EXHIBIT 10.1
EQUITY LINE OF CREDIT AGREEMENT
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THIS EQUITY LINE OF CREDIT AGREEMENT dated as of the 12th day of June 2001, (the
"Agreement") between CORNELL CAPITAL PARTNERS, L.P., a Delaware limited partnership and
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DUTCHESS PRIVATE EQUITIES FUND, L.P. (the "Investors") a Delaware limited partnership and
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MEDIX RESOURCES INC., a corporation organized and existing under the laws of the State of
Colorado (the "Company").
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WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investors, from time to time as
provided herein, and the Investors shall purchase up to Ten Million ($10,000,000) Dollars
of the Company's common stock, par value $0.001 per share (the "Common Stock"), for a
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total purchase price of Ten Million ($10,000,000) Dollars; and
WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the
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regulations promulgated there under (the "Securities Act"), and or upon such other
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exemption from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments to be made hereunder; and
WHEREAS, the Cornell Capital Partners, L.P. business affairs are managed by
Yorkville Advisors Management, LLC, a Delaware Corporation.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Advance" shall mean the portion of the Commitment Amount requested by
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the Company in the Advance Notice.
Section 1.2 "Advance Date" shall mean the date Xxxxxx Xxxxxxxx LLP/First Union
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Escrow Account is in receipt of the funds from the Investors and Xxxxxx Xxxxxxxx LLP, as
the Investors Counsel, is in possession of free trading shares from the Company and
therefore an Advance by the Investors to the Company can be made and Xxxxxx Xxxxxxxx LLP
can release the free trading shares to the Investors. No Advance Date shall be later than
ten (10) Trading Days after an Advance Notice Date.
Section 1.3 "Advance Notice" shall mean a written notice to the Investors setting
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forth the Advance amount that the Company requests from the Investors and the Advance
Date.
Section 1.4 "Advance Notice Date" shall mean each date the Company delivers to the
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Investors an Advance Notice requiring the Investors to advance funds to the Company,
subject to the terms of this Agreement. No Advance Notice Date shall be less thirteen
(13) Trading Days after the prior Advance Notice Date.
Section 1.5 "Bid Price" shall mean, on any date, the closing bid price (as reported
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by Bloomberg L.P.) of the Common Stock on the Principal Market or if the Common Stock is
not traded on a Principal Market, the highest reported bid price for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc.
Section 1.6 "Closing" shall mean one of the closings of a purchase and sale of
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Common Stock pursuant to Section 2.1.
Section 1.7 "Commitment Amount" shall mean the aggregate amount of up to Ten
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Million Dollars ($10,000,000) which the Investors have agreed to provide to the Company
in order to purchase the Company's Common Stock pursuant to the terms and conditions of
this Agreement.
Section 1.8 "Commitment Period" shall mean the period commencing on the
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earlier to occur of (i) the Effective Date, or (ii) such earlier date as the Company and
the Investors may mutually agree in writing, and expiring on the earliest to occur of (x)
the date on which the Investors shall have made payment of Advances pursuant to this
Agreement in the aggregate amount of up to Ten Million Dollars ($10,000,000), (y) the
date this Agreement is terminated pursuant to Section 2.6, or (z) the date occurring
twenty four (24) months from the date hereof.
Section 1.10 "Common Stock" shall mean the Company's common stock, par value
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$0.001 per share.
Section 1.11 "Condition Satisfaction Date" shall have the meaning set forth in
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Section 7.2.
Section 1.12 "Damages" shall mean any loss, claim, damage, liability, costs
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and expenses (including, without limitation, reasonable attorney's fees and disbursements
and costs and expenses of expert witnesses and investigation).
Section 1.13 "Effective Date" shall mean the date on which the SEC first
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declares effective a Registration Statement registering the resale of the Registrable
Securities as set forth in Section 7.2(a).
Section 1.14 "Escrow Agreement" shall mean the escrow agreement among the
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Company, First Union National Bank and the Investors dated the date hereof.
Section 1.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, and the rules and regulations promulgated there under.
Section 1.16 "Material Adverse Effect" shall mean any condition, circumstance,
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or situation that would prohibit or otherwise materially interfere with the ability of
the Company to enter into and perform any of its obligations under this Agreement or the
Registration Rights Agreement in any material respect.
Section 1.17 "Market Price" shall mean the average of the three (3) lowest
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daily Volume Weighted Average Prices of the Common Stock during the Pricing Period .
Section 1.18 "Maximum Advance Amount" shall be equal to one hundred and
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seventy five percent (175%) of the average daily volume of the Company's Common Stock
over the forty (40) Trading Days prior to the Advance Notice Date multiplied by the
Purchase Price.
Section 1.19 "NASD" shall mean the National Association of Securities Dealers,
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Inc.
Section 1.20 "Person" shall mean an individual, a corporation, a partnership,
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an association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
Section 1.22 "Pricing Period" shall mean the twenty two (22) Trading Day
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period, beginning twenty two days(22) Trading Days before the relevant Advance Notice
Date and ending on the Trading Day prior to the relevant Advance Notice Date.
Section 1.23 "Principal Market" shall mean the Nasdaq National Market, the
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Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common Stock.
Section 1.24 "Purchase Price" shall be set at ninety one percent (91%) of the
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Market Price during the Pricing Period
Section 1.25 "Registrable Securities" shall mean the shares of Common Stock
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(i) in respect of which the Registration Statement has not been declared effective by the
SEC, (ii) which have not been sold under circumstances meeting all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") or (iii) which have not been otherwise transferred to a holder who may trade
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such shares without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.
Section 1.26 "Registration Rights Agreement" shall mean the Registration
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Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the Company
and the Investors.
Section 1.27 "Registration Statement" shall mean a registration statement on
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Form X-0, Xxxx X-0, or Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC andif not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered there under in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with the intended
method of distribution of such securities), for the registration of the resale by the
Investors of the Registrable Securities under the Securities Act.
