EXHIBIT 10.9
METROPOLITAN HEALTH NETWORKS, INC.
SECURITIES PURCHASE AGREEMENT
FEBRUARY 6, 2002
TABLE OF CONTENTS
Page
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1. AGREEMENT TO SELL AND PURCHASE...........................................................................1
2. FEES AND WARRANTS........................................................................................1
3. CLOSING, DELIVERY AND PAYMENT............................................................................2
3.1 Closing.........................................................................................2
3.2 Delivery........................................................................................2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................3
4.1 Organization, Good Standing and Qualification...................................................3
4.2 Subsidiaries....................................................................................3
4.3 Capitalization; Voting Rights...................................................................3
4.4 Authorization; Binding Obligations..............................................................4
4.5 Liabilities.....................................................................................4
4.6 Agreements; Action..............................................................................5
4.7 Obligations to Related Parties..................................................................5
4.8 Changes.........................................................................................6
4.9 Title to Properties and Assets; Liens, Etc......................................................7
4.10 Intellectual Property...........................................................................7
4.11 Compliance with Other Instruments...............................................................8
4.12 Litigation......................................................................................8
4.13 Tax Returns and Payments........................................................................8
4.14 Employees.......................................................................................8
4.15 Registration Rights and Voting Rights...........................................................9
4.16 Compliance with Laws; Permits...................................................................9
4.17 Environmental and Safety Laws...................................................................9
4.18 Valid Offering.................................................................................10
4.19 Full Disclosure................................................................................10
4.20 Insurance......................................................................................10
4.21 SEC Reports....................................................................................10
4.22 No Market Manipulation.........................................................................10
4.23 Listing........................................................................................11
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4.24 Stop Transfer..................................................................................11
4.25 Dilution.......................................................................................11
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................................................11
5.1 Requisite Power and Authority..................................................................11
5.2 Investment Representations.....................................................................12
5.3 Purchaser Bears Economic Risk..................................................................12
5.4 Acquisition for Own Account....................................................................12
5.5 Purchaser Can Protect Its Interest.............................................................12
5.6 Accredited Investor............................................................................12
5.7 Legends........................................................................................12
5.8 No Shorting....................................................................................12
6. COVENANTS OF THE COMPANY................................................................................13
6.1 Stop-Orders....................................................................................13
6.2 Listing........................................................................................14
6.3 Market Regulations.............................................................................14
6.4 Reporting Requirements........................................................................14
6.5 Use of Funds...................................................................................14
6.6 Access to Facilities...........................................................................14
6.7 Taxes..........................................................................................15
6.8 Insurance......................................................................................15
6.9 Intellectual Property..........................................................................15
6.10 Properties.....................................................................................15
6.11 Confidentiality................................................................................15
6.12 Required Approvals.............................................................................15
6.13 Reissuance of Securities.......................................................................16
6.14 Opinion........................................................................................17
7. COVENANTS OF THE COMPANY AND PURCHASERS REGARDING INDEMNIFICATION.......................................17
7.1 Company Indemnification........................................................................17
7.2 Purchaser's Indemnification....................................................................17
7.3 Procedures.....................................................................................17
8. CONVERSION OF CONVERTIBLE NOTES.........................................................................17
8.1 Mechanics of Conversion........................................................................18
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8.2 Mandatory Redemption...........................................................................19
8.3 Maximum Conversion.............................................................................19
8.4 Injunction - Posting of Bond...................................................................19
8.5 Buy-In.........................................................................................20
9. REGISTRATION RIGHTS.....................................................................................20
9.1 Registration Rights Granted....................................................................20
9.2 Registration Procedures........................................................................22
9.3 Provision of Documents.........................................................................23
9.4 Non-Registration Events........................................................................23
9.5 Expenses.......................................................................................24
9.6 Indemnification and Contribution...............................................................24
10. OFFERING RESTRICTIONS...................................................................................27
11. SECURITY INTEREST.......................................................................................27
12. MISCELLANEOUS...........................................................................................27
12.1 Governing Law..................................................................................27
12.2 Survival.......................................................................................27
12.3 Successors and Assigns.........................................................................28
12.4 Entire Agreement...............................................................................28
12.5 Severability...................................................................................28
12.6 Amendment and Waiver...........................................................................28
12.7 Delays or Omissions............................................................................28
12.8 Notices........................................................................................28
12.9 Attorneys' Fees................................................................................29
12.10 Titles and Subtitles...........................................................................29
12.11 Counterparts...................................................................................29
12.12 Broker's Fees..................................................................................29
12.13 Indemnification................................................................................29
12.14 Construction...................................................................................29
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METROPOLITAN HEALTH NETWORKS, INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") is made and
entered into as of March 6, 2002, by and among METROPOLITAN HEALTH NETWORKS,
INC., a Florida corporation (the "COMPANY"), and the Purchaser listed on
Exhibit A hereto (the "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale of 5% Convertible Notes
in an aggregate principal amount of $1,200,000 (the "NOTES"), convertible into
shares of the Company's common stock, $0.001 par value per share (the "COMMON
STOCK");
WHEREAS, the Company wishes to issue warrants (the "WARRANTS") to the
Purchaser to purchase shares of the Company's Common Stock in connection with
Purchaser's purchase of the Notes;
WHEREAS, Purchaser desires to purchase the Notes and Warrants on the
terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Notes and Warrants
to Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set
forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3), the Company agrees to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company Notes in the amount set forth next
to the Purchaser's name on Exhibit A under the column heading "Closing Date
Notes," convertible in accordance with the terms thereof into shares of the
Company's Common Stock, which amount shall be equal to $1,200,000. The Notes
purchased on the Closing Date shall be known as the "OFFERING." The form of
Notes is annexed hereto as Exhibit B. The Notes will have a Maturity Date (as
defined in the Notes) two years from the date of issuance. Collectively, the
Notes and Warrants (as defined in Section 2) and Common Stock issuable upon
conversion of the Notes and exercise of the Warrants are referred to as the
"SECURITIES."
