NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of October 26, 2005 (this
"Agreement"), by and between OMNI MEDICAL HOLDINGS, INC., a Utah limited
liability company (the "Company"), with headquarters located at 0000 Xxxx
Xxxxx Xxxxx, Xxxxx 000, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, and SIGMA
OPPORTUNITY FUND, LLC, a Delaware limited liability company (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase from the Company and the
Company wishes to sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, a promissory note of the Company having the
aggregate principal amount set forth on the signature page of this Agreement
and in connection with which the Company shall issue to the Buyer warrants to
purchase shares of Common Stock (such capitalized term and all other
capitalized terms used in this Agreement having the meanings provided in
Section 1);
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS
(a) All the agreements or instruments herein defined shall mean
such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Agreement.
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Blackout Period" means the period of up to 20 Trading Days
(whether or not consecutive) during any period of 365 consecutive days after
the date the Company notifies the Investors that they are required, pursuant
to Section 8(c)(4), to suspend offers and sales of Registrable Securities as a
result of an event or circumstance described in Section 8(b)(5)(A), during
which period, by reason of Section 8(b)(5)(B), the Company is not required to
amend the Registration Statement or supplement the related Prospectus.
"Business Day" means any day other than a Saturday, Sunday or a
day on which commercial banks in The City of New York are authorized or
required by law or executive order to remain closed.
"Claims" means any losses, claims, damages, liabilities or
expenses, including, without limitation, reasonable fees and expenses of legal
counsel (joint or several), incurred by a Person.
"Closing Date" means 10:00 a.m., New York City time, on October
26, 2005 or such other mutually agreed to time.
"Common Stock" means the Common Stock, par value $.001 per share,
of the Company.
"Common Stock Equivalent" means any warrant, option, subscription
or purchase right with respect to shares of Common Stock, any security
convertible into, exchangeable for, or otherwise entitling the holder thereof
to acquire, shares of Common Stock or any warrant, option, subscription or
purchase right with respect to any such convertible, exchangeable or other
security.
"Indemnified Party" means the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any Person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act.
"Indemnified Person" means the Buyer and each other Investor who
beneficially owns or holds Registrable Securities and each other Investor who
sells such Registrable Securities in the manner permitted under this
Agreement, the directors, if any, of such Investor, the officers or persons
performing similar functions, if any, of the Buyer and any such Investor, each
Person, if any, who controls the Buyer or any such Investor within the meaning
of the 1933 Act or the 1934 Act, any underwriter (as defined in the 0000 Xxx)
acting on behalf of an Investor who participates in the offering of
Registrable Securities of such Investor in accordance with the plan of
distribution contained in the Prospectus, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each Person, if
any, who controls any such underwriter within the meaning of the 1933 Act or
the 1934 Act.
"Inspector" means any attorney, accountant or other agent retained
by an Investor for the purposes provided in Section 8(b)(9).
"Investor" means the Buyer and any transferee or assignee who
agrees to become bound by the provisions of Sections 5(a), 5(b), 8, 9, and 10
of this Agreement.
"Margin Stock" shall have the meaning provided in Regulation U of
the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221).
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"NASD" means the National Association of Securities Dealers, Inc.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means the 5% Senior Note due 2006 of the Company in the
form attached as Annex I.
"Person" means any natural person, corporation, partnership,
limited liability company, trust, incorporated organization, unincorporated
association or similar entity or any government, governmental agency or
political subdivision.
"Prospectus" means the prospectus forming part of the Registration
Statement at the time the Registration Statement is declared effective and any
amendment or supplement thereto (including any information or documents
incorporated therein by reference).
"Purchase Price" means the purchase price for the Note set forth
on the signature page of this Agreement.
"Record" means all pertinent financial and other records,
pertinent corporate documents and properties of the Company subject to
inspection for the purposes provided in Section 8(b)(9).
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415, and the
declaration or ordering of effectiveness of such Registration Statement by the
SEC.
