EXHIBIT 10.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") dated as of December 13, 2006 is
by and among United American Healthcare Corporation, a Michigan corporation
("Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission ("SEC") under the 1933 Act.
B. The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, upon the terms and conditions stated
in this Agreement, (i) an aggregate of one million (1,000,000) shares of the
Company's Common Stock, no par value, and (ii) warrants to purchase an aggregate
of one hundred thousand (100,000) shares of Common Stock of the Company in the
form attached hereto as EXHIBIT A ("Warrants").
C. Contemporaneously with the sale of the Shares and the Warrants, the
parties hereto will execute and deliver a Registration Rights Agreement, in the
form attached hereto as EXHIBIT B ("Registration Rights Agreement"), pursuant to
which the Company will agree to provide certain registration rights under the
1933 Act, and the rules and regulations promulgated thereunder, and applicable
state securities laws.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly Controls, is Controlled by, or is under common Control
with, such Person.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Common Stock" means the common shares, no par value, of the Company,
and any securities into which the Common Stock may be reclassified.
"Company's Knowledge" means the actual knowledge of the officers of
the Company, after due inquiry.
"Confidential Information" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"Control" (and any correlative term) means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Intellectual Property" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, databases and documentation).
"Material Adverse Effect" means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise),
or business of the Company and its Subsidiaries taken as a whole, or (ii) the
ability of the Company to perform its obligations under the Transaction
Documents.
"Nasdaq" means The NASDAQ Stock Market, Inc., its successors and
assigns.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Purchase Price" means Six Million Five Hundred Thousand Dollars
($6,500,000).
"Representative" means Security Research Associates, Inc., as the
authorized representative of itself and Moors & Cabot, Inc., the co-placement
agents ("Agents") for the transactions contemplated hereby.
"SEC Filings" has the meaning set forth in Section 4.6 below.
"Securities" means the Shares, the Warrants and the Warrant Shares.
"Shares" means the shares of Common Stock being purchased by the
Investors hereunder.
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"Subsidiary" has the meaning set forth in Section 4.1 below.
"Transaction Documents" means this Agreement, the Warrants and the
Registration Rights Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares and the Warrants. Subject to the terms
and conditions of this Agreement, on the Closing Date, each of the Investors
shall severally, and not jointly, purchase, and the Company shall sell and issue
to the Investors, the Shares and the Warrants in the respective amounts set
forth opposite the Investors' names on the signature pages attached hereto in
exchange for the Purchase Price as specified in Section 3 below. That number of
Shares with respect to any particular Investor is here called its "Share
Amount"; and that Investor's associated Warrant shall be exercisable in
accordance with its terms to purchase an aggregate number of additional shares
of the Company's Common Stock equal to ten percent (10%) of its Share Amount.
The Company intends to issue and sell a total of one million (1,000,000) Shares
together with associated Warrants for an additional 100,000 shares pursuant to
this Agreement; and consequently, each Investor's pro rata portion of the
aggregate Purchase Price of $6,500,000 is mathematically equivalent to $6.50 per
Share (with the associated Warrant purchase rights).
3. Closing. The date scheduled for closing this transaction (the "Closing")
is Wednesday, December 13, 2006 (the "Closing Date"). Investors shall completely
fill out and sign their signature pages in (i) THIS AGREEMENT and (ii) the
REGISTRATION RIGHTS AGREEMENT and (iii) the PURCHASER QUESTIONNAIRE. Investors
shall then fax those completed documents to Security Research Associates (the
"Representative"), Attention: Xxxxx Xxxxx, at fax no. 000-000-0000. Call Xx.
Xxxxx at telephone no. 000-000-0000 if you have any questions or problems. Also,
by Wednesday, December 13, 2006, Investors shall wire to the Company (see below)
an amount representing such Investor's pro rata portion of the Purchase Price as
set forth on the signature pages to this Agreement.
Wire info for: United American Healthcare Corporation
000 Xxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Account: United American Healthcare Corporation
LaSalle Bank ABN AMRO
0000 X. Xxx Xxxxxx Xxxx
Xxxx, XX 00000-0000
Bank ABA/Routing No.: 000000000
Account No: 6843105237
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Bank Contact: Xxxxxxx Xxxxxx Tel. (000) 000-0000
Upon receipt, the Representative shall fax the Investors' above-described
signature pages to the Company. Upon receiving faxed copies of all such
Investors' signature pages, the Company shall fax to the Representative,
Attention: Xxxxx Xxxxx, at fax no. 000-000-0000, executed copies of this
Agreement, the Registration Rights Agreement and the Warrants; and the Company's
counsel shall fax its signed opinion letter to the Representative in the same
manner,
Upon confirmation that the other conditions to closing specified herein
have been satisfied, the Company shall instruct Computershare (the Company's
"Transfer Agent"): (i) to print physical stock certificates and (ii) upon the
Transfer Agent's receiving notice from the Company of its receipt of an
Investor's payment of its pro rata portion of the Purchase Price, to deliver to
that Investor, by overnight mail or courier, a certificate or certificates,
registered in such name or names as that Investor may designate, representing
that Investor's purchased Shares. Upon the Company's receipt of an Investor's
payment of its pro rata portion of the Purchase Price, the Company shall give
the Transfer Agent the related notice described in clause (ii) above and shall
issue and deliver to that Investor its purchased Warrants, executed and
registered in such name or names as that Investor may designate, by overnight
mail or courier..