2. FEES AND WARRANTS.
(a) The Company will issue and deliver to the persons
listed on Exhibit A under the column heading "Warrant Holders", or to such
other persons as the Purchaser shall otherwise designate (in accordance with
applicable laws) (such named persons,
as they may be so otherwise designated, being referred to as the "WARRANT
RECIPIENTS"), Warrants to purchase shares of Common Stock in the amounts
designated on Exhibit A hereto in connection with the Offering (the "WARRANTS")
pursuant to Section 1 hereof. The Warrants must be delivered on the Closing
Date. The aggregate number of shares of Common Stock purchasable upon exercise
of the Warrants granted on the Closing Date is set forth on Exhibit A hereto. A
form of Warrant is annexed hereto as Exhibit C. The per share "PURCHASE PRICE"
of Common Stock as defined in the Warrants shall be equal to 120% of the
average of the eight lowest closing prices of the Common Stock as reported by
Bloomberg Financial for the Pink Sheets, the NASD OTC Bulletin Board, NASDAQ
SmallCap Market, NASDAQ National Market, American Stock Exchange, or New York
Stock Exchange (each of the foregoing the "PRINCIPAL MARKET"), or such other
principal market or exchange where the Common Stock is listed or traded, for
the thirty (30) trading days preceding but not including the Closing Date. All
the representations, covenants, warranties, undertakings, and indemnification,
and other rights made or granted to or for the benefit of Purchaser are hereby
also made and granted to the holders of the Warrants in respect of the Warrants
and shares of the Company's Common Stock issuable upon exercise of the Warrants
(the "WARRANT SHARES").
(b) The Company shall reimburse Purchaser for its
reasonable legal fees of $20,000 for services rendered to Purchaser in
preparation of this Agreement and the Related Agreements, and an additional
amount not to exceed $2,500 in connection with its due diligence review of the
Company and relevant matters. Amounts required to be paid hereunder will be
paid at the Closing.
(c) The Company will pay a cash fee in the amount of ten
percent (10%) of the aggregate gross purchase price to be paid to the Company
from the sale of Notes in the Offering (the "FUND MANAGER'S FEE") to the
persons listed on Exhibit A under the column heading "Fund Manager's Fee
Recipient." The Fund Manager's Fee must be paid on the Closing Date. The
aforementioned Fund Manager's Fee and legal fees will be payable at the Closing
out of funds held pursuant to a Funds Escrow Agreement to be entered into by
the Company, Purchaser and an Escrow Agent. Failure to timely deliver the Fund
Manager's Fee, or the Warrants shall be deemed an Event of Default as defined
in Article III of the Notes.
3. CLOSING, DELIVERY AND PAYMENT.
3.1 CLOSING. Subject to the terms and conditions herein,
the closing of the transactions contemplated hereby (the "CLOSING"), which
closing is comprised of Purchaser's purchase of Notes in the aggregate
principal amount of $1,200,000, shall take place on the date hereof, at the
offices of Xxxxxx X. Xxxxxx, Esq., 000 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or at such other time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "CLOSING DATE").
3.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to the Purchaser an applicable Note
representing the aggregate principal amount borrowed by the Company at the
Closing from the Purchaser and a warrant certificate registered in the
Purchaser's name representing the number of Warrant Shares as to which the
Warrant is exercisable pursuant to this Agreement, against payment of the
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purchase price therefor by certified funds or wire transfer made payable to the
order of the Company, cancellation of indebtedness or any combination of the
foregoing.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser
as of the date of this Agreement as set forth below.
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida. The Company has the corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Warrants to be issued in connection with this Agreement,
the Funds Escrow Agreement, the Security Agreement and all other agreements
referred to herein (collectively, the "RELATED AGREEMENTS"), to issue and sell
the Notes and the shares of Common Stock issuable upon conversion of the Notes
(the "CONVERSION SHARES"), to issue and sell the Warrants and the Warrant
Shares, and to carry out the provisions of this Agreement and the Related
Agreements and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on the Company
or its business.
4.2 SUBSIDIARIES. Except as disclosed on Schedule 4.2,
the Company does not own or control any equity security or other interest of
any other corporation, limited partnership or other business entity. If any
entity is listed on Schedule 4.2 and the Company owns a controlling interest in
such entity, each of the representations and warranties set forth in this
Section 4 are being hereby restated with respect to such entity (modified as
appropriate to the nature of such entity.)
4.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the
Company, immediately prior to the Closing, consists of (i) 80,000,000 shares of
Common Stock, par value $0.001 per share, _____________ shares of which are
issued and outstanding, and (ii) 10,000,000 shares of Preferred Stock, par
value $0.001 per share, 5,000 shares of which are issued and outstanding.
(b) Other than (i) the shares reserved for
issuance under the Company's stock option plans; (ii) those shares of Common
Stock which may be issued upon conversion of the shares of Preferred Stock;
(iii) shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities; and (iv)
shares reserved for issuance under outstanding options and warrants not under
existing plans. Neither the offer, issuance or sale of any of the Notes or
Warrants, or the issuance of any of the Conversion Shares or Warrant Shares,
nor the consummation of any transaction contemplated hereby will result in a
change in the price or
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number of any securities of the Company outstanding, under anti-dilution or
other similar provisions contained in or affecting any such securities.
(c) All issued and outstanding shares of the
Company's Common Stock and Preferred Stock (to the extent Preferred Stock has
been issued) (i) have been duly authorized and validly issued and are fully
paid and nonassessable and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and
restrictions of the shares of Preferred Stock and the Common Stock are as
stated in the Articles of Incorporation (the "CHARTER"). The Conversion Shares
and Warrant Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the Company's
Charter, the Securities will be validly issued, fully paid and nonassessable,
and will be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate
action on the part of the Company, its officers, directors and stockholders
necessary for the authorization of this Agreement and the Related Agreements,
the performance of all obligations of the Company hereunder at the Closing and
the authorization, sale, issuance and delivery of the Securities pursuant
hereto and the Related Agreements has been taken or will be taken prior to the
Closing. The Agreement and the Related Agreements, when executed and delivered,
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, and (b) general principles of equity that
restrict the availability of equitable remedies. The sale of the Notes and the
subsequent conversion of the Notes into Conversion Shares are not and will not
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with. The sale of the Warrants and the
subsequent exercise of the Warrants for Warrant Shares are not and will not be
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with. The Notes and the Warrants, when executed and
delivered in accordance with the terms of this Agreement, will be valid and
binding obligations of the Company, enforceable in accordance with their
respective terms.