"Registrable Securities" means (1) the Warrant Shares, (2) if the
Common Stock is changed, converted or exchanged by the Company or its
successor, as the case may be, into any other stock or other securities on or
after the date hereof, such other stock or other securities which are issued
or issuable in respect of or in lieu of the Warrant Shares and (3) if any
other securities are issued to holders of the Common Stock (or such other
shares or other securities into which or for which the Common Stock is so
changed, converted or exchanged as described in the immediately preceding
clause (2)) upon any reclassification, share combination, share subdivision,
share dividend, merger, consolidation or similar transaction or event, such
other securities which are issued or issuable in respect of or in lieu of the
Common Stock.
"Registration Default Period" means the period during which any
Registration Event occurs and is continuing.
"Registration Event" means the occurrence of any of the following
events:
(i) the Company fails to file with the SEC the Registration
Statement on or before the date by which the Company is required to file
the Registration Statement pursuant to Section 8(a)(1),
(ii) the Registration Statement covering Registrable Securities
is not declared effective by the SEC within 90 days following the filing
thereof,
(iii) after the SEC Effective Date, sales cannot be made pursuant
to the Registration Statement for any reason (including without
limitation by reason of a stop order of any untrue statement of a
material fact or omission of a material fact in the Registration
Statement, or the Company's failure to update the Registration
Statement) but except as excused pursuant to Section 8(b)(5),
(iv) after the date on which securities of the Company are listed
or included for quotation on a Trading Market, the Common Stock
generally or the Registrable Securities specifically are not listed or
included for quotation on a Trading Market, or trading of the Common
Stock is suspended or halted for a period exceeding 5 days on the
Trading Market which at the time constitutes the principal market for
the Common Stock, or
(v) the Company fails, refuses or is otherwise unable timely to
issue Warrant Shares upon exercise of the Warrant in accordance with the
terms of the Warrant, or certificates therefor as required under the
Transaction Documents or the Company fails, refuses or is otherwise
unable timely to transfer any Warrant Shares as and when required by the
Transaction Documents.
"Registration Period" means the period from the SEC Effective Date
to the earlier of (A) the date which is three years after the Closing Date (or
if the Note shall no longer remain outstanding, such date after which each
Investor may sell all of its Registrable Securities without registration under
the 1933 Act pursuant to Rule 144, free of any limitation on the volume of
such securities which may be sold in any period) and (B) the date on which the
Investors no longer own any Registrable Securities.
"Registration Statement" means a registration statement on Form S-
1, Form SB-2, Form S-3 or such other form as may be available to the Company
to be filed with the SEC under the 1933 Act relating to the Registrable
Securities and which names the Investors as selling stockholders.
"Regulation D" means Regulation D under the 1933 Act.
"Required Information" means, with respect to each Investor, all
information regarding such Investor, the Registrable Securities held by such
Investor or which such Investor has the right to acquire and the intended
method of disposition of the Registrable Securities held by such Investor or
which such Investor has the right to acquire as shall be required by the 1933
Act to effect the registration of the resale by such Investor of such
Registrable Securities.
"Rule 144" means Rule 144 promulgated under the 1933 Act or any
other similar rule or regulation of the SEC that may at any time provide a
"safe harbor" exemption from registration under the 1933 Act so as to permit a
holder to sell securities of the Company to the public without registration
under the 1933 Act.
"Rule 144A" means Rule 144A under the 1933 Act or any successor
rule thereto.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement is
first filed with the SEC pursuant to Section 8.
"SEC Reports" means the Company's (1) Annual Report on Form 10-KSB
for the fiscal year ended March 31, 2005, (2) Quarterly Report on Form 10-QSB
for the quarter ended June 30, 2005, and (3) all other periodic and other
reports filed by the Company with the SEC pursuant to the 1934 Act subsequent
to June 30, 2005, and prior to the date hereof, in each case as filed with the
SEC and including the information and documents (other than exhibits)
incorporated therein by reference.
"Securities" means, collectively, the Note, the Warrants and the
Warrant Shares.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
the Company.
"Trading Day" means at any time a day on which any of a national
securities exchange, Nasdaq, Nasdaq SmallCap or such other securities market
as at such time constitutes the principal securities market for the Common
Stock is open for general trading of securities.
