Financial Information
Schedule 4.8 Litigation
Schedule 4.12 Investments, Joint Ventures
Schedule 8.2 Transactions with Affiliates
Schedule 8.3 Merger or Consolidation
LIST OF EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Solvency Certificate
Exhibit D Form of Officer's Certificate
Exhibit E Form of Common Stock Purchase Warrant
SECURITIES PURCHASE AGREEMENT
DATED AS OF
MAY 24, 2002
BY AND BETWEEN
METROPOLITAN HEALTH NETWORKS, INC.
AS THE ISSUER,
AND
GLOBAL CAPITAL FUNDING GROUP, L.P.
SCHEDULE 8.3
MERGER OR CONSOLIDATION
Xxxx Xxxxxxxxx
Xxxxxxx Xxxxxx
SCHEDULE 2.2
ALLOCATION OF PURCHASE PRICE
The purchase price shall be allocated as follows:
Promissory Note: $ 945,925.00
Warrants: $ 254,075.00
------------
TOTAL: $1,200,000.00
=============