4.5 LIABILITIES. The Company has no material liabilities
and, to the best of its knowledge, knows of no material contingent liabilities,
except current liabilities incurred in the ordinary course of business which
have not been, either in any individual case or in the aggregate, material.
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4.6 AGREEMENTS; ACTION.
(a) Except as disclosed in the Company's SEC
Reports, there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or to its knowledge by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $50,000 (other than obligations of, or payments to, the Company arising from
purchase or sale agreements entered into in the ordinary course of business),
or (ii) the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from the Company (other than licenses arising from the
purchase of "off the shelf" or other standard products), or (iii) provisions
restricting the development, manufacture or distribution of the Company's
products or services, or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(b) Except as set forth in Schedule 4.6, the
Company has not (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock,
(ii) incurred any indebtedness for money borrowed or any other liabilities
individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(c) For the purposes of subsections (a) and (b)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
4.7 OBLIGATIONS TO RELATED PARTIES. There are no
obligations of the Company to officers, directors, stockholders or employees of
the Company other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and (c)
for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company and any other stock options
authorized by the Company). None of the officers or directors of the Company,
or any members
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of their immediate families, are indebted to the Company. None of the officers,
directors or, to the best of the Company's knowledge or key employees of the
Company or any members of their immediate families, are indebted to the Company
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
1% of such company) which may compete with the Company. No officer or director,
or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company and no agreements,
understandings or proposed transactions are contemplated between the Company
and any such person. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation other than its
subsidiaries.
4.8 CHANGES. Since September 30, 2001, there has not
been:
(a) Any change in the assets, liabilities,
financial condition or operations of the Company, other than changes in the
ordinary course of business, none of which individually or in the aggregate has
had or is reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition or operations of the Company;
(b) Any resignation or termination of any
officer, key employee or group of employees of the Company;
(c) Any material change, except in the ordinary
course of business, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the properties,
business or financial condition of the Company;
(e) Any waiver by the Company of a valuable
right or of a material debt owed to it;
(f) Any direct or indirect loans made by the
Company to any officer or director of the Company, other than advances made in
the ordinary course of business;
(g) Any material change in any compensation
arrangement or agreement with any employee, officer or director;
(h) Any declaration or payment of any dividend
or other distribution of the assets of the Company;
(i) Any labor organization activity related to
the Company;
(j) Any debt, obligation or liability incurred,
assumed or guaranteed by the Company, except liabilities incurred in the
ordinary course of business;
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(k) Any sale, assignment or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to
which the Company is a party or by which it is bound which may materially and
adversely affect the business, assets, liabilities, financial condition or
operations of the Company;
(m) Any other event or condition of any
character that, either individually or cumulatively, has or may materially and
adversely affect the business, assets, liabilities, financial condition, or
operations of the Company; or
(n) Any arrangement or commitment by the
Company to do any of the acts described in subsection (a) through (m) above.
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The
Company has good and marketable title to its properties and assets, and good
title to its leasehold estates, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than (a) those resulting from taxes
which have not yet become delinquent, (b) minor liens and encumbrances which do
not materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and (c) those that have
otherwise arisen in the ordinary course of business. The Company is in
compliance with all material terms of each material lease to which it is a
party or is otherwise bound.
4.10 INTELLECTUAL PROPERTY.
(a) The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes necessary for its business as now conducted and to the Company's
knowledge as presently proposed to be conducted (the "INTELLECTUAL PROPERTY"),
without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products.
(b) The Company has not received any
communications alleging that the Company has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity.
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4.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is
not in violation or default of any term of the Charter or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order or writ the violation or default of which would not have a
material adverse effect on the Company. The execution, delivery and performance
of and compliance with this Agreement and the Related Agreements, and the
issuance and sale of Securities pursuant hereto, will not, with or without the
passage of time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term or provision,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
4.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of this Agreement or the
Related Agreements or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby,
or which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition or affairs of the Company. The Company
is not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality other
than those would not have a material adverse effect on the Company. There is no
action, suit, proceeding or investigation by the Company currently pending or
which the Company intends to initiate.
4.13 TAX RETURNS AND PAYMENTS. Except as disclosed in the
SEC Reports, the Company has timely filed all tax returns (federal, state and
local) required to be filed by it. All taxes shown to be due and payable on
such returns, any assessments imposed, and to the Company's knowledge all other
taxes due and payable by the Company on or before the Closing, have been paid
or will be paid prior to the time they become delinquent. The Company has not
been advised (a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (b) of any deficiency in assessment
or proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
4.14 EMPLOYEES. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be
conducted by the Company.
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4.15 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as set
forth on Schedule 4.15, the Company is presently not under any obligation, and
has not granted any rights, to register any of the Company's presently
outstanding securities or any of its securities that may hereafter be issued.
4.16 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the
Company is not in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of
its properties which violation would materially and adversely affect the
business, assets, liabilities, financial condition or operations of the
Company. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the issuance of any of the Securities, except such as has been
duly and validly obtained or filed, or with respect to any filings that must be
made after the Closing, as will be filed in a timely manner. The Company has
all franchises, permits, licenses and any similar authority reasonably
necessary for the conduct of its business as now being conducted by it, the
lack of which could materially and adversely affect the business, properties,
or financial condition of the Company.
4.17 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety the violation of which would have
a material adverse effect on the Company, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. No Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Company. For the purposes of
the preceding sentence, "HAZARDOUS MATERIALS" shall mean (a) materials which
are listed or otherwise defined as "HAZARDOUS" or "TOXIC" under any applicable
local, state, federal and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials, or (b)
any petroleum products or nuclear materials.
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4.18 VALID OFFERING. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement,
the offer, sale and issuance of the Securities will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the
Securities to any person or persons so as to bring the sale of such Securities
by the Company within the registration provisions of the Securities Act or any
state securities laws.