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors as follows:
4. 1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not and could not reasonably be expected to have a
Material Adverse Effect. The Company's subsidiaries are reflected on Schedule
4.1 hereto (the "Subsidiaries").
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and shareholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities. The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally and general equitable principles (regardless of whether
considered in a proceeding at law or in equity).
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized capital
stock of the Company on the date hereof; (b) the number of shares of capital
stock issued and outstanding; (c) the number of shares of capital stock issuable
pursuant to the Company's stock
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plans; and (d) the number of shares of capital stock issuable and reserved for
issuance pursuant to securities (other than the Shares and the Warrants)
exercisable for, or convertible into or exchangeable for, any shares of capital
stock of the Company. All of the issued and outstanding shares of the Company's
capital stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights and were issued in compliance in all
material respects with applicable law and any rights of third parties. All of
the issued and outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, were issued in compliance in all material respects with
applicable law and any rights of third parties and are owned by the Company,
beneficially and of record (except as disclosed in footnote 2 on Schedule 4.1),
subject to no lien, encumbrance or other adverse claim. No Person is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as described on Schedule 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described on
Schedule 4.3, the Company has not granted any Person the right to require the
Company to register any securities of the Company under the 1933 Act, whether on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person. Except as
described on Schedule 4.3, the issuance and sale of the Securities hereunder
will not obligate the Company to issue shares of Common Stock or other
securities to any other Person (other than the Investors) and will not result in
the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.
Except as described on Schedule 4.3, the Company does not have
outstanding shareholder purchase rights or any similar arrangement in effect
giving any Person the right to purchase any equity interest in the Company upon
the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws. The Warrants
have been duly and validly authorized. Upon the due exercise of the Warrants,
the Warrant Shares will be validly issued, fully paid, nonassessable and free
and clear of all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws. The Company has reserved a sufficient number of shares of
Common Stock for issuance upon the exercise of the Warrants, free and clear of
all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws.
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4.5 Consents. The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods. The Company is unaware of any facts or
circumstances that would prevent the Company from obtaining or effecting any of
the filings pursuant to the preceding sentence. The Company is not in violation
of the listing requirements of Nasdaq and has no knowledge of any facts that
would reasonably lead to delisting or suspension of the Common Stock from Nasdaq
in the foreseeable future. The issuance by the Company of the Securities shall
not have the effect of delisting or suspending the Common Stock from Nasdaq.
Notwithstanding the foregoing, the Company makes no representation about its
future Common Stock price.
4.6 Delivery of SEC Filings; Business. The Investors have received
copies of the Company's most recent Annual Report on Form 10-K (the "10-K"), and
all other reports filed by the Company pursuant to the 1934 Act since the filing
of the 10-K and prior to the date hereof (collectively, the "SEC Filings").
Except as described on Schedule 4.6, the SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period. The Company
and its Subsidiaries are engaged only in the business described in the SEC
Filings and, except as described on Schedule 4.6, the SEC Filings contain a
complete and accurate description in all material respects of the business of
the Company and its Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The proceeds of the sale of the Shares and the
Warrants hereunder shall be used by the Company for working capital and general
corporate purposes, including in particular but without limitation for start-up
costs associated with its Subsidiary, UAHC Health Plan of Tennessee, Inc.,
performing its new Medicare Advantage contract with the Centers for Medicare &
Medicaid Services.
4.8 No Material Adverse Change. Since June 30, 2006, except as
identified and described in the SEC Filings or as described on Schedule 4.8,
there has not been:
(i) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2006, except for changes in the ordinary course
of business which have not and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance, to any assets or properties of the Company or its
Subsidiaries;
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(iv) any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its Subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
(vi) any change or amendment to the Company's Articles of
Incorporation or by-laws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(vii) any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;
(viii) any material transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key employee, or any
material change in the composition or duties of the senior management of the
Company or any Subsidiary;
(x) the loss or threatened loss of any customer which has had or
could reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had
or could reasonably be expected to have a Material Adverse Effect.
4.9 SEC Filings. During the one (1) year period prior to the date
hereof, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act. Except as described on Schedule 4.9, at
the time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
4.10 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Securities will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under (i) the
Company's Articles of Incorporation or the Company's Bylaws, both as in effect
on the date hereof (copies of which have been provided to the Investors before
the date hereof), or (ii)(a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or
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any of their respective assets or properties, or (b) any agreement or instrument
to which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is
subject, except in the case of clause (ii), for breaches, violations or defaults
that that would not have a Material Adverse Effect, individually or in the
aggregate.