Section 1.28 "Regulation D" shall have the meaning set forth in the recitals
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of this Agreement.
Section 1.29 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.30 "Securities Act" shall have the meaning set forth in the recitals
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of this Agreement.
Section 1.31 "SEC Documents" shall mean Annual Reports on Form 10-K or 10-KSB,
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Quarterly Reports on Form 10-Q or 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the Company for a
period of at least twelve (12) months immediately preceding the date hereof or the
Advance Date, as the case may be, until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
Section 1.32 "Trading Day" shall mean any day during which the New York Stock
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Exchange shall be open for business.
Section 1.33 "Volume Weighted Average Price" shall mean the volume weighted
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average price of the Company's Common Stock as reported by Bloomberg L.P. on the AQR
Function.
ARTICLE II
Advances
Section 2.1 Investments.
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(a) Advances. Upon the terms and conditions set forth herein (including
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without limitation the provisions of Article VII hereof), on any Advance Notice Date the
Company may request an Advance by the Investors by the delivery of an Advance Notice.
The number of shares of Common Stock that the Investors shall receive for each Advance
shall be determined by dividing the amount of the Advance by the Purchase Price. No
fractional shares shall be issued. Fractional shares shall be rounded to the next higher
whole number of shares. Upon each Advance Notice requested by the Company Cornell
Capital Partners, L.P. shall be obligated to provide ninety percent (90%) and Dutchess
Private Equities Fund, L.P. shall be obligated to provide ten percent (10%) of the
Advance Notice amount. In the event that Dutchess Private Equities Fund, L.P. fails to
provide their percentage of the Advance Notice amount Cornell Capital Partners, L.P.
shall obligated to provide the corresponding percentage that Dutchess Private Equities
Fund, L.P. fails to provide. In the event Dutchess Private Equities Fund, L.P. shall fail
to perform their obligation to provide their respective percentage of an Advance Notice
amount they shall forfeit their right on all future Advance Notices and Cornell Capital
Partners, L.P. shall be obligated to provide one hundred percent (100%) of all future
Advance Notices for the life of this Agreement. Notwithstanding the provisions hereof
the Company shall be able to seek any and all remedies available to it under applicable
state or federal law against any Investor that fails to meet its obligations hereunder.
The aggregate maximum amount of all Advances that the Investors shall be obligated to
make under this Agreement shall not exceed the Commitment Amount.
(b) Notwithstanding the foregoing the Company shall only request an Advance
if the Volume Weighted Average Price of the Company's Common Stock on the Trading Day
prior to the Advance Notice Date is equal to or greater than the Volume Weighted Average
Price of the Company's Common Stock during the Pricing Period.
Section 2.2 Mechanics.
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(a) Advance Notice. At any time during the Commitment Period, the Company
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may deliver an Advance Notice to the Investors, subject to the conditions set forth in
Section 2.6 and Section 7.2; provided, however, the amount for each Advance as designated
by the Company in the applicable Advance Notice shall not be more than the Maximum
Advance Amount. The aggregate amount of the Advances pursuant to this Agreement shall
not exceed the Commitment Amount, unless otherwise agreed by the Investors in the
Investors' sole and absolute discretion. There will be a minimum of thirteen (13)
Trading Days between each Advance Notice Date.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be deemed
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delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investors if such notice is received prior to 12:00 noon Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile or otherwise after
12:00 noon Eastern Time on a Trading Day or at any time on a day which is not a Trading
Day. No Advance Notice may be deemed delivered, on a day that is not a Trading Day.
Section 2.3 Closings. On each Advance Date, which shall be no later than ten (10)
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Trading Days after an Advance Notice Date, (i) the Company shall deliver to the
Investors' counsel, as defined pursuant to the Escrow Agreement, shares of the Company's
Common Stock, representing the amount of the Advance by the Investors pursuant to Section
2.1 herein, registered in the name of the Investors which shall be delivered to the
Investors, or otherwise in accordance with the Escrow Agreement and (ii) the Investors
shall deliver to the Escrow Agent the amount of the Advance specified in the Advance
Notice by wire transfer of immediately available funds which shall be delivered to the
Company, or otherwise in accordance with the Escrow Agreement. In addition, on or prior
to the Advance Date, each of the Company and the Investors shall deliver to the other
through the Investors' counsel all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement in order
to implement and effect the transactions contemplated herein. Payment of funds to the
Company and delivery of the Company's Common Stock to the Investors shall occur in
accordance with the conditions set forth above and those contained in the Escrow
Agreement; provided, however, that to the extent the Company has not paid the fees,
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expenses, and disbursements of the Investors' counsel, Yorkville Advisors and Dutchess
Advisors Limited in accordance with Section 12.4, the amount of such fees, expenses, and
disbursements may be deducted by the Investors (and shall be paid to the relevant party)
from the amount of the Advance with no reduction in the amount of shares of the Company's
Common Stock to be delivered on such Advance Date.
Section 2.4 Termination of Investment. The obligation of the Investors to
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make an Advance to the Company pursuant to this Agreement shall terminate permanently
(including with respect to an Advance Date that has not yet occurred) in the event that
(i) there shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of thirty (30) Trading Days, other than due to
the acts of the Investors, during the Commitment Period, or (ii) the Company shall at any
time fail materially to comply with the requirements of Section 6.2, 6.3 or 6.8;
provided, however, that this termination provision shall not apply to any period
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commencing upon the filing of a post-effective amendment to such Registration Statement
and ending upon the date on which such post effective amendment is declared effective by
the SEC.
Section 2.5 Agreement to Advance Funds.
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(a) The Investors agree to advance the amount specified in the Advance
Notice to the Company after the completion of each of the following conditions and the
other conditions set forth in this Agreement:
(i) the execution and delivery by the Company, and the Investors, of this
Agreement, and the Exhibits hereto;
(ii) Investors' counsel shall have received the shares of Common Stock
applicable to the Advance;
(iii) the Company's Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement shall have been declared effective by the SEC, which Registration
Statement may cover up to one hundred thousand (100,000) shares of the Company's
common stock to be sold by other selling shareholders;
(iv) the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions there from.