"Trading Market" means the Over-The-Counter Bulletin Board, the
American Stock Exchange, Inc., the Nasdaq, the Nasdaq SmallCap or the New York
Stock Exchange, Inc.
"Transaction Documents" means, collectively, this Agreement, the
Securities and the other agreements, instruments and documents contemplated
hereby and thereby.
"Transfer Agent" means Interwest Transfer Co., as transfer agent
and registrar for the Common Stock, or its successor.
"Violation" means
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or 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,
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation
under the 1933 Act, the 1934 Act or any state securities law, or
(iv) any breach or alleged breach by any Person other than the
Buyer of any representation, warranty, covenant, agreement or other term of
any of the Transaction Documents.
"Warrants" means the Common Stock Purchase Warrants in the form
attached hereto as Annex II.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
2. PURCHASE AND SALE; PURCHASE PRICE.
(a) Purchase. Upon the terms and subject to the conditions of
this Agreement, the Buyer hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to the Buyer, on the Closing Date, the Note in
the principal amount set forth on the signature page of this Agreement and
having the terms and conditions as set forth in the form of the Note attached
hereto as Annex I for the Purchase Price. In connection with the purchase of
the Note by the Buyer, the Company shall issue to the Buyer at the closing on
the Closing Date Warrants initially entitling the holder to purchase 15,000
shares of Common Stock for each $1,000 principal amount of the Note.
(b) Form of Payment. Payment by the Buyer of the Purchase Price
to the Company on the Closing Date shall be made by wire transfer of
immediately available funds to:
Xxxxx Fargo Bank
00 Xxxxx Xxxxxxx Xxx.
Xxxxxxxx Xxxxxxx, XX 00000
ABA No.: 000000000
For credit to account No. 2323174348
For credit to the account of Omni Medical Holdings, Inc.
(c) Closing. The issuance and sale of the Note and the issuance
of the Warrants shall occur on the Closing Date. At the closing, upon the
terms and subject to the conditions of this Agreement, (1) the Company shall
issue and deliver to the Buyer the Note and the Warrants against payment by
the Buyer to the Company of an amount equal to the Purchase Price, and (2) the
Buyer shall pay to the Company an amount equal to the Purchase Price against
delivery by the Company to the Buyer of the Note and the Warrants.
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) Purchase for Investment. The Buyer is purchasing the Note
and acquiring the Warrants for its own account for investment and not with a
view towards the public sale or distribution thereof within the meaning of the
1933 Act; and the Buyer will acquire any Shares issued to the Buyer prior to
the SEC Effective Date of a Registration Statement covering the resale of such
Shares by the Buyer for its own account for investment and not with a view
towards the public sale or distribution thereof within the meaning of the 1933
Act prior to the SEC Effective Date; and the Buyer has no intention of making
any distribution, within the meaning of the 1933 Act, of the Shares except in
compliance with the registration requirements of the 1933 Act or pursuant to
an exemption therefrom;
(b) Accredited Investor. The Buyer is an "accredited investor"
as that term is defined in Rule 501 of Regulation D under the 1933 Act by
reason of Rule 501(a)(3) thereof;
(c) Reoffers and Resales. The Buyer will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the Securities unless registered under the 1933 Act, pursuant to an exemption
from registration under the 1933 Act or in a transaction not requiring
registration under the 1933 Act;
(d) Information Provided. The Buyer and its advisors, if any,
have requested, received and considered all information relating to the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and information relating to the offer
and sale of the Note and the offer of the Warrant Shares deemed relevant by
them (assuming the accuracy and completeness of the SEC Reports and of the
Company's responses to the Buyer's requests); the Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company
concerning the terms of the offering of the Securities and the business,
properties, operations, condition (financial or other), results of operations
and prospects of the Company and its Subsidiaries and have received
satisfactory answers to any such inquiries; and
(e) Note Purchase Agreement. The Buyer has all requisite power
and authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed by the
Buyer in connection herewith and to consummate the transactions contemplated
hereby and thereby; and this Agreement has been duly and validly authorized,
duly executed and delivered by the Buyer and, assuming due execution and
delivery by the Company, is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and general principles of
equity, regardless of whether enforcement is considered in a proceeding in
equity or at law.
