EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "AGREEMENT") is made as of
March 27, 2006 by and between National Quality Care, Inc., a Delaware
corporation (the "COMPANY") and Xxxxxx X. Xxxxxx ("PURCHASER").
1. ISSUANCE OF SECURITIES. Subject to the terms and conditions of this
Agreement, on the Purchase Date (as defined below) the Company will issue to
Purchaser an Unsecured Convertible Promissory Note (the "NOTE"), substantially
in the form attached hereto as EXHIBIT A, in the amount of $1,100,000,
convertible into shares of common stock of the Company (the "SHARES," and
together with the Note, the "SECURITIES") at a conversion price of $0.48 per
share, in consideration of $1,100,000 of existing indebtedness.
2. PURCHASE. The purchase and sale of the Securities under this
Agreement shall occur at the principal office of the Company simultaneously with
the execution of this Agreement by the parties or at such other place, or on
such other date as the Company and Purchaser shall agree (the "PURCHASE DATE").
3. LIMITATIONS ON TRANSFER.
(a) Purchaser shall not assign, encumber or dispose of any interest
in such Securities except in compliance with applicable securities laws.
(b) Regardless of whether the offering and sale of Securities under
this Agreement have been registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT") or have been registered or qualified under the securities
laws of any state, the Company at its discretion may impose restrictions upon
the sale, pledge or other transfer of the Securities (including the placement of
appropriate legends on stock certificates or the imposition of stop-transfer
instructions) if, in the judgment of the Company, such restrictions are
necessary or desirable in order to achieve compliance with the Securities Act,
the securities laws of any state or any other law.
4. INVESTMENT AND TAXATION REPRESENTATION. In connection with the
issuance of the Securities, Purchaser represents to the Company the following:
(a) Purchaser is an officer of the Company and a member of its
Board of Directors.
(b) Purchaser has a preexisting personal or business relationship
with the Company or one or more of its officers or directors or (b) by reason of
Purchaser's business or financial experience, or by reason of the business or
financial experience of Purchaser's financial advisor who is unaffiliated with
and who is not compensated, directly or indirectly, by the Company or any
affiliate or selling agent of the Company. Purchaser is capable of evaluating
the risks and merits of an investment in the Securities and of protecting
Purchaser's own interests in connection with the investment.
(c) Purchaser is an " accredited investor" as such term is defined
in Rule 501(a) of the Securities Act. Without limiting the generality of the
foregoing, Purchaser is at least one of the following:
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(i) a natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his or her purchase exceeds
$1,000,000; and/or
(ii) a natural person who had an individual income in excess
of $200,000 in each of the two most recent years, or joint income with that
person's spouse in excess of $300,000 in each of those years, and has a
reasonable expectation of reaching the same income level in the current year.
(d) Purchaser has had an opportunity to review all documents,
records and books pertaining to this investment and has been given the
opportunity to consult with counsel of his choice with respect to all aspects of
this investment and the Company's proposed business activities. Purchaser has
personally met with the officers and directors of the Company and has been
provided with such information as may have been requested and has at all times
been given the opportunity to obtain additional information necessary to verify
the accuracy of the information received and the opportunity to ask questions of
and receive answers from such officers and directors concerning the terms and
conditions of the investment and the nature and prospects of the Company's
business.
(e) Purchaser is aware that his investment in the Company is a
speculative investment that has limited liquidity and is subject to the risk of
complete loss. Purchaser is able, without impairing his financial condition, to
hold the Securities for an indefinite period and to suffer a complete loss of
his respective investment in the Securities. Purchaser is financially able to
bear the economic risk of an investment in the Securities, including the total
loss thereof.
(f) Purchaser is acquiring the Securities for investment purposes
and for Purchaser's own account only and not with a view to, or for sale in
connection with, any distribution of all or any part of the Securities.
(g) Purchaser has been advised to consult with his own attorneys
regarding all legal and tax matters concerning an investment in the Securities
and has done so to the extent he considers necessary.
(h) Purchaser has not seen, received or been solicited by any
leaflet, public promotional meeting, newspaper or magazine article or
advertisement, radio or television advertisement or any other form of
advertising or general solicitation with respect to the sale of the Securities.
(i) Purchaser understands that the Securities constitute
"restricted securities" under the Securities Act of 1933 in that the Securities
will be acquired from the Company in a transaction not involving a public
offering, that the Securities may be resold without registration under the
Securities Act of 1933 only in certain limited circumstances and that otherwise
the Securities must be held indefinitely. Purchaser further acknowledges and
understands that the Company is under no obligation to register the Securities.
(j) Purchaser acknowledges that the Securities have not been
registered under the Securities Act of 1933 or qualified under any state
securities law in reliance, in part, upon its representations, warranties and
agreements herein.
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(k) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the
Securities. Purchaser represents that Purchaser has consulted any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Securities and that Purchaser is not relying on the Company
for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Securities shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) Any legend required to be placed thereon by the California
Commissioner of Corporations.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Securities that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Securities or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Securities shall
have been so transferred.
6. TAX MATTERS.
(a) Purchaser acknowledges that the Company has directed Purchaser
to seek independent advice regarding the acquisition of the Securities, the
application of provisions of the Internal Revenue Code of 1986, as amended (the
"CODE"), the tax consequences of purchasing the Securities, the income tax laws
of any municipality or state in which Purchaser may reside, and the tax
consequences of Purchaser's death.
7. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
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(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or 48 hours after being deposited in the U.S. mail,
certified or registered mail, with postage prepaid and addressed to the party to
be notified at such party's address or fax number as set forth below or as
subsequently modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OR CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 24100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
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The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
NATIONAL QUALITY CARE, INC.
By: /s/ Xxxxxx Xxxx, M.D.
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Name: Xxxxxx Xxxx, M.D.
Title: Secretary
Address: 0000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Telecopier No.: (000) 000-0000
PURCHASER:
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Address: 00000 Xxxxxxx Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
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EXHIBIT A
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UNSECURED CONVERTIBLE PROMISSORY NOTE
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