4.11 Tax Matters. The Company and each Subsidiary has timely prepared
and filed all material tax returns required to have been filed by the Company or
such Subsidiary with all appropriate governmental agencies and timely paid all
taxes shown thereon or otherwise owed by it. The charges, accruals and reserves
on the books of the Company in respect of taxes for all fiscal periods are
adequate in all material respects with respect to taxes due and payable, and
there are no material unpaid assessments against the Company or any Subsidiary
that are subject to interest or penalties for nonpayment nor, to the Company's
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any completed fiscal period or audits by any federal, state or
local taxing authority except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. All taxes and other assessments
and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due, except where the failure to so
withhold, collect or pay has not and would not reasonably be expected to result
in a Material Adverse Effect. There are no tax liens or claims pending or, to
the Company's Knowledge, threatened against the Company or any Subsidiary or any
of their respective assets or property. Except as described on Schedule 4.11,
there are no outstanding tax sharing agreements or other such arrangements
between the Company and any Subsidiary or other corporation or entity.
4.12 Title to Properties. Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.13 Certificates, Authorities and Permits. The Company and each
Subsidiary possess all material certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.14 No Labor Disputes. No material labor dispute with the employees
of the Company or any Subsidiary exists or, to the Company's Knowledge, is
imminent. No executive officer of the Company or any of its Subsidiaries (as
defined in Rule 501(f) of the 0000 Xxx) has notified the Company or any such
Subsidiary that such officer intends to leave the Company or
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any such Subsidiary or otherwise terminate such officer's employment with the
Company or any such Subsidiary.
4.15 Intellectual Property.
(a) The Company and/or its Subsidiaries has complied in all
material respects with its obligations (including timely filings, proofs and
payments of fees) with respect to all material Intellectual Property owned by
the Company and/or its Subsidiaries, and to the Company's Knowledge, the
Company's rights with respect to such owned Intellectual Property is currently
valid and enforceable. No Intellectual Property of the Company or its
Subsidiaries which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any cancellation,
dispute or litigation, and, to the Company's Knowledge, no such action is
threatened. No patent of the Company or its Subsidiaries has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty or
other agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $50,000 per
license) (collectively, "License Agreements") are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company's Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
general equitable principles (regardless of whether considered in a proceeding
at law or in equity), and there exists no event or condition which will result
in a material violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default by the Company or any of its Subsidiaries
under, any such License Agreement.
(c) The Company and its Subsidiaries own or have the valid right
to use all of the Intellectual Property that is necessary for the conduct of the
Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted and for the ownership,
maintenance and operation of the Company's and its Subsidiaries' properties and
assets, free and clear of all liens, encumbrances, adverse claims or obligations
to license all such owned Intellectual Property and Confidential Information,
other than licenses entered into in the ordinary course of the Company's and its
Subsidiaries' businesses and other than the Company's and its Subsidiaries'
obligations under licenses to them. The Company and its Subsidiaries have a
valid and enforceable right to use all material third party Intellectual
Property and Confidential Information used or held for use in the respective
businesses of the Company and its Subsidiaries.
(d) The conduct of the Company's and its Subsidiaries' businesses as
currently conducted does not infringe or otherwise impair or conflict with
(collectively,
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"Infringe") any material Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party, and, to the Company's
Knowledge, the Intellectual Property and Confidential Information of the Company
and its Subsidiaries which are necessary for the conduct of Company's and each
of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted are not being Infringed by any third party.
There is no litigation or order pending or outstanding or, to the Company's
Knowledge, threatened or imminent, that seeks to limit or challenge or that
concerns the ownership, use, validity or enforceability of any material
Intellectual Property or Confidential Information of the Company and its
Subsidiaries and the Company's and its Subsidiaries' use of any material
Intellectual Property or Confidential Information owned by a third party, and,
to the Company's Knowledge, there is no valid basis for the same.
(e) The consummation of the transactions contemplated hereby will
not result in the alteration, loss, impairment of or restriction on the
Company's or any of its Subsidiaries' ownership or right to use any of the
Intellectual Property or Confidential Information which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted.
4.16 Environmental Matters. Neither the Company nor any Subsidiary is
in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.17 Litigation. Except as described on Schedule 4.17, there are no
pending actions, suits or proceedings against the Company, its Subsidiaries or
any of its or their properties; and to the Company's Knowledge, no such actions,
suits or proceedings are threatened or contemplated, which have had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.
4.18 Financial Statements. Except as described on Schedule 4.18, the
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (except as may be disclosed therein or in the notes thereto, and, in the
case of quarterly financial statements, as permitted by Form 10-Q under the 1934
Act). As of their respective filing dates, the financial statements of the
Company included in the SEC Filings complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto. Except as set forth in the
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financial statements of the Company included in the SEC Filings filed prior to
the date hereof or as described on Schedule 4.18, neither the Company nor any of
its Subsidiaries has incurred any liabilities, contingent or otherwise, except
those incurred in the ordinary course of business, consistent (as to amount and
nature) with past practices since the date of such financial statements, none of
which, individually or in the aggregate, have had or could reasonably be
expected to have a Material Adverse Effect.