4.19 FULL DISCLOSURE. The Company has provided the
Purchaser with all information requested by the Purchaser in connection with
its decision to purchase the Notes and Warrants. Neither this Agreement, the
exhibits and schedules hereto, the Related Agreements nor any other document
delivered by the Company to Purchaser or its attorneys or agents in connection
herewith or therewith or with the transactions contemplated hereby or thereby,
contain any untrue statement of a material fact nor knowingly omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
4.20 INSURANCE. The Company has general commercial,
product liability, fire and casualty insurance policies with coverage customary
for companies similarly situated to the Company.
4.21 SEC REPORTS. The Company has since January 1, 2000
filed all proxy statements, reports and other documents required to be filed by
it under the Exchange Act. The Company has furnished the Purchaser with copies
of (i) its Annual Report on Form 10-KSB/A for the fiscal year ended December
31, 2000, (ii) its Quarterly Reports on Form 10-QSB/A for the fiscal quarters
ended March 31, 2001, June 30, 2001 and September 30, 2001 and (iii) its Proxy
Statement dated April 25, 2001 (collectively, the "SEC REPORTS"). Each SEC
Report was in substantial compliance with the requirements of its respective
form and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective dates, contained
any untrue statement of a material fact or knowingly omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.22 NO MARKET MANIPULATION. The Company has not taken,
and will not take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock of the Company to facilitate the
sale or resale of any of the Securities being offered hereby or affect the
price at which any of the Securities being offered hereby may be issued.
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4.23 LISTING. The Company's Common Stock is listed for
trading on the NASD OTC Bulletin Board and satisfies all requirements for the
continuation of such listing. The Company has not received any notice that its
Common Stock will be delisted from the NASD OTC Bulletin Board or that the
Common Stock does not meet all requirements for the continuation of such
listing.
4.24 STOP TRANSFER. The Securities are restricted
securities as of the date of this Agreement. The Company will not issue any
stop transfer order or other order impeding the sale and delivery of any of the
Securities at such time as the Securities are registered for public sale or an
exemption from registration is available, except as required by federal
securities laws.
4.25 DILUTION. The number of shares of Common Stock
issuable upon conversion of the Notes and exercise of the Warrants may increase
substantially in certain circumstances, including, but not necessarily limited
to, the circumstance wherein the trading price of the Common Stock declines
prior to conversion or exercise of such securities. The Company's executive
officers and directors have studied and fully understand the nature of the
Securities being sold hereby and recognize that they have a potential dilutive
effect. The Board of Directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the shares
of Common Stock upon conversion of the Notes and exercise of the Warrants is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company with respect to itself or himself
as follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
5.1 REQUISITE POWER AND AUTHORITY. Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Related Agreements and to carry out their
provisions. All action on Purchaser's part required for the lawful execution
and delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of
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creditors' rights, and (b) as limited by general principles of equity that
restrict the availability of equitable remedies.
5.2 INVESTMENT REPRESENTATIONS. Purchaser understands
that the Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement.
5.3 PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser must bear the economic
risk of this investment until the Securities are registered pursuant to the
Securities Act, or an exemption from registration is available.
5.4 ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring
the Notes for Purchaser's own account for investment only, and not with a view
towards their distribution.
5.5 PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement, and the
Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the
Agreement.
5.6 ACCREDITED INVESTOR. Purchaser represents that it is
an accredited investor within the meaning of Regulation D under the Securities
Act.
5.7 LEGENDS.
(a) The Notes shall bear the following legend
until the Notes and Conversion Shares are covered by an effective registration
statement filed with the SEC:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR, IF APPLICABLE, STATE SECURITIES
LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO METROPOLITAN HEALTH NETWORKS, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
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(b) The Conversion Shares and the Warrant
Shares shall bear a legend which shall be in substantially the following form
until such shares are covered by an effective registration statement filed with
the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
IF APPLICABLE, STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO METROPOLITAN HEALTH
NETWORKS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrants shall bear the following
legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF
COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
METROPOLITAN HEALTH NETWORKS, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
5.8 NO SHORTING. The Purchaser will not and will not
cause any person or entity to engage in "short sales" of the Company's Common
Stock.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Purchaser as follows:
6.1 STOP-ORDERS. The Company will advise the Purchaser,
promptly after it receives notice of issuance by the Securities and Exchange
Commission (the "SEC"), any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
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6.2 LISTING. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon conversion of the Notes and
upon the exercise of the Warrants upon the Principal Market upon which shares
of Common Stock are then listed (subject to official notice of issuance) and
shall maintain such listing so long as any other shares of Common Stock shall
be so listed. The Company will maintain the listing of its Common Stock on a
Principal Market, and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers ("NASD") and such exchanges, as applicable.
The Company will provide the Purchaser copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock from any Principal Market.
6.3 MARKET REGULATIONS. The Company shall notify the
SEC, NASD and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall
take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to Purchaser and promptly provide copies thereof to
Purchaser.
6.4 REPORTING REQUIREMENTS. (a) Until at least two (2)
years after the effectiveness of the Registration Statement on Form SB-2 or
such other Registration Statement described in Section 9.1(d) hereof, the
Company will (i) cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all material
respects with its reporting and filing obligations under the Exchange Act,
(iii) comply with all reporting requirements that is applicable to an issuer
with a class of shares registered pursuant to Section 12(g) of the Exchange
Act, and (iv) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will not take any
action or file any document (whether or not permitted by the Securities Act or
the Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Acts until the earlier of (y) two (2) years after the effective date
of the Registration Statement on Form SB-2 or such other Registration Statement
described in Section 9.1(d) hereof, or (z) the sale by the Purchaser of all the
Securities issuable by the Company pursuant to this Agreement. Until at least
two (2) years after the Warrants have been exercised, the Company will use its
commercial best efforts to continue the listing of the Common Stock on the NASD
OTC Bulletin Board and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and NASDAQ. Notwithstanding the foregoing, the Company shall be permitted to
merge or consolidate with and into another entity and ceases its status as a
reporting public entity, provided that the surviving corporation shall be a
reporting public entity.