The sale and issuance of the Registrable Securities shall be legally permitted by
all laws and regulations to which the Company is subject;
(v) the Company shall have filed with the Commission in a timely manner all
reports, notices and other documents required of a "reporting company" under the
Exchange Act and applicable Commission regulations;
(vi) the fees as set forth in Section 12.4 below shall have been paid or can
be withheld as provided in Section 2.3; and
(vii) the conditions set forth in Section 7.2 shall have been satisfied.
(viii) Investors shall received an opinion letter from counsel to the Company
(updated where applicable) on the date hereof and updated annually for the life of
the this Agreement.
Section 2.6 Limitation on Other Registration Statements. The Company shall
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not file any other registration statements under the 1933 Act until ninety (90) days has
elapsed from the Effective Date, excluding, however, any registration statement covering
shares issued upon the exercise of warrants or options existing on the date hereof,
shares issued to strategic partners or in connection with a merger or acquisition, or
shares issued in a $15,000,000 PIPE financing to be placed with both strategic investors
and long-term institutional investors, or shares issued upon the conversion of debentures
or promissory notes not to exceed an aggregate amount of One Million Dollars
($1,000,000).
ARTICLE III
Representations, Warranties and Covenants of Investors
Investors hereby represents and warrants to, and agrees with, the Company that the
following are true and as of the date hereof and as of each Advance Date:
Section 3.1 Organization and Authorization. Each Investor is duly incorporated or
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organized and validly existing in the jurisdiction of its incorporation or organization
and has all requisite power and authority to purchase and hold the securities issuable
hereunder. The decision to invest and the execution and delivery of this Agreement by
each Investors, the performance by each Investors of its obligations hereunder and the
consummation by each Investors of the transactions contemplated hereby have been duly
authorized and requires no other proceedings on the part of the Investors. The
undersigned have the right, power and authority to execute and deliver this Agreement and
all other instruments ( including, without limitations, the Registration Rights
Agreement), on behalf of the Investors. This Agreement and all such other instruments
have been duly executed and delivered by the Investors and, assuming the execution and
delivery hereof and thereof by the Company, will constitute the legal, valid and binding
obligations of the Investors, enforceable against the Investors in accordance with their
respective terms.
Section 3.2 Evaluation of Risks. The Investors have such knowledge and experience
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in financial tax and business matters as to be capable of evaluating the merits and risks
of, and bearing the economic risks entailed by, an investment in the Company and of
protecting its interests in connection with this transaction. They recognize that its
investment in the Company involves a high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investors acknowledges
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that they had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with their own legal counsel and investment and tax advisors. The
Investors are relying solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
Section 3.4 Investment Purpose. The securities are being purchased by the Investors
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for their own account, for investment and without any view to the distribution,
assignment or resale to others or fractionalization in whole or in part in violation of
the applicable Federal and state securities laws. The Investors agree not to assign or
in any way transfer the Investors' rights to the securities or any interest therein and
acknowledges that the Company will not recognize any purported assignment or transfer
except in accordance with applicable Federal and state securities laws. No other person
has or will have a direct or indirect beneficial interest in the securities. The
Investors agree not to sell, hypothecate or otherwise transfer the Investors' securities
unless the securities are registered under Federal and applicable state securities laws
or unless, in the opinion of counsel satisfactory to the Company, an exemption from such
laws is available.
Section 3.5 Accredited Investors. Investors are "Accredited Investors" as that
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term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
Section 3.6 Information. Such Investors and their advisors (and counsel), if
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any, have been furnished with all materials relating to the business, finances and
operations of the Company and information they deemed material to making an informed
investment decision including the SEC Documents. Such Investors and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due diligence investigations conducted
by such Investors or its advisors, if any, or its representatives shall modify, amend or
affect the Investors' right to rely on the Company's representations and warranties
contained in this Agreement. Such Investors understands that its investment involves a
high degree of risk. Such Investors are in a position regarding the Company, which,
based upon employment, family relationship or economic bargaining power, enabled and
enables each Investor to obtain information from the Company in order to evaluate the
merits and risks of this investment. Such Investors have sought such accounting, legal
and tax advice, as it has considered necessary to make an informed investment decision
with respect to this transaction.
Section 3.7 Receipt of Documents. Such Investors and their advisors and counsel
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have received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto; (ii) all due diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii) the Company's Form
10-KSB for the year ended year ended December 31, 2000 and Form 10-Q for the period ended
March 2001; and (v) answers to all questions the Investors submitted to the Company
regarding an investment in the Company; and the Investors has relied on the information
contained therein and has not been furnished any other documents, literature, memorandum
or prospectus.
Section 3.8 Registration Rights Agreement and Escrow Agreement. The parties have
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entered into the Registration Rights Agreement and the Escrow Agreement, each dated the
date hereof.
Section 3.9 Not an Affiliate. The Investors are not an officers, directors or
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persons that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the Company or any Affiliate of the
Company as that term is defined in Rule 405 of the Securities Act) of the Company). The
Investors agree that they will not, and that they will cause its Affiliates not to,
engage in any short sales of or hedging transactions with respect to the Common Stock.
Section 3.10 Continued Validity. Unless notified to the contrary, the Company may
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assume that the representations and warranties contained in this Article III continue to
be true and correct at any time in the future when the Investors my be purchasing
Registrable Securities hereunder.
Section 3.11 Disclaimer. The Investors hereby disclaim any interest in the
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Registrable Securities held under the Escrow Agreement (the "Escrow Shares"), including,
but not limited to, voting rights, any rights to dividends or any other rights of a
shareholder with respect to the Escrow Shares until the Escrow Shares are delivered to
the Investors pursuant to the provisions of the Escrow Agreement.