4.19 Insurance Coverage. The Company and each Subsidiary maintains in
full force and effect insurance coverage set forth on the attached Schedule
4.19.
4.20 Brokers and Finders. Except as set forth on the attached Schedule
4.20, no Person will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the Company, any
Subsidiary or an Investor for any commission, fee or other compensation pursuant
to any agreement, arrangement or understanding entered into by or on behalf of
the Company.
4.21 No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.22 No Integrated Offering. Neither the Company nor any Person acting
on its behalf has, directly or indirectly, made any offers or sales of any
Company security or solicited any offers to buy any security that is of the same
or a similar class as the Securities, in the six months before the start of the
offering of the Shares and the Warrants contemplated hereby, other than those
offers or sales of Company securities under an employee benefit plan, under
circumstances that would adversely affect reliance by the Company on Section
4(2) for the exemption from registration for the transactions contemplated
hereby or would require registration of the Securities under the 1933 Act.
4.23 Private Placement. Assuming the accuracy of the Investors'
representations in Section 5 below, the offer and sale of the Shares and the
Warrants to the Investors as contemplated hereby is exempt from the registration
requirements of the 1933 Act.
4.24 Transactions with Affiliates. Except as disclosed in SEC Filings
made on or prior to the date hereof or as disclosed on Schedule 4.24, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than as holders of stock options
and/or warrants, and for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, trustee or partner.
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4.25 Internal Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company is in compliance in all
material respects with any and all applicable requirements of the Xxxxxxxx-Xxxxx
Act of 2002 that are effective as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are effective as of
the date hereof.
4.26 Disclosures. Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes material, nonpublic information. The Company has
provided the Investors with all the information that the Investors have
requested for deciding whether to acquire the Shares and the Warrants. The
written materials delivered to the Investors in connection with the transactions
contemplated by the Transaction Documents do not 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 light of the circumstances under which they
were made, not misleading.
4.27 Form S-3 Eligibility. Assuming the accuracy of the Investors'
representations in Section 5 below, the Company is eligible to use Form S-3
promulgated under the 1933 Act to register the Shares and the Warrant Shares for
resale by the Investors.
4.28 Manipulation of Price. The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result, or that could reasonably be expected to cause or
result, in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, or (ii) other
than the Agents or pursuant to the Transaction Documents or the Company's
engagement agreement with the Agents referred to on Schedule 4.20, sold, bid
for, purchased, or paid any compensation for soliciting purchases of, any of the
Securities.
5. Representations and Warranties of the Investors. Each of the Investors
hereby severally, and not jointly, represents and warrants to the Company that:
5.1 Organization and Existence. Each Investor who is not a natural
person is a validly existing corporation, limited partnership or limited
liability company and has all requisite corporate, partnership or limited
liability company power and authority to invest in the Securities pursuant to
this Agreement. Each Investor who is a natural person has all requisite right,
power and authority to invest in the Securities pursuant to this Agreement
(including without limitation obtaining any spousal consents necessary).
5.2 Authorization. The execution, delivery and performance by the
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of the Investor, enforceable against
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the Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors' rights generally and
general equitable principles (regardless of whether considered in a proceeding
at law or in equity).
5.3 Purchase Entirely for Own Account. The Securities to be received
by the Investor hereunder will be acquired for the Investor's own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act provided, however, that by making the
representations herein, such Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act and pursuant to the
applicable terms of the Transaction Documents. The Investor is not a registered
broker dealer or an entity engaged in the business of being a broker dealer.
5.4 Investment Experience. The Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an opportunity to
receive all additional information related to the Company requested by it and to
ask questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. The
Investor acknowledges receipt of copies of the SEC Filings. The Company has
provided the Investor with all the information that the Investor has requested
in order to decide whether to acquire the Shares and the Warrants.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, that the Securities have not been
registered under the 1933 Act, and that under such laws and applicable
regulations such securities may not be resold unless they are registered or
unless an exemption from registration is available under the 1933 Act or
applicable state securities laws. The Securities may be pledged in connection
with a bona fide margin account or other loan or financing arrangement secured
by the Securities if such pledge of Securities is exempt from registration under
the 1933 Act and applicable state securities laws, and no Investor effecting
such a pledge of Securities shall be required to provide the Company with any
notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without limitation, this
Section 5.6.
5.7 Legends. It is understood that, except as provided below,
certificates evidencing such Securities may bear the following or any similar
legend:
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(a) "The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, or any state securities laws and
may not be transferred unless (i) such securities have been registered for sale
pursuant to the Securities Act of 1933, as amended, or (ii) the Company has
received an opinion of counsel reasonably satisfactory to it that such transfer
may lawfully be made without registration under the Securities Act of 1933 or
qualification under applicable state securities laws."
(b) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.