6.5 USE OF FUNDS. The Company undertakes to use the
proceeds of the Purchaser's funds for the purposes set forth on SCHEDULE 6.5
attached hereto. A deviation from the use of proceeds set forth on SCHEDULE 6.5
of more than 10% per item or more than 20% in the aggregate shall be deemed a
material breach of the Company's obligations hereunder.
6.6 ACCESS TO FACILITIES. The Company will permit any
representatives designated by the Purchaser (or any transferee of the
Purchaser), so long as such person holds at least $500,000 of the Notes upon
reasonable notice and during normal business hours, at such person's expense
and accompanied by a representative of the Company, to (a) visit
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and inspect any of the properties of the Company, (b) examine the corporate and
financial records of the Company (unless such examination is not permitted by
federal, state or local law or by contract) and make copies thereof or extracts
therefrom and (c) discuss the affairs, finances and accounts of any such
corporations with the directors, officers and independent accountants of the
Company.
6.7 TAXES. The Company will promptly pay and discharge,
or cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings
to foreclose any lien which may have attached as security therefor.
6.8 INSURANCE. The Company will keep its assets which
are of an insurable character insured by reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business; and the Company will maintain,
with financially sound and reputable insurers, insurance against other hazards
and risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
6.9 INTELLECTUAL PROPERTY. The Company shall maintain in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights to use Intellectual Property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business.
6.10 PROPERTIES. The Company will keep its properties in
good repair, working order and condition, reasonable wear and tear excepted,
and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably be
expected to have a material adverse effect.
6.11 CONFIDENTIALITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
6.12 REQUIRED APPROVALS. For so long as at least 20% of
the principal amount of the Notes are outstanding, the Company, without the
prior written consent of the Purchaser, shall not:
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(a) authorize, create or issue any securities
(or any rights or securities directly or indirectly convertible into or
exercisable or exchangeable for securities) having rights, preferences or
privileges superior to the Conversion Shares, except as set forth on Schedule
6.12;
(b) directly or indirectly redeem, purchase or
otherwise acquire any of the Corporation's capital stock or other equity
securities (including, without limitation, the Securities or any warrants,
options and other rights to acquire such capital stock or other equity
securities) or directly or indirectly redeem, purchase or make any payments
with respect to any stock appreciation rights, phantom stock plans or similar
rights or plans;
(c) liquidate, dissolve or effect a
recapitalization, reclassification or reorganization in any form of transaction
(including, without limitation, any reorganization into a limited liability
company, a partnership or any other non-corporate entity which is treated as a
partnership for federal income tax purposes or a stock split or "reverse" stock
split of the Common Stock). Notwithstanding the foregoing, the Company shall be
permitted to merge or consolidate with and into another entity and ceases its
status as a reporting public entity, provided that the surviving corporation
shall be a reporting public entity;
(d) become subject to (including, without
limitation, by way of amendment to or modification of) any agreement or
instrument which by its terms would (under any circumstances) restrict the
Company's right to perform the provisions of this Agreement or any of the
agreements contemplated thereby;
(e) amend, alter or repeal the Company's Bylaws
or Charter which is designed to, or could have the effect of, adversely
affecting the rights or other powers of the Conversion Shares;
(f) materially alter or change the business of
the Company; or
(g) Sell any securities to Copira Investments,
Inc. ("Copira"), or any affiliate thereof, in connection with the Company's
Stock Purchase Agreement with Copira.
6.13 REISSUANCE OF SECURITIES. The Company agrees to
reissue certificates representing the Securities without the legends set forth
in Section 5.7 above at such time as (a)
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the holder thereof is permitted to dispose of such Securities pursuant to Rule
144(k) under the Securities Act, or (b) upon resale subject to an effective
registration statement after such Securities are registered under the
Securities Act. The Company agrees to cooperate with the Purchaser in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested representations from the selling Purchaser
and broker, if any.
6.14 OPINION. On the Closing Date, the Company will
deliver to the Purchaser an opinion acceptable to the Purchaser from the
Company's legal counsel in the form annexed hereto as Exhibit D. The Company
will provide, at the Company's expense, such other legal opinions in the future
as are reasonably necessary for the conversion of the Notes and exercise of the
Warrants.
7. COVENANTS OF THE COMPANY AND PURCHASER REGARDING
INDEMNIFICATION.
7.1 COMPANY INDEMNIFICATION. The Company agrees to
indemnify, hold harmless, reimburse and defend Purchaser, each of Purchaser's
officers, directors, agents, affiliates, control persons, and principal
shareholders, against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Purchaser which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any material warranty by Company in
this Agreement or in any exhibits or schedules attached hereto or any Related
Agreement, or (ii) any breach or default in performance by Company of any
material covenant or undertaking to be performed by Company hereunder, or any
other agreement entered into by the Company and Purchaser relating hereto.
7.2 PURCHASER'S INDEMNIFICATION. Purchaser agrees to
indemnify, hold harmless, reimburse and defend the Company and each of the
Company's officers, directors, agents, affiliates, control persons and
principal shareholders, at all times against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company which results, arises out of or
is based upon (a) any misrepresentation by Purchaser in this Agreement or in
any exhibits or schedules attached hereto or any Related Agreement; or (b) any
breach or default in performance by Purchaser of any covenant or undertaking to
be performed by Purchaser hereunder, or any other agreement entered into by the
Company and Purchaser relating hereto.
7.3 PROCEDURES. The procedures and limitations set forth
in Section 9.6 shall apply to the indemnifications set forth in Sections 7.1
and 7.2 above.
8. CONVERSION OF CONVERTIBLE NOTES.
Subject to the provisions of Section 2 of the Notes, the following
provisions shall apply:
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8.1 MECHANICS OF CONVERSION.
(a) Upon the conversion of the Notes or part
thereof, the Company shall, at its own cost and expense, take all necessary
action (including the issuance of an opinion of counsel) to assure that the
Company's transfer agent shall issue stock certificates in the name of the
Purchaser (or its nominee) or such other persons as designated by the Purchaser
and in such denominations to be specified representing the number of Conversion
Shares issuable upon such conversion. The Company warrants that no instructions
other than these instructions have been or will be given to the transfer agent
of the Company's Common Stock and that the Conversion Shares issued will not
contain a legend restricting the resale or transferability of the Conversion
Shares, provided the Purchaser has notified the Company of the Purchaser's
present intention to sell the Conversion Shares and the Conversion Shares are
included in an effective registration statement or are otherwise exempt from
registration when sold.