Section 3.12 Sales Pursuant to Prospectus. In order to induce the Company
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to instruct the transfer agent to issue certificates evidencing shares of Registrable
Securities in the name of the Investors without the restricted securities legend, the
Investors agree that they will not sell any shares of Registrable Securities that are
free from such legend other than pursuant to the prospectus delivery requirements of
Section 5(b)(2) of the Securities Act. Further, if requested at each Closing the
Investors shall deliver to the Company a broker's letter relating to the Registrable
securities being delivered to Investors at such Closing stating that the sale by the
Investors was or will be made pursuant to the prospectus delivery requirements of Section
5(b)(2) of the Securities Act. If the Company's obligation to keep the shares of
Registrable Securities registered pursuant to the Registration Rights Agreement
terminates for any reason, the Investors shall submit the certificates evidencing the
shares of Registrable Securities that remain in its or its agent's possession to the
transfer agent for re-issuance with the restrictive securities legend, unless the
Investor delivers to the Company an opinion of Investor's counsel, acceptable to the
Company's counsel, that such re-issuance is not required pursuant to Rule 144(k) or some
other law or regulation.
ARTICLE IV
Representations, Warranties and Covenants of the Company
Except as stated below or on the disclosure schedules attached hereto, the Company
hereby represents and warrants to, and covenants with, the Investors that the following
are true and correct as of the date hereof.
Section 4.1 Organization and Qualification. Each of the Company and its
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subsidiaries is duly incorporated or organized and validly existing in the jurisdiction
of its incorporation or organization and has all requisite power and authority corporate
power to own their properties and to carry on their business as now being conducted.
Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other Instruments. (i)
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The Company has the requisite corporate power and authority to enter into and perform
this Agreement, the Registration Rights Agreement and any related agreements, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Registration Rights Agreement, the Escrow Agreement and any related
agreements by the Company and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of Directors or
its stockholders( other than as may be required as stated in Section 7.2(g) hereof),
(iii) this Agreement, Registration Rights Agreement, the Escrow Agreement and any
related agreements have been duly executed and delivered by the Company, (iv) this
Agreement, the Registration Rights Agreement, Escrow Agreement and any related agreements
constitute the valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
Section 4.3 Capitalization. As of the date hereof, the authorized capital stock
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of the Company consists of 100,000,000 shares of Common Stock, par value $0.001 per
share, of which 50,006,779 shares were issued and outstanding, and 2,500,000 shares of
preferred stock, par value $1.00 per share of which 426 are outstanding. All of such
outstanding shares have been validly issued and are fully paid and nonassessable. Except
as disclosed in the SEC Documents, no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company. Except as disclosed in Schedule 4.3 hereto , as of the date hereof, (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible
into, any shares of capital stock of the Company or any of its subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no outstanding debt securities and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to register
the sale of any of their securities under the Securities Act (except pursuant to the
Registration Rights Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by this Agreement or any
related agreement or the consummation of the transactions described herein or therein.
The Company has furnished to the Investors true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as in effect on the date
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hereof (the "By-laws").
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Section 4.4 Lock Up. The Company shall cause it's executive officers and
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directors not to sell any shares of the Company's Common Stock during the ten (10)
Trading Days following any Advance Notice Date.
Section 4.5 No Conflict. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of preferred
stock of the Company or By-laws or (ii) conflict with or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market on which the Common Stock is quoted) applicable to
the Company or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which could cause a Material
Adverse Effect. Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Certificate of
Incorporation or By-laws or their organizational charter or by-laws, respectively, or any
material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being conducted in
violation of any material law, ordinance, regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under the Securities Act
and any applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to the
preceding sentence have been or will be obtained or effected on or prior to the Effective
Date . The Company and its subsidiaries are unaware of any fact or circumstance which
might give rise to any of the foregoing.
Section 4.6 SEC Documents; Financial Statements. Since January 1, 1996, the
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Company has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under of the Exchange Act (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being hereinafter
referred to as the "SEC Documents"). The Company has delivered to the Investors or its
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representatives, or made available through the SEC's website at xxxx://xxx.xxx.xxx, true
and complete copies of the SEC Documents. As of their respective dates, the financial
statements of the Company disclosed in the SEC Documents (the "Financial Statements")
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complied as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 4.7. 10b-5. The SEC Documents, when filed, did not include any untrue
-----
statements of material fact, nor do they omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the circumstances under
which they were made, not misleading.
Section 4.8. No Default. Except as disclosed Section 4.4 the Company is not in
----------
default in the performance or observance of any material obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property is bound
and neither the execution, nor the delivery by the Company, nor the performance by the
Company of its obligations under this Agreement or any of the exhibits or attachments
hereto will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition of any
lien or charge on any assets or properties of the Company under its Certificate of
Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other material
agreement applicable to the Company or instrument to which the Company is a party or by
which it is bound, or any statute, or any decree, judgment, order, rules or regulation of
any court or governmental agency or body having jurisdiction over the Company or its
properties, in each case which default, lien or charge is likely to cause a Material
Adverse Effect on the Company's business or financial condition.
Section 4.9 Absence of Events of Default. Except for matters described in the SEC
----------------------------
Documents and/or this Agreement, no Event of Default, as defined in the respective
agreement to which the Company is a party, and no event which, with the giving of notice
or the passage of time or both, would become an Event of Default (as so defined), has
occurred and is continuing, which would have a Material Adverse Effect on the Company's
business, properties, prospects, financial condition or results of operations.
Section 4.10 Intellectual Property Rights. The Company and its subsidiaries own
------------------------------
or possess adequate rights or licenses to use all material trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets
and rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement by the Company
or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx registrations, trade
secret or other similar rights of others, and, to the knowledge of the Company, there is
no claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service names, service
marks, service xxxx registrations, trade secret or other infringement; and the Company
and its subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
Section 4.11 Employee Relations Neither the Company nor any of its
--------------------
subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any
of its subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its subsidiaries
believe that their relations with their employees are good.
Section 4.12 Environmental Laws. The Company and its subsidiaries are (i) in
-------------------
compliance with any and all applicable material foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental
---------------
Laws"), (ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license or approval.