Upon the earlier of (i) registration for resale pursuant to the
Registration Rights Agreement or (ii) Rule 144(k) becoming available, the
Company shall, upon an Investor's written request, promptly cause certificates
evidencing the Securities to be replaced with certificates which do not bear
such restrictive legends, and Warrant Shares subsequently issued upon due
exercise of the Warrants shall not bear such restrictive legends, provided that
the provisions of either clause (i) or clause (ii) above, as applicable, are
satisfied with respect to such Warrant Shares. The Company agrees that at such
time as such legend is no longer required under this Section 5.7, it will, no
later than three Business Days following the delivery by an Investor to the
Company or the Company's transfer agent of a certificate representing Shares or
Warrant Shares, as applicable, issued with a restrictive legend (such third
Business Day, the "Legend Removal Date"), deliver or cause to be delivered to
such Investor such shares electronically or by a certificate representing such
shares that is free from all restrictive and other legends. The Company shall
cause to be delivered to the transfer agent a blanket opinion of counsel to
permit the foregoing. The Company may not make any notation on its records or
give instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in the Transaction Documents. Certificates
for Securities subject to legend removal hereunder shall be transmitted by the
transfer agent of the Company to the Investors by crediting the account of the
Investor's prime broker with the Depository Trust Company System. All of the
Company's and its transfer agent's costs and expenses related to such removal of
the legends and the reissuance of any Securities shall be borne by the Company.
In addition to such Investor's other available remedies, the Company shall pay
to an Investor, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares (or Warrant Shares underlying a Warrant tendered for
legend removal) (based on the VWAP, as defined in the Warrant form attached
hereto as EXHIBIT A, of the Common Stock on the date such Securities are
submitted to the Company's transfer agent) delivered for removal of the
restrictive legend, $2.50 per Trading Day for each Trading Day after the Legend
Removal Date until such certificate is delivered without a legend but not to
exceed the aggregate amount of $100,000 to all Investors collectively. Nothing
herein shall limit such Investor's right to pursue actual damages for the
Company's failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Investor shall have the right to
pursue all remedies for such failure available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief, without the necessity of showing economic loss and without
any bond or other security being required.
5.8 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
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5.9 Related Parties. The Investor is not an Affiliate of any other
Investor or of any shareholder of the Company and does not otherwise have
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the 0000 Xxx) of any shares of the Company's securities held in the name of any
other Person.
5.10 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of, and has not otherwise received with
respect to the Securities, any form of general advertising or general
solicitation.
5.11 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investors, except for the
agreements with Security Research Associates, Inc. and Moors & Cabot, Inc.
5.12 Permitted Transactions. Prior to the Effective Date (as defined
in the Registration Rights Agreement), the Investor will not, directly or
indirectly, if then prohibited by law or regulation, sell, offer to sell,
solicit offers to buy, dispose of, loan, pledge or grant any right with respect
to (collectively, a "Disposition") the Common Stock.
6. Conditions to Closing.
6.1 Conditions to the Investors' Obligations. The obligation of the
Investors to purchase the Shares and the Warrants at the Closing is subject to
the fulfillment to the Investors' satisfaction, on or prior to the Closing Date,
of the following conditions, any of which may be waived by the Investors
agreeing hereunder to purchase 66-2/3% of the Shares and the Warrants (the
"Required Investors"):
(a) The representations and warranties made by the Company in
Section 4 above qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 4
above not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(b) The Company shall have obtained in a timely fashion any and
all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Shares and the
Warrants, all of which shall be in full force and effect.
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(c) The Company shall have executed and delivered the
Registration Rights Agreement.
(d) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, in each case enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(e) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b) and (d) of this Section 6.1.
(f) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
Articles of Incorporation and Bylaws of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.
(g) No stop order or suspension of trading shall have been
imposed by Nasdaq, the SEC or any other governmental regulatory body with
respect to public trading in the Common Stock.
(h) The Company shall have delivered the opinion of Xxxxxxxx
Xxxxxx Xxxxxxxx and Xxxx LLP, the Company's outside counsel, dated the Closing
Date, in substantially the form attached hereto as EXHIBIT C.
6.2 Conditions to Obligations of the Company. The Company's obligation
to sell and issue the Shares and the Warrants at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the Investors in
Section 5 above shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
representations in Sections 5.3 through 5.10 shall be true and correct in all
respects when made, and shall be true and correct in all respects on the Closing
Date with the same force and effect as if they had been made on and as of said
date. The Investors shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by them
on or prior to the Closing Date.
(b) The Investors shall have executed and delivered the
Registration Rights Agreement.
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(c) The Investors shall have delivered the Purchase Price to the
Company.
6.3 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the
Required Investors;
(ii) By the Company if any of the conditions set forth in
Section 6.2 above shall have become incapable of fulfillment, and shall not have
been waived by the Company;
(iii) By the Required Investors if any of the conditions set
forth in Section 6.1 above shall have become incapable of fulfillment, and shall
not have been waived by the Required Investors; or
(iv) By either the Company or the Required Investors if the
Closing has not occurred on or prior to December 31, 2006;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
(b) In the event of termination by the Company or the Required
Investors of their obligations to effect the Closing pursuant to this Section
6.3, written notice thereof shall forthwith be given to the other parties hereto
and the obligation of all parties to effect the Closing shall be terminated,
without further action by any party. Nothing in this Section 6.3 shall be deemed
to release any party from any liability for any breach by such party of the
terms and provisions of this Agreement or the other Transaction Documents or to
impair the right of any party to compel specific performance by any other party
of its obligations under this Agreement or the other Transaction Documents.