(b) Purchaser will give notice of its decision
to exercise its right to convert the Notes or part thereof by telecopying or
otherwise delivering an executed and completed notice of the number of shares
to be converted to the Company (the "NOTICE OF CONVERSION"). The Purchaser will
not be required to surrender the Notes until the Purchaser receives a
certificate or certificates, as the case may be, representing the Conversion
Shares or until the Note has been fully satisfied. Each date on which a Notice
of Conversion is telecopied or delivered to the Company in accordance with the
provisions hereof shall be deemed a "CONVERSION DATE." The Company will or will
cause the transfer agent to transmit the Company's Common Stock certificates
representing the shares issuable upon conversion of the Notes (and a
certificate representing the balance of the Notes not so converted, if
requested by Purchaser) to the Purchaser via express courier for receipt by
such Purchaser within three business days after receipt by the Company of the
Notice of Conversion (the "DELIVERY DATE").
(c) The Company understands that a delay in the
delivery of the Conversion Shares in the form required pursuant to Section 8
hereof, or the Mandatory Redemption Payment described in Section 8.2 hereof,
beyond the Delivery Date or Mandatory Redemption Payment Date (as defined in
Section 8.2) could result in economic loss to the Purchaser. As compensation to
the Purchaser for such loss, the Company agrees to pay late payments to the
Purchaser for late issuance of the Conversion Shares in the form required
pursuant to Section 8 hereof upon conversion of the Notes or late payment of
the Mandatory Redemption Payment, in the amount of $100 per business day after
the Delivery Date or Mandatory Redemption Payment Date, as the case may be, for
each $10,000 Note principal being converted or redeemed. The Company shall pay
any payments incurred under this Section in immediately available funds upon
demand. Furthermore, in addition to any other remedies which may be available
to the Purchaser, in the event that the Company fails for any reason to effect
delivery of the Conversion Shares by the Delivery Date or make payment by the
Mandatory Redemption Payment Date, the Purchaser will be entitled to revoke all
or part of the relevant Notice of Conversion or rescind all or part of the
notice of Mandatory Redemption by delivery of a notice to such effect to the
Company whereupon the Company and the Purchaser shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that late payment charges described above shall be payable through the date
notice of revocation or rescission is given to the Company.
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(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest or dividends required to be paid or other charges hereunder exceed
the maximum amount permitted by such law, any payments in excess of such
maximum shall be credited against amounts owed by the Company to a Purchaser
and thus refunded to the Company.
8.2 MANDATORY REDEMPTION. In the event the Company is
unable to issue Conversion Shares on a Delivery Date or at any time when a Note
is convertible, for any reason, other than as a result of the action or
inaction of the Purchaser, then at the Purchaser's election, the Company must
pay to the Purchaser five (5) business days after request by the Purchaser or
on the Delivery Date (if requested by the Purchaser) a sum of money determined
by multiplying the principal of the Note required to be converted and not so
converted (or otherwise not convertible, as applicable) by 130%, together with
accrued but unpaid interest thereon ("MANDATORY REDEMPTION PAYMENT"). The
Mandatory Redemption Payment must be received by the Purchaser on the same date
as the Conversion Shares are otherwise deliverable or within five (5) business
days after request, whichever is sooner ("MANDATORY REDEMPTION PAYMENT DATE").
Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
8.3 MAXIMUM CONVERSION. The Purchaser shall not be
entitled to convert on a Conversion Date that amount of a Note or Notes in
connection with that number of shares of Common Stock which would be in excess
of the sum of (i) the number of shares of Common Stock beneficially owned by
the Purchaser on a Conversion Date, and (ii) the number of shares of Common
Stock issuable upon the conversion of the Notes with respect to which the
determination of this proviso is being made on a Conversion Date, which would
result in beneficial ownership by the Purchaser of more than 4.99% of the
outstanding shares of Common Stock of the Company on such Conversion Date. For
the purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. Subject to the foregoing, a Purchaser
shall not be limited to aggregate conversions of only 4.99%. A Purchaser may
void the conversion limitation described in this Section 8.3 upon 75 days prior
notice to the Company or upon an Event of Default under the Note. A Purchaser
may allocate which of the equity of the Company deemed beneficially owned by
such Purchaser shall be included in the 4.99% amount described above and which
shall be allocated to the excess above 4.99%.
8.4 INJUNCTION - POSTING OF BOND. In the event a
Purchaser shall elect to convert a Note or part thereof, the Company may not
refuse conversion for any reason, unless an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of said Note shall have
been sought and obtained and the Company posts a surety bond for the benefit of
such Purchaser in the amount of 130% of the amount of the Note, which is
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Purchaser to the extent it obtains judgment.
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8.5 BUY-IN. In addition to any other rights available to
the Purchaser, if the Company fails to deliver to the Purchaser Conversion
Shares by the Delivery Date and if after the Delivery Date the Purchaser
purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by such Purchaser of the Common Stock
which the Purchaser anticipated receiving upon such conversion (a "BUY-IN"),
then the Company shall pay in cash to the Purchaser (in addition to any
remedies available to or elected by such Purchaser) the amount by which (A) the
Purchaser's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note, for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which
amount shall be paid as liquidated damages and not as a penalty). For example,
if the Purchaser purchases shares of Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000
of Note principal and/or interest, the Company shall be required to pay the
Purchaser $1,000, plus interest. The Purchaser shall provide the Company
written notice indicating the amounts payable to the Purchaser in respect of
the Buy-In.
9. REGISTRATION RIGHTS.
9.1 REGISTRATION RIGHTS GRANTED. The Company hereby
grants the following registration rights to holders of the securities purchased
hereby.
(a) On two occasions, for a period commencing
90 days after the Closing Date, but not later than two (2) years after the
Closing Date (the "REQUEST Date"), the Company, upon a written request therefor
from holders of more than 50% of the aggregate of the Company's Securities then
outstanding, on an as converted basis (the Conversion Shares and Warrant Shares
issued or issuable with respect to all Notes or Warrants issued or to be issued
hereunder, being, the "REGISTRABLE SECURITIES"), shall prepare and file with
the SEC a registration statement under the Securities Act covering the
Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration statement.
In addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 9.1. As a condition precedent to the
inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The
obligation of the Company under this Section 9.1 shall be limited to two
registration statements.
(b) Intentionally omitted.
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(c) Intentionally omitted.
(d) The Company shall file with the SEC within
10 days of the Closing Date (the "FILING DATE"), and use its reasonable
commercial efforts to cause to be declared effective a Form SB-2 registration
statement (or such other form that it is eligible to use) within 75 days of the
Closing Date in order to register the Registrable Securities for resale and
distribution under the Securities Act. The registration statement described in
this paragraph must be declared effective by the SEC within 75 days of the
Closing Date (as defined herein) ("EFFECTIVE DATE"). The Company will register
not less than a number of shares of Common Stock in the aforedescribed
registration statement that is equal to the Warrant Shares and 2,400,000 of the
Conversion Shares issuable at the Conversion Prices set forth in the Warrants
and Notes, respectively, that would be in effect on the Closing Date or the date
of filing of such registration statement (employing the conversion price which
would result in the greater number of Shares), assuming the conversion of 100%
of the Notes which are then outstanding or issuable hereunder, and at least one
share of common stock for each common share issuable upon exercise of the
Warrants which are then outstanding or issuable hereunder (employing the
Conversion Price that would result in the greater number of shares). The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of the Purchaser and the holders of the Warrants, as the case may be,
and not issued, employed or reserved for anyone other than the Purchaser and the
holders of the Warrants. Such registration statement will be promptly amended or
additional registration statements will be promptly filed by the Company as
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necessary to register additional Company Shares to allow the public resale of
all Common Stock included in and issuable by virtue of the Registrable
Securities.
9.2 REGISTRATION PROCEDURES. If and whenever the Company
is required by the provisions hereof to effect the registration of any shares
of Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the SEC a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as herein
provided), and promptly provide to the holders of Registrable Securities copies
of all filings and SEC letters of comment;
(b) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the later of: (i) six months after the latest
exercise period of the Warrants; (ii) twelve months after the Maturity Date of
the last maturing Notes or (iii) two years after the Closing Date, and comply
with the provisions of the Securities Act with respect to the disposition of
all of the Registrable Securities covered by such registration statement in
accordance with the Seller's intended method of disposition set forth in such
registration statement for such period;
(c) furnish to the Seller, and to each
underwriter if any, such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request to facilitate the public sale or their
disposition of the securities covered by such registration statement;
(d) use its best efforts to register or qualify
the Seller's Registrable Securities covered by such registration statement
under the securities or "blue sky" laws of such jurisdictions as the Seller and
in the case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify the Seller and each
underwriter under such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be
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stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(g) make available for inspection by the
Seller, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
the Seller or underwriter, all publicly available, non-confidential financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by the
seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
9.3 PROVISION OF DOCUMENTS.
(a) At the request of the Seller, provided a
demand for registration has been made pursuant to Section 9.1(a) or a request
for registration has been made pursuant to Section 9.1(b), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 9 subject to the limitations contained in Section 9.
(b) In connection with each registration
hereunder, the Seller will furnish to the Company in writing such information
and representation letters with respect to itself and the proposed distribution
by it as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws. In connection with each
registration pursuant to Section 9 covering an underwritten public offering,
the Company and the Seller agree to enter into a written agreement with the
managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
9.4 NON-REGISTRATION EVENTS. The Company and the
Purchaser agree that the Seller will suffer damages if any registration
statement required under Section 9.1(a) above is not filed within 30 days after
written request by the holder and not declared effective by the SEC within 90
days after such request, and maintained in the manner and within the time
periods contemplated by Section 9 hereof, and it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (i) the
Registration Statement described in Section 9.1(a) is not filed within 30 days
of such written request, or is not declared effective by the SEC on or prior to
the date that is 90 days after such request, or (ii) the registration statement
on Form SB-2 or such other form as described in Section 9.1(d) is not filed on
or before the Filing Date or not declared effective on or before the sooner of
the Effective Date, or within five business days of receipt by the Company of a
communication from the SEC that the registration statement described in Section
9.1(d) will not be reviewed, or (iii) any registration statement described in
Section 9.1(a) or (d) is filed and declared effective but shall thereafter
cease to be effective (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 45 days in the aggregate per year but not more than 30 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
this Section 9.4 is referred to herein as a "NON-REGISTRATION EVENT"), then,
for so long as such Non-Registration Event shall continue, the Company shall
pay in cash as Liquidated Damages to each holder of any Registrable Securities
an amount equal to two percent (2%) per month or pro rata
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part thereof during the pendency of such Non-Registration Event of the
principal of the Notes issued in connection with the Offering, whether or not
converted, then owned of record by such holder or issuable as of or subsequent
to the occurrence of such Non-Registration Event. Payments to be made pursuant
to this Section shall be due and payable immediately upon demand in immediately
available funds. In the event a Mandatory Redemption Payment is demanded from
the Company by the holder pursuant to Section 8.2 of this Agreement, then the
Liquidated Damages described in this Section 9.4 shall no longer accrue on the
portion of the purchase price underlying the Mandatory Redemption Payment, from
and after the date the holder receives the Mandatory Redemption Payment. It
shall be deemed a Non-Registration Event to the extent that all the Common
Stock included in the Registrable Securities and underlying the Securities is
not included in an effective registration statement as of and after the
Effective Date at the conversion prices in effect from and after the Effective
Date.
9.5 EXPENSES. All expenses incurred by the Company in
complying with Section 9, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Seller, and costs of insurance are called "REGISTRATION
EXPENSES". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Seller beyond those included in Registration Expenses,
are called "SELLING EXPENSES."
The Company will pay all Registration Expenses in
connection with the registration statement under Section 9. All Selling
Expenses in connection with each registration statement under Section 9 shall
be borne by the Seller and may be apportioned among the Sellers in proportion
to the number of shares sold by the Seller relative to the number of shares
sold under such registration statement or as all Sellers thereunder may agree.
9.6 INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any
Registrable Securities under the Securities Act pursuant to Section 9, the
Company will indemnify and hold harmless each Seller, each officer of each
Seller, each director of each Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls any such
Seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which the Seller,
or such underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities was
registered under the Securities Act pursuant to Section 9, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances when
made not misleading, and will reimburse the Seller, each such underwriter and
each such controlling person for any legal or other expenses reasonably
incurred
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by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, the underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of
the Registrable Securities under the Securities Act pursuant to Section 9, the
Seller will indemnify and hold harmless the Company, and each person, if any,
who controls the Company within the meaning of the Securities Act, each officer
of the Company who signs the registration statement and each director of the
Company, against all losses, claims, damages or liabilities, joint or several,
to which the Company or such officer or director may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Securities Act pursuant to Section 9, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer or director for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that the
Seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the
Registrable Securities sold by the Seller under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not in any event to exceed the net proceeds received by the Seller from the
sale of Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Section 9.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 9.6(c) if and to the extent the
indemnifying party is prejudiced by such omission. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 9.6(c) for any
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legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and counsel for the indemnified party shall have reasonably concluded in
writing that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified parties shall
have the right to select one separate counsel for such claim or related claims
and to assume such legal defenses and otherwise to participate in the defense
of such action, with the reasonable expenses and fees of such separate counsel
and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the Securities Act in any
case in which either (i) the Seller, or any controlling person of the Seller,
makes a claim for indemnification pursuant to this Section 9.6 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 9.6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of the Seller or controlling person of the Seller in
circumstances for which indemnification is provided under this Section 9.6;
then, and in each such case, the Company and the Seller will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Seller is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the registration statement bears to
the public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (A) the Seller will not
be required to contribute any amount in excess of the public offering price of
all such securities offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
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10. OFFERING RESTRICTIONS. Except as previously disclosed in the
SEC Reports or stock or stock options granted to employees or directors of the
Company; or equity or debt issued in connection with an acquisition of a
business or assets by the Company; or the issuance by the Company of stock in
connection with the establishment of a joint venture partnership or licensing
arrangement (these exceptions hereinafter referred to as the "EXCEPTED
Issuances"), the Company will not issue any securities with a variable/floating
conversion feature which are or could be (by conversion or registration)
free-trading securities prior to the expiration of 6 months from the actual
effective date of the registration statement described in Section 9.1(d) above
(the "EXCLUSION PERIOD") without the consent of the Purchaser. This restriction
shall not prohibit the Company from issuing any equity, convertible debt or
other securities prior to the expiration of the Exclusion Period, provided that
such equity, convertible debt or other securities are restricted securities
when issued and remain restricted until the expiration of the Exclusion Period.
Notwithstanding the above, if the Purchaser elects not to further fund the
Company within 30 days following the full conversion of the Note, the Purchaser
shall waive the provisions of this Section 10.
11. SECURITY INTEREST. As a condition of Closing, the Company
will deliver to the Purchaser Common Shares of the Company owned by certain
shareholders of the Company, together with signature guaranteed stock powers.
Collectively, the foregoing stock is referred to as "Security Shares." The
Security Shares will be held by the Purchaser pursuant to a Security Agreement.
The Company will also execute all such documents reasonably necessary to
memorialize and further protect the security interest described above.
12. MISCELLANEOUS.
12.1 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York. Both parties and the individuals executing
this Agreement and other agreements on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's
fees and costs. In the event that any provision of this Agreement or any other
agreement delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
12.2 SURVIVAL. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby. All
statements as to factual matters contained in any certificate or other written
instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date
of such certificate or instrument.
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12.3 SUCCESSORS AND ASSIGNS. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Securities from time to
time.
12.4 ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, the Related Agreements and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
12.5 SEVERABILITY. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
12.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified
only upon the written consent of the Company and the Purchaser.
(b) The obligations of the Company and the
rights of the holders of the Securities under the Agreement may be waived only
with the written consent of such holders of Securities. The rights of the
holder of a Note may be waived only with the written consent of the holder of
such Note.
12.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or
any acquiescence therein, or of or in any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver,
permit, consent or approval of any kind or character on the Purchaser's part of
any breach, default or noncompliance under this Agreement, the Notes or the
Related Agreements or any waiver on such party's part of any provisions or
conditions of the Agreement, a Note or the Related Agreements must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, the Notes or the
Related Agreements, by law or otherwise afforded to any party, shall be
cumulative and not alternative.
12.8 NOTICES. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then
on the next business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the Company at the address as set forth on the signature page hereof
and to the Purchaser at the address set forth on the signature page hereto for
such Purchaser, with a copy in the case of the Purchaser to Xxxxxx X. Xxxxxx,
Esq., 000 Xxxx
-00-
00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000, facsimile number (000) 000-0000, or
at such other address as the Company or the Purchaser may designate by ten days
advance written notice to the other parties hereto.
12.9 ATTORNEYS' FEES. In the event that any suit or
action is instituted to enforce any provision in this Agreement, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including, without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
12.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
12.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
12.12 BROKER'S FEES. Each party hereto represents and
warrants that no agent, broker, investment banker, person or firm acting on
behalf of or under the authority of such party hereto is or will be entitled to
any broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein, except as specified
herein with respect to the Purchaser. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 12.12 being
untrue.
12.13 INDEMNIFICATION. The Company shall indemnify the
Purchaser for any losses or expenses incurred by the Purchaser in connection
with any claims brought against the Purchaser by any third party (including any
other stockholder of the Company) as a result of the transactions contemplated
by this Agreement, other than for a breach of representation or warranty made
by the Purchaser herein.
12.14 CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other.
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IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
METROPOLITAN HEALTH NETWORKS, INC. LAURUS MASTER FUND, LTD.
By: By:
--------------------------------- ------------------------------------
Name: Name:
Title: Address: c/o Onshore Corporate
Address: 000 Xxxxxxxxxx Xxxxxx Xxxxx, Services Ltd.
Xxxxx 0000 X.X. Xxx 0000 X.X.,
Xxxx Xxxx Xxxxx, XX 00000 Xxxxxxxxxx Xxxxx,
Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