Section 4.13 Title. Except as set forth in the SEC Documents, the Company has good
-----
and marketable title to its properties and material assets owned by it, free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Company. Any real property and
facilities held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such property and buildings by
the Company and its subsidiaries.
Section 4.14 Insurance. The Company and each of its subsidiaries are
---------
insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and customary in
the businesses in which the Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
Section 4.15 Regulatory Permits. The Company and its subsidiaries possess all
-------------------
certificates, authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or
permit.
Section 4.16 Internal Accounting Controls. The Company and each of its
--------------------------------
subsidiaries maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
Section 4.17 No Material Adverse Breaches, etc. Except as set forth in the SEC
--------------------------------------
Documents, neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future to have
a Material Adverse Effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries. Neither the
Company nor any of its subsidiaries is in breach of any contract or agreement which
breach, in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect on the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries.
Section 4.18 Absence of Litigation. Except as set forth in the SEC Documents,
------------------------
there is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending against or
affecting the Company, the Common Stock or any of the Company's subsidiaries, wherein an
unfavorable decision, ruling or finding would (i) have a Material Adverse Effect on the
transactions contemplated hereby (ii) adversely affect the validity or enforceability of,
or the authority or ability of the Company to perform its obligations under, this
Agreement or any of the documents contemplated herein, or (iii) except as expressly
disclosed in the SEC Documents, have a Material Adverse Effect on the business,
operations, properties, financial condition or results of operation of the Company and
its subsidiaries taken as a whole.
Section 4.19 Subsidiaries. Except as disclosed in the SEC Documents, the Company
------------
does not presently own or control, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity.
Section 4.20 Other Outstanding Securities/Financing Restrictions. As of the
------------------------------------------------------
date hereof, other than warrants and options to acquire shares of Common Stock as
disclosed in Schedule 4.3, there are no other warrants and options registered with the
SEC, which are available for sale as unrestricted ("free trading") stock.
------------
Section 4.21 Tax Status. The Company and each of its subsidiaries has made or
-----------
filed all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the extent
that the Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid all
taxes and other governmental assessments and charges that are material in amount, shown
or determined to be due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.
Section 4.22 Certain Transactions. Except as set forth in the SEC Documents, none
---------------------
of the officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee
or, to the knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Section 4.23 Fees and Rights of First Refusal. Except as set forth in the SEC
------------------------------------
Documents, the Company is not obligated to offer the securities offered hereunder on a
right of first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents or other
third parties.
Section 4.24 Use of Proceeds. The Company represents that the net proceeds
----------------
from this offering will be used for working capital purposes and to reduce indebtedness
. However, in no event shall the net proceeds from this offering be used by the Company
for the payment (or loaned to any such person for the payment) of any judgment, or
other liability, incurred by any executive officer, officer, director, or employee of the
Company.
Section 4.25 Further Representation and Warranties of the Company. For so
---------------------------------------------------------
long as any securities issuable hereunder held by the Investors remain outstanding, the
Company acknowledges, represents, warrants and agrees that it will use commercially
reasonable efforts to maintain the listing of its Common Stock on NASD Bulletin Board.
Section 4.26 Opinion of Counsel. Investors shall receive an opinion letter
-------------------
from counsel to the Company (updated where applicable) on the date hereof and updated
annually for the life of the this Agreement in form substantially acceptable to the
Investors.
Section 4.27 Opinion of Counsel. The Company will obtain for the Investors,
-------------------
at the Company's expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without restriction.
Section 4.28 Dilution. The Company is aware and acknowledges that issuance of
--------
shares of the Company's Common Stock could cause dilution to existing shareholders and
could significantly increase the outstanding number of shares of Common Stock.
Section 4.29 No General Solicitation. Neither the Company, nor any of its
-------------------------
affiliates, nor any person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of the shares of Common Stock
offered hereby.
ARTICLE V
Indemnification
The Investors and the Company represent to the other the following with respect to
itself:
Section 5.1 Indemnification. (a) In consideration of the Investors' execution and
---------------
delivery of this Agreement, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investors, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Investors Indemnitees") from and
----------------------
against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Investors Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Investors Indemnitees or any of them as a
-------------------------
result of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of action, suit
or claim brought or made against such Investors Indemnitee not arising out of any action
or inaction of an Investors Indemnitee, and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the Investors
Indemnitees. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities, which is permissible
under applicable law.
(b) In consideration of the Company's execution and delivery of this Agreement,
and in addition to all of the Investors' other obligations under this Agreement, the
Investors shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement) (collectively, the
"Company Indemnitees") from and against any and all Indemnified Liabilities incurred by
---------------------
the Company Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by the
Investors(s) in this Agreement, the Registration Rights Agreement or any instrument or
document contemplated hereby or thereby executed by the Investors, (b) any breach of any
covenant, agreement or obligation of the Investors(s) contained in this Agreement, the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Investors, or (c) any cause of action,
suit or claim brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach by the Investors and arising out of or
resulting from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by any of the
Company Indemnitees. To the extent that the foregoing undertaking by the Investors may
be unenforceable for any reason, the Investors shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is permissible
under applicable law.
(c ) Promptly after receipt by an Investors Indemnitees or Company Indemnitees
---------------------- --------------------
(collectively referred to as an "Indemnified Person or Indemnified Party") under this
Section 5 of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 5, deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel reasonably satisfactory to the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified Party shall
have the right to retain its own counsel with the fees and expenses of not more than one
counsel for all such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnified Person or Indemnified Party and the indemnifying
party. The Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the Indemnified Party
or Indemnified Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior written
consent, provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior written
consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment
or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person or Indemnified Party
under this Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action.