7. Covenants and Agreements of the Company.
7.1 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the exercise of the Warrants,
such number of shares of Common Stock as shall from time to time equal the
number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.
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7.2 Information. The Company shall not disclose material nonpublic
information to the Investors, or to advisors to or representatives of the
Investors, unless prior to disclosure of such information the Company identifies
such information as being material nonpublic information and provides the
Investors, such advisors and representatives with the opportunity to accept or
refuse to accept such material nonpublic information for review and any Investor
wishing to obtain such information enters into an appropriate confidentiality
agreement with the Company with respect thereto.
7.3 No Conflicting Agreements. The Company will not take any action,
enter into any agreement or make any commitment that would interfere in any
material respect with the obligations to the Investors under the Transaction
Documents.
7.4 Compliance with Laws. The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.
7.5 Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Investor promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Investors 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 the Investors on or prior to the Closing
Date. The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of such states of the United States as reasonably determined by the Company to
be necessary following the Closing Date.
7.6 Reporting Status. Until the date on which the Investors shall have
sold all the Shares and Warrant Shares and none of the Warrants are outstanding
(the "Reporting Period"), the Company shall timely file all reports required to
be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would no longer
require or otherwise permit such termination, and the Company shall take all
actions necessary to maintain its eligibility to register the Shares and Warrant
Shares for resale by the Investors on Form S-3.
7.7 Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall use commercially reasonable efforts to maintain, in
accordance with the Transaction Documents, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall use commercially reasonable efforts to maintain the
Common Stock's authorization for quotation on Nasdaq. Neither the Company nor
any of its Subsidiaries shall take any action which would be reasonably expected
to result in the delisting or suspension of
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the Common Stock on Nasdaq. The Company shall pay all of its fees and expenses
in connection with satisfying its obligations under this Section 7.7.
7.8 Fees. The Company shall pay an expense allowance to Capital
Ventures International (an Investor) or its designee(s) for all reasonable costs
and expenses incurred in connection with the transactions contemplated by the
Transaction Documents (including all reasonable legal fees and disbursements in
connection therewith, documentation and implementation of the transactions
contemplated by the Transaction Documents and due diligence in connection
therewith), in an amount equal to $15,000, which amount shall be withheld by
such Investor from its Purchase Price at the Closing. Subject to the Investors'
representations in Section 5 above, the Company shall be responsible for the
payment of any placement agent's fees, financial advisory fees, or broker's
commissions relating to or arising out of the transactions contemplated hereby,
including, without limitation, any fees payable to the Agent. Subject to the
Investors' representations in Section 5 above, the Company shall pay, and hold
each Investor harmless against, any liability, loss or expense (including,
without limitation, reasonable attorney's fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment.
7.9 Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York City time, on the first Business Day following the
Closing Date, the Company shall issue a press release disclosing all of the
material terms of this Agreement. (the "Press Release"). Within four (4)
Business Days after the Closing Date, the Company shall file a Current Report on
Form 8-K describing the material terms of the Transaction Documents in the form
required by the 1934 Act and attaching copies of this Agreement, the form of
Warrant and the form of the Registration Rights Agreement as exhibits to such
filing (including all attachments, the "8-K Filing"). From and after the
issuance of the Press Release, no Investor shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
agents, that is not disclosed in the Press Release.
7.10 Variable Securities; Dilutive Issuances. For so long as any
Warrants remain outstanding, the Company shall not, in any manner, issue or sell
any rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at an exercise or conversion price which varies or may vary with
the market price of the Common Stock after issuance, including by way of one or
more reset(s) to any fixed price unless the conversion, exchange or exercise
price of any such security cannot be less than the then applicable Warrant Price
(as defined in the Warrants) with respect to the Common Stock into which any
Warrant is exercisable, except pursuant to customary anti-dilution provisions.
7.11 Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
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7.12 Additional Issuances of Securities.
(a) For purposes of this Section 7.12, the following definitions
shall apply.
(i) "Convertible Securities" means any stock or securities
(other than Options) convertible into or exercisable or exchangeable for shares
of Common Stock.
(ii) "Options" means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible Securities.
(iii) "Common Stock Equivalents" means, collectively,
Options and Convertible Securities.
(iv) "Excluded Securities" shall mean any Common Stock,
equity, Common Stock Equivalents or equity equivalent securities issued or
issuable: (i) in connection with any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, consultant, officer or
director; (ii) upon the exercise of the Warrants or the exercise of warrants
issued to the Representatives in connection with the Transaction Documents;
(iii) pursuant to the Transaction Documents or to the Representatives in
connection with the transactions described in the Transaction Documents; (iv) in
connection with any acquisition or transaction by the Company, whether through
an acquisition of stock or a merger of any business, assets or technologies the
primary purpose of which is not to raise equity capital; (v) upon exercise of
any Options or Convertible Securities which are outstanding on the Closing Date,
provided that the terms of such Options or Convertible Securities are not
amended, modified or changed on or after the Closing Date; and (vi) for
consideration other than cash.