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY.
The Company represents and warrants to, and covenants and agrees
with, the Buyer as follows:
(a) Organization and Authority. The Company and each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and (i) each
of the Company and the Subsidiaries has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as described in the SEC Reports and as currently conducted, and (ii)
the Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the other
Transaction Documents to be executed and delivered by the Company in
connection herewith, and to consummate the transactions contemplated hereby
and thereby; and the Company does not have any equity investment in any other
Person other than the Subsidiaries listed in Schedule 4(a) hereto.
(b) Qualifications. The Company and each of the Subsidiaries
are duly qualified to do business as foreign corporations and are in good
standing in all jurisdictions where such qualification is necessary and where
failure so to qualify could have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations
or prospects of the Company and the Subsidiaries, taken as a whole.
(c) Capitalization. (1) The authorized and outstanding capital
stock of the Company and each of the Subsidiaries is as set forth on Schedule
4(c). Except as set forth on Schedule 4(c), there are no outstanding options
or warrants for the purchase of, or rights to purchase or subscribe for, or
securities convertible into, exchangeable for, or otherwise entitling the
holder to acquire, Common Stock or other capital stock of the Company or any
Subsidiary or any contracts or commitments to issue or sell Common Stock or
other capital stock of the Company or any Subsidiary or any such options,
warrants, rights or other securities. Schedule 4 (c) sets forth the number of
shares held by the Company in each Subsidiary.
(2) The outstanding shares of Common Stock of the Company and each
Subsidiary have been duly and validly authorized and issued. None of the
outstanding shares of Common Stock or capital stock of any Subsidiary has been
issued in violation of the preemptive rights of any securityholder of the
Company or any Subsidiary. The offers and sales of the outstanding shares of
Common Stock of the Company or capital stock of any Subsidiary were at all
relevant times either registered under the 1933 Act and applicable state
securities laws or exempt from such requirements. Except as set forth on
Schedule 4(c), no holder of any of the Company's or any Subsidiary's
securities has any rights, "demand," "piggy-back" or otherwise, to have such
securities registered by reason of the intention to file, filing or
effectiveness of the Registration Statement or otherwise.
(d) Concerning the Warrant Shares. The Warrant Shares have been
duly authorized and, when issued upon exercise of the Warrants, will be duly
and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder. There
are no preemptive or similar rights of any stockholder of the Company or any
other Person to acquire any of the Warrants or Warrant Shares. The Company
has duly reserved 6,000,000 shares of Common Stock for issuance upon exercise
of the Warrants, and such shares shall remain so reserved, and the Company
shall from time to time reserve such additional shares of Common Stock as
shall be required to be reserved pursuant to the Warrants, so long as the
Warrants are outstanding. The Common Stock is traded on the Over-The-Counter
Bulletin Board. The Company knows of no reason that the Warrant Shares will
be ineligible for quotation on the Over-The-Counter Bulletin Board.
(e) Corporate Authorization. This Agreement and the other
Transaction Documents to which the Company is a party have been duly and
validly authorized by the Company; this Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery by the
Buyer, this Agreement, the Note and the Warrants are the valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as the enforceability hereof or thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally
and general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law.