(d) The indemnification required by this Section 5 shall be made by
periodic payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
(e) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to pursuant to the law.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the Registration Rights
--------------------
Agreement to remain in full force and effect and the Company shall comply in all material
respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company shall maintain the Common Stock's
-----------------------
authorization for listing on the American Stock Exchange, or if such listing is not
maintained, the Company shall obtain the quotation of its Common Stock on the NASD OTC
Bulletin Board.
Section 6.3 Exchange Act Registration. The Company will cause its Common Stock to
---------------------------
continue to be registered under Section 12(g) of the Exchange Act, will file in a timely
manner all reports and other documents required of it as a reporting company under the
Exchange Act and will not take any action or file any document (whether or not permitted
by Exchange Act or the rules there under) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said Exchange Act.
Section 6.4 Transfer Agent Instructions. Upon each Closing and the effectiveness
---------------------------
of the Registration Statement and re-sale by the Investors, the Company will deliver
instructions to its transfer agent to issue shares of Common Stock free of restrictive
legends.
Section 6.5 Corporate Existence. The Company will take all steps necessary to
--------------------
preserve and continue the corporate existence of the Company.
Section 6.6 Notice of Certain Events Affecting Registration; Suspension of Right to
------------------------------------------------------------------------
Make an Advance. The Company will immediately notify the Investors upon its becoming
---------------
aware of the occurrence of any of the following events in respect of a registration
statement or related prospectus relating to an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other Federal or
state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other Federal or state governmental
authority of any stop order suspending the effectiveness of the Registration Statement
or the initiation of any proceedings for that purpose; (iii) receipt of any notification
with respect to the suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event that
makes any statement made in the Registration Statement or related prospectus of any
document incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration Statement
would be appropriate; and the Company will promptly make available to the Investors any
such supplement or amendment to the related prospectus. The Company shall not deliver to
the Investors any Advance Notice during the continuation of any of the foregoing events.
Section 6.7 Expectations Regarding Advance Notices. Within ten (10) days after the
---------------------------------------
commencement of each calendar quarter occurring subsequent to the commencement of the
Commitment Period, the Company must notify the Investors, in writing, as to its
reasonable expectations as to the dollar amount it intends to raise during such calendar
quarter, if any, through the issuance of Advance Notices. Such notification shall
constitute only the Company's good faith estimate and shall in no way obligate the
Company to raise such amount, or any amount, or otherwise limit its ability to deliver
Advance Notices. The failure by the Company to comply with this provision can be cured
by the Company's notifying the Investors, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.
Section 6.8 Consolidation; Merger. The Company shall not, at any time after the
----------------------
date hereof, effect any merger or consolidation of the Company with or into, or a
transfer of all or substantially all the assets of the Company to another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investors such
shares of stock and/or securities as the Investors is entitled to receive pursuant to
this Agreement.
Section 6.9 Issuance of the Company's Common Stock. The sale of the shares of
-------------------------------------------
Common Stock shall be made in accordance with the provisions and requirements of
Regulation D and any applicable state securities law.
ARTICLE VII
Conditions for Advance and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligations of the Company. The obligation
--------------------------------------------------------
hereunder of the Company to issue and sell the shares of Common Stock to the Investors
incident to each Closing is subject to the satisfaction, or waiver by the Company, at or
before each such Closing, of each of the conditions set forth below.
(a) Accuracy of the Investors' Representation and Warranties. The
-----------------------------------------------------------------
representations and warranties of the Investors shall be true and correct in all material
respects.
(b) Performance by the Investors. The Investors shall have performed,
------------------------------
satisfied and complied in all respects with all covenants, agreements and conditions
required by this Agreement and the Registration Rights Agreement to be performed,
satisfied or complied with by the Investors at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver an Advance
------------------------------------------------------------------------
Notice and the Obligation of the Investors to Purchase Shares of Common Stock. The right
-------------------------------------------------------------------------------
of the Company to deliver an Advance Notice and the obligation of the Investors hereunder
to acquire and pay for shares of the Company's Common Stock incident to a Closing is
subject to the satisfaction or waiver by the Investors, on (i) the date of delivery of
such Advance Notice and (ii) the applicable Advance Date (each a "Condition Satisfaction
------------------------
Date"), of each of the following conditions:
----
(a) Registration of the Common Stock with the SEC. The Company shall have
----------------------------------------------
filed with the SEC a Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the Registration Rights Agreement. As set
forth in the Registration Rights Agreement, the Registration Statement shall have
previously become effective and shall remain effective on each Condition Satisfaction
Date and (i) neither the Company nor the Investors shall have received notice that the
SEC has issued or intends to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has threatened
to do so (unless the SEC's concerns have been addressed and the Investors is reasonably
satisfied that the SEC no longer is considering or intends to take such action), and (ii)
no other suspension of the use or withdrawal of the effectiveness of the Registration
Statement or related prospectus shall exist. The Registration Statement must have been
declared effective by the SEC prior to the first Advance Notice Date.
(b) Authority. The Company shall have obtained all permits and
---------
qualifications required by any applicable state in accordance with the Registration
Rights Agreement for the offer and sale of the shares of Common Stock, or shall have the
availability of exemptions there from. The sale and issuance of the shares of Common
Stock shall be legally permitted by all laws and regulations to which the Company is
subject.
(c) No Fundamental Changes. There shall no exist any fundamental change to
-----------------------
the information set forth in the Registration Statement which would require the Company
to file a post-effective amendment to the Registration Statement.
(d) Performance by the Company. The Company shall have performed,
------------------------------
satisfied and complied in all material respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior to each Condition
Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order, decree,
-------------
ruling or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits or directly and
adversely affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of prohibiting or adversely
affecting any of the transactions contemplated by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The trading
----------------------------------------------------------
of the Common Stock is not suspended by the SEC or the Principal Market (if the Common
Stock is traded on a Principal Market) or by the NASD OTC Bulletin Board (if the Common
Stock is traded on the over-the-counter market. The Company shall not have received any
notice threatening the continued listing of the Common Stock on the Principal Market (if
the Common Stock is traded on a Principal Market).
(g) AMEX Compliance. The number of shares of Registrable Securities to
----------------
be purchased at each Closing shall not exceed the number of such shares that, when
aggregated with all other shares of Common Stock purchased hereunder by the Investor
would result in a violation of Rule 713 of the American Stock Exchange Company Guide,
unless or until the shareholder vote required by such rule has occurred and approved such
purchase. In the event that the number of shares of Registrable Securities to be
purchased at a Closing, when aggregated with all other shares of Common Stock purchased,
shall result in the Investor having acquired more than permitted by such Rule 713 of all
outstanding Common Stock, the respective Advance and the shares of Registrable Securities
to be purchased shall be adjusted so that the Investor will not have acquired more than
permitted by such Rule 713 of all outstanding Common Stock when aggregated with all other
shares of Common Stock purchased until Rule 713 has been satisfied.
(h) Maximum Advance Amount. The amount of the advance requested by the
------------------------
Company does not exceed the Maximum Advance Amount.
(i) No Knowledge. The Company has no knowledge of any event more likely
-------------
than not to have the effect of causing such Registration Statement to be suspended or
otherwise ineffective.
(j) Other. On each Condition Satisfaction Date, the Investors shall have
-----
received and been reasonably satisfied with such other certificates and documents as
shall have been reasonably requested by the Investors in order for the Investors to
confirm the Company's satisfaction of the conditions set forth in this Section 7.2,
including, without limitation, a certificate executed by an executive officer of the
Company and to the effect that all the conditions to such Closing shall have been
satisfied as at the date of each such certificate substantially in the form annexed
hereto on Schedule B.
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1 Due Diligence Review. Prior to the filing of the Registration
-----------------------
Statement the Company shall make available for inspection and review by the Investors,
advisors to and representatives of the Investors, any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investors pursuant to the
Registration Statement, any such registration statement or amendment or supplement
thereto or any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such review,
and cause the Company's officers, directors and employees to supply all such information
reasonably requested by the Investors or any such representative, advisor or underwriter
in connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by any of
them), prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and attorneys
to conduct initial and ongoing due diligence with respect to the Company and the accuracy
of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
----------------------------------------
(a) The Company shall not disclose non-public information to the Investors,
advisors to or representatives of the Investors unless prior to disclosure of such
information the Company identifies such information as being non-public information and
provides the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require the Investors'
advisors and representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investors or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any Investors who
purchase stock in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the advisors and
representatives of the Investors and, if any, underwriters, of any event or the existence
of any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information (whether or
not requested of the Company specifically or generally during the course of due diligence
by such persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading. Nothing
contained in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investors (without the written consent of the Investors prior to
disclosure of such information) may not obtain non-public information in the course of
conducting due diligence in accordance with the terms of this Agreement and nothing
herein shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were made, not
misleading. In connection with its private placements of securities to investors, the
Company discloses all material information to such investors as required by Federal and
state securities laws and regulations
ARTICLE IX
Choice of Law/Jurisdiction
Section 9.1 Governing Law. This Agreement shall be governed by and interpreted in
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accordance with the laws of the State of New York without regard to the principles of
conflict of laws. The parties further agree that any action between them shall be heard
in New York City, New York, and expressly consent to the jurisdiction and venue of the
Supreme Court of New York and the United States District Court for the Southern District
of New York for the adjudication of any civil action asserted pursuant to this paragraph.
ARTICLE X
Assignment; Termination
Section 10.1 Assignment. Neither this Agreement nor any rights of the
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Investors hereunder may be assigned to any other Person.
Section 10.2 Termination. The obligations of the Investors to make Advances
-----------
under Article II hereof shall terminate upon the termination of the Commitment Period.
This Agreement shall terminate (6) months after the termination of the Commitment
Period. .
ARTICLE XI
Notices
Section 11.1 Notices. Any notices, consents, waivers, or other communications
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required or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified
mail, return receipt requested; (iii) three (3) days after being sent by U.S. certified
mail, return receipt requested, or (iv) one (1) day after deposit for overnight delivery
with a nationally recognized overnight delivery service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to: Medix Resources Inc.
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Executive Vice
President and Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxxxxx, P.C.
0000 X. Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Investors, to its address and facsimile number on Exhibit A, with copies to the
Investors Counsel as set forth on Exhibit A. Each party shall provide five (5) days'
prior written notice to the other party of any change in address or facsimile number.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to
the other party. In the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5) days of the
execution and delivery hereof
Section 12.2 Entire Agreement; Amendments. This Agreement supersedes all other
------------------------------
prior oral or written agreements between the Investors, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Investors makes any
representation, warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
Section 12.3 Reporting Entity for the Common Stock. The reporting entity
-----------------------------------------
relied upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg,
L.P. or any successor thereto. The written mutual consent of the Investors and the
Company shall be required to employ any other reporting entity.
Section 12.4 Fees and Expenses. As set forth in the Consulting Services
-------------------
Agreement entered into by the Company in connection herewith, the Company has agreed to
pay the following fees:
(a) Legal Fees. Each of the parties shall pay its own fees and
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expenses (including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions contemplated
hereby, except upon the execution of this Agreement the Company will pay the sum of
Twelve Thousand Five Hundred Dollars ($12,500) , to the Investor, Cornell Capital
Partners, L.P.'s counsel, Xxxxxx Xxxxxxxx LLP, for legal fees and Two Thousand Five
Hundred Dollars ($2,500) to the Investor Dutchess Private Equities Fund, L.P.'s counsel,
Xxxxxx XxXxxxx. Subsequently on each Advance Date, the Company will pay Xxxxxx Xxxxxxxx
LLP the sum of Five Hundred Dollars ($500) Dollars for escrow fees, which shall include
the fees of First Union National Bank, as the escrow agent under the Escrow Agreement.