(b) From the date hereof until the date that is sixty (60)
Trading Days following the Effective Date (as defined in the Registration Rights
Agreement) (the "Trigger Date"), the Company will not, directly or indirectly,
file any registration statement with the SEC other than the Registration
Statement (as defined in the Registration Rights Agreement) or a registration
statement on Form S-8. From the date hereof until the Trigger Date, the Company
will not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or its Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock or Common Stock Equivalents, except for Excluded
Securities (any such offer, sale, grant, disposition or announcement being
referred to as a "Subsequent Placement").
(c) From the Trigger Date until the first anniversary of the
Closing Date, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the
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Company shall have first complied with this Section 7.12(c). The Company shall
deliver to each Investor an irrevocable written notice (the "Offer Notice") of
any proposed or intended issuance or sale or exchange (the "Offer") of the
securities being offered (the "Offered Securities") in a Subsequent Placement,
which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued, sold
or exchanged, (y) identify the persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued, sold or exchanged and
(z) offer to issue and sell to or exchange with such Investors at least forty
percent (40%) of the Offered Securities, allocated among such Investors (a)
based on such Investor's pro rata portion of the aggregate Purchase Price paid
for the Securities hereunder (the "Basic Amount"), and (b) with respect to each
Investor that elects to purchase its Basic Amount, any additional portion of the
Offered Securities attributable to the Basic Amounts of other Investors as such
Investor shall indicate it will purchase or acquire should the other Investors
subscribe for less than their Basic Amounts (the "Undersubscription Amount"),
which process shall be repeated until the Investors shall have an opportunity to
subscribe for any remaining Undersubscription Amount.
(d) To accept an Offer, in whole or in part, such Investor must
deliver a written notice to the Company prior to the end of the tenth (10th)
Business Day after such Investor's receipt of the Offer Notice (the "Offer
Period"), setting forth the portion of such Investor's Basic Amount that such
Investor elects to purchase and, if such Investor shall elect to purchase all of
its Basic Amount, the Undersubscription Amount, if any, that such Investor
elects to purchase (in either case, the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Investors are less than the total of all of the
Basic Amounts, then each Investor who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"), each Investor
who has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Investor bears to the total Basic Amounts of all Investors
that have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary. Notwithstanding the
foregoing, if the Company desires to modify or amend the terms and conditions of
the Offer prior to the expiration of the Offer Period, the Company may deliver
to the Investors a new Offer Notice and the Offer Period shall expire on the
third (3rd) Business Day after such Investor's receipt of such new Offer Notice.
(e) The Company shall have forty (40) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Investors (the "Refused Securities") pursuant to a definitive
agreement(s) (the "Subsequent Placement Agreement"), but only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring person or persons or less favorable to
the Company than those set forth in the Offer Notice. The Company shall have
forty-four (44) Business Days from the expiration of the Offer Period above to
publicly announce (a) the
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execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.
(f) In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 7.12(e) above), then each Investor may, at its sole option
and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that such Investor
elected to purchase pursuant to Section 7.12(d) above multiplied by a fraction,
(i) the numerator of which shall be the number or amount of Offered Securities
the Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Investors pursuant to Section 7.12(d) above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Investor so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Investors in accordance with Section 7.12(b) above.
(g) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Investors shall acquire from the
Company, and the Company shall issue to the Investors, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 7.12(f) above if the Investors have so elected, upon the terms and
conditions specified in the Offer. Notwithstanding anything to the contrary
contained in this Agreement, if the Company does not consummate the closing of
the issuance, sale or exchange of all or less than all of the Refused
Securities, within forty (40) Business Days of the expiration of the Offer
Period, the Company shall issue to the Investors, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 7.12(f) above if the Investors have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Investors of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Investors of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Investors and
their respective counsel. Any Offered Securities not acquired by the Investors
or other persons in accordance with Section 7.12(f) above may not be issued,
sold or exchanged until they are again offered to the Investors under the
procedures specified in this Agreement.
(h) The Company and the Investors agree that if any Investor
elects to participate in the Offer, (x) neither the Subsequent Placement
Agreement with respect to such Offer nor any other transaction documents related
thereto (collectively, the "Subsequent Placement Documents") shall include any
term or provisions whereby any Investor shall be required to agree to any
restrictions in trading as to any securities of the Company owned by such
Investor prior to such Subsequent Placement, except as otherwise required by
law, and (y) any registration rights set forth in such Subsequent Placement
Documents shall be similar in all material respects to the registration rights
contained in the Registration Rights Agreement.