(f) Non-contravention. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of
the issuance of the Securities as contemplated by this Agreement and
consummation by the Company of the other transactions contemplated by the
Transaction Documents do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) result in any violation of any term
or provision of the certificate of incorporation or bylaws of the Company or
any Subsidiary, (ii) conflict with or result in a breach by the Company or any
Subsidiary of any of the terms or provisions of, or constitute a default
under, or result in the modification of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company or any Subsidiary pursuant to, any
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties or assets are bound or
affected, in any such case which would be reasonably likely to have a material
adverse effect on the business, properties, operations, condition (financial
or other), results of operations or prospects of the Company and the
Subsidiaries, taken as a whole, or the validity or enforceability of, or the
ability of the Company to perform its obligations under, the Transaction
Documents, (iii) violate or contravene any applicable law, rule or regulation
or any applicable decree, judgment or order of any court, United States
federal or state regulatory body, administrative agency or other governmental
body having jurisdiction over the Company or any Subsidiary or any of their
respective properties or assets, in any such case which would be reasonably
likely to have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries, taken as a whole, or the validity or
enforceability of, or the ability of the Company to perform its obligations
under, the Transaction Documents, or (iv) have any material adverse effect on
any permit, certification, registration, approval, consent, license or
franchise necessary for the Company or any Subsidiary to own or lease and
operate any of its properties and to conduct any of its business or the
ability of the Company or any Subsidiary to make use thereof.
(g) Approvals, Filings, Etc. No authorization, approval or
consent of, or filing with, any United States or foreign court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained or made
by the Company or any Subsidiary for (x) the execution, delivery and
performance by the Company of the Transaction Documents, (y) the issuance and
sale of the Securities as contemplated by this Agreement and the terms of the
Note and the Warrants and (z) the performance by the Company of its
obligations under the Transaction Documents, other than (1) registration of
the resale of the Shares under the 1933 Act as contemplated by Section 8, (2)
as may be required under applicable state securities or "blue sky" laws, and
(3) filing of one or more Forms D with respect to the Securities as required
under Regulation D.
(h) Information Provided. The SEC Reports, the Transaction
Documents and the instruments delivered by the Company to the Buyer in
connection with the closing on the Closing Date do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, it being understood that for purposes of
this Section 4(h), any statement contained in such information shall be deemed
to be modified or superseded for purposes of this Section 4(h) to the extent
that a statement in any document included in such information which was
prepared and furnished to the Buyer on a later date or filed with the SEC on a
later date modifies or replaces such statement, whether or not such later
prepared or filed statement so states.
(i) Absence of Brokers, Finders, Etc. No broker, finder or
similar Person is entitled to any commission, fee or other compensation by
reason of action taken by or on behalf of the Company in connection with the
transactions contemplated by this Agreement, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer
by any Person for any such commission, fee or other compensation.
(j) No Solicitation. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any
other Person acting on behalf of the Company, in respect of the Securities or
in connection with the offer and sale of the Securities. Neither the Company
nor, to its knowledge, any Person acting on behalf of the Company has, either
directly or indirectly, sold or offered for sale to any Person any of the
Securities or, within the six months prior to the date hereof, any other
similar security of the Company except as contemplated by this Agreement and
neither the Company nor any Person authorized to act on its behalf will sell
or offer for sale any promissory notes, warrants, shares of Common Stock or
other securities to, or solicit any offers to buy any such security from, any
Person so as thereby to cause the issuance or sale of any of the Securities to
be in violation of any of the provisions of Section 5 of the 1933 Act.
5. CERTAIN COVENANTS.
(a) Restrictive Legends. Once the Registration Statement required
to be filed by the Company pursuant to Section 8 has been declared effective
or particular Warrant Shares are eligible for resale pursuant to Rule 144(k)
under the 1933 Act, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for any
such Warrant Shares issued prior to the SEC Effective Date or prior to the
time of such eligibility, as the case may be, which bear such restrictive
legend and remove any stop-transfer restriction relating thereto promptly, but
in no event later than three days after surrender of such certificates by the
Buyer and (2) the Company shall not place any restrictive legend on
certificates issued upon exercise of the Warrants or impose any stop-transfer
restriction thereon.
(b) Reporting Status. During the Registration Period, the
Company shall timely file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
(c) Form D. The Company agrees to file one or more Forms D with
respect to the Securities as required under Regulation D to claim the
exemption provided by Rule 506 of Regulation D and to provide a copy thereof
to the Buyer promptly after such filing.
(d) State Securities Laws. On or before the Closing Date, the
Company shall take such action as shall be necessary to qualify, or to obtain
an exemption for, the offer and sale of the Securities to the Buyer as
contemplated