(b) Consulting Fees. On each Advance Date, directly from the gross funds
----------------
held in escrow, the Company shall pay Yorkville Advisor's Management, LLC ("Yorkville
----------
Advisors") an amount equal to two and thirty one one hundredths percent (2.31%) of the
--------
amount of the Advance and Dutchess Advisors Limited ("Dutchess Advisors") an amount equal
------------------
to four and sixty nine one hundredths percent (4.69%) of the amount of the Advance. The
Company hereby agrees that if such payment, as is described above, is not made by the
Company on the Advance Date, such payment will be made at the direction of the Investors
as outlined and mandated by Section 2.3 of this Agreement. Furthermore upon the
effective registration statement the Company shall issue and deliver to Yorkville
Advisors and Dutchess Advisors , shares of the Company's Common Stock in an amount equal
to sixty six one hundredths percent (0.66%) and one and thirty four one hundredths
percent (1.34%) respectively, of the Commitment Amount divided by the Volume Weighted
Average Price of the Company's Common Stock on the date this Agreement is executed or
ninety cents ($0.90) which ever is higher (the "Initial Shares"), and on the one hundred
---------------
and fiftieth (150th ) day following an effective registration statement the Company or
one hundred and eighty (180) days following the date hereof, which ever occurs first,
shall issue and deliver Yorkville Advisors and Dutchess Advisors shares of the Company's
Common Stock in an amount equal to sixty six one hundredths percent (0.66%) and one and
thirty four one hundredths percent (1.34%) respectively, of the Commitment Amount divided
by the Purchase Price calculated as if an Advance Notice Date occurred on the one hundred
and fiftieth (150th) or one hundred and eightieth (180th) day respectively, as the case
may be. (the "Additional Shares") Such Initial and Additional Shares will have demand
------------------
and piggy-back registration rights.
Section 12.5 Brokerage. Each of the parties hereto represents that it has had
---------
no dealings in connection with this transaction with any finder or broker who will demand
payment of any fee or commission from the other party, other than Yorkville Advisors and
Dutchess Advisors Limited . The Company on the one hand, and the Investors, on the other
hand, agree to indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 12.6 Confidentiality. If for any reason the transactions contemplated
---------------
by this Agreement are not consummated, each of the parties hereto shall keep confidential
any information obtained from any other party (except information publicly available or
in such party's domain prior to the date hereof, and except as required by court order)
and shall promptly return to the other parties all schedules, documents, instruments,
work papers or other written information without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE INTENIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Line of Credit Agreement to
be executed by the undersigned, thereunto duly authorized, as of the date first set forth
above.
MEDIX RESOURCES INC.
By:/s/Xxxx X. Xxxxx
----------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
Chief Financial Official
CORNELL CAPITAL PARTNERS, L.P.
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/Xxxx X. Angel
----------------
Name: Xxxx X. Xxxxxx
Title: Fund Manager
DUTCHESS PRIVATE EQUITIES FUND, L.P.
By: Dutchess Capital Management, LLC
Its: General Partner
By: /s/Xxxxxxx Xxxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxxx
Title: Managing Partner
EXHIBIT A
SCHEDULE OF INVESTORS
---------------------
Cornell Capital Partners, L.P. Duchess Private Equities Fund, L.P.
c/o Yorkville Advisors, LLC c/o Dutchess Captital Management, LLC
000 Xxxxx Xxxxxx - 17th Floor 000 Xxxx Xxxxx Xxxx - 0xx Xxxxx
Xxx Xxxx, XX 00000 Xxxxxxx, XX 00000
EXHIBIT B
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
-------------------------------------
MEDIX RESOURCES INC.
The undersigned, ________________________________ hereby certifies, with
respect to the sale of shares of Common Stock of Medix Resources Inc., ( the "Company")
-------
issuable in connection with this Advance Notice and Compliance Certificate dated
___________________ (the "Notice"), delivered pursuant to the Equity Line of Credit
------
Agreement (the "Agreement"), as follows:
---------
1. The undersigned is the duly elected Chief Executive Officer of the
Company.
2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post -
effective amendment to the Registration Statement
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Advance
Date related to the Notice and has complied in all material respects
with all obligations and conditions contained in the Agreement.
4. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
-----------------.
MEDIX RESOURCES INC.
By: ______________________________
Name:
Title:
Schedule 4.3
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Equity Line of Credit Agreement
-------------------------------
Among Medix Resources, Inc, Cornell Capital Partners, L.P. and
---------------------------------------------------------------
Dutchess Private Equity Fund, L.P., Dated June 12, 2001
-------------------------------------------------------
1. Rights to Acquire Medix Common Stock
------------------------------------
Outstanding Convertible Preferred Stock................. 860,000shares
Outstanding Options..................................... 7,229,767shares
Outstanding Warrants and Other
Rights to Subscribe.....................................13,197,197shares
Convertible Debt........................................ 916,667shares*
-----------
*This amount is the nominal convertible amount relating to the convertible debt
outstanding(750,000 shares convertible at $1.00 and 166,667 shares convertible at
$0.90). However, the holder of the debt may force redemption for a greater number of
shares for any principal amount, which such number of Common Shares is equal to the
fraction where (i) the numerator is the dollar value of the amount of debt which the
Company is required by notice from the holder to redeem, and (ii) the denominator is
eighty (80%) percent of the Volume Weighted Market Price per Common Share during the
twenty (20) trading days ending on the day of the notice is given by the holder.
2. Outstanding Debt Securities
---------------------------
Convertible debt in the principal amount of $900,000, bearing interest at 10.0% per
annum, maturing on January 10, 2002, convertible and redeemable as indicated above.
3. Registration Rights
-------------------
The Company has granted registration rights to the investors in its1996, 1997 and 1999
preferred stock unit financings, to RoyCap, Inc. which has invested $2,000,000 in
convertible debt and common stock in 2001 and certain warrant holders who have received
warrants in litigation settlements and as compensation for services. The Company has
also registered its common stock issuable to options holders on a From S-8 that is
currently effective. Substantially all of the shares of common stock referred to in item
1 above have been registered for sale under the Securities Act of 1933, as amended and
are currently covered by an effective prospectus.