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(i) Notwithstanding anything to the contrary in this Section 7.12
and unless otherwise agreed to by the Investors, the Company shall either
confirm in writing to the Investors that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention
to issue the Offered Securities, in either case in such a manner such that the
Investors will not be in possession of material nonpublic information, by the
forty-fourth (44th) Business Day following expiration of the Offer Period. If by
the forty-fourth (44th) Business Day following expiration of the Offer Period no
public disclosure regarding a transaction with respect to the Offered Securities
has been made, and no notice regarding the abandonment of such transaction has
been received by the Investors, such transaction shall be deemed to have been
abandoned. Should the Company decide to pursue such transaction with respect to
the Offered Securities, the Company shall provide each Investor with another
Offer Notice and each Investor will again have the right of participation set
forth in this Section 7.12. The Company shall not be permitted to deliver more
than one such Offer Notice to the Investors in any 60 day period.
(j) The restrictions contained in this Section 7.12 shall not
apply in connection with any Excluded Securities.
8. INTENTIONALLY OMITTED
9. Survival and Indemnification.
9.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for a period of two (2) years from the
date of this Agreement; provided, however, that the provisions contained in
Section 7 above shall survive in accordance therewith.
9.2 Indemnification. The Company agrees to indemnify and hold
harmless, on an after tax and after insurance recovery basis, each Investor and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all losses, claims, damages, liabilities and expenses
(including, without limitation, reasonable attorney fees) (collectively,
"Losses") to which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed on
the part of the Company under the Transaction Documents, and will reimburse any
such Person for all such amounts as they are incurred by such Person.
9.3 Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 9.2 above, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof,
and shall assume the payment of all fees and expenses; provided, however, that
the failure of any Indemnified Person so to notify the Company shall not relieve
the Company of its obligations hereunder except to the extent that the Company
is prejudiced by
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such failure to notify. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless: (i) the
Company and the Indemnified Person shall have mutually agreed to the retention
of such counsel; or (ii) in the reasonable judgment of counsel to such
Indemnified Person representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
Company shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent, or if there be a
final judgment for the plaintiff, the Company shall indemnify and hold harmless
such Indemnified Person from and against any loss or liability (to the extent
stated above) by reason of such settlement or judgment.
10. Miscellaneous.
10.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Required
Investors, as applicable. Each Investor acknowledges that a transfer of its
Securities may be subject to the terms of the Registration Rights Agreement. The
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
10.2 Counterparts; Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
10.3 Titles 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.
10.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three Business Days after such notice is deposited in first
class mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one day after
delivery to such carrier. All notices shall be addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days' advance written notice to the other party:
IF TO THE COMPANY: United American Healthcare Corporation
000 Xxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
WITH A COPY TO: Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP
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0000 Xxxxx Xxxxxxxx Xxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
IF TO THE INVESTORS:
to the addresses set forth on the signature pages hereto.
10.5 Expenses. Except as otherwise provided herein, the parties hereto
shall pay their own costs and expenses in connection herewith. In the event that
legal proceedings are commenced by any party to this Agreement against another
party to this Agreement in connection with this Agreement or the other
Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys' fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
10.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Required Investors. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Securities purchased under this Agreement at the time
outstanding, each future holder of all such securities, and the Company.
10.7 Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by any of the Investors without
the prior consent of the Company (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Investors shall allow the Company, to the extent reasonably
practicable in the circumstances, reasonable time to comment on such release or
announcement in advance of such issuance.
10.8 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
10.9 Entire Agreement. This Agreement, including the Exhibits and the
Schedules attached hereto, and the other Transaction Documents constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between or among the parties with respect to the subject
matter hereof and thereof.
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10.10 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
10.11 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York without
regard to the choice of law principles thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
THE COMPANY: UNITED AMERICAN HEALTHCARE CORPORATION
By:
------------------------------------
Xxxxxxx X. Xxxxxx,
Chairman, President and
Chief Executive Officer
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The Investors:
----------------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
E-mail:
--------------------------------
Telephone:
-----------------------------
Pro Rata Portion of the Purchase Price: ________________________________________
Number of Shares: ______________________
Number of Warrants: ____________________ (i.e., number of additional common
shares subject to the Warrant)
Address for Notice: ____________________________________
____________________________________
____________________________________
with a copy to: ____________________________________
____________________________________
____________________________________
PLEASE SET OUT BELOW YOUR REGISTRATION REQUIREMENTS.
IF SHARES ARE TO BE REGISTERED IN THE NAME OF MORE THAN ONE ENTITY, PROVIDE THE
INFORMATION REQUESTED BELOW FOR EACH ENTITY. (PLEASE USE MULTIPLE PAGES, ONE FOR
EACH ENTITY.)
1. The exact name that your Shares and Warrants
are to be registered in. You may use a
nominee name if appropriate: ____________________________
2. The relationship between the Investor and the
registered holder listed in response to item
1 above: ____________________________
3. The mailing address of the registered holder
listed in response to item 1 above: ____________________________
4. The Social Security Number or Tax
Identification Number of the registered
holder listed in response to item 1 above: ____________________________
CONTACT NAME AND TELEPHONE NUMBER REGARDING SETTLEMENT AND REGISTRATION:
________________________________________
Name
________________________________________
Telephone Number
EXACT ADDRESS CERTIFICATES ARE TO BE PHYSICALLY DELIVERED TO:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
CONTACT AT DELIVERY ADDRESS: _______________________ PHONE: ____________________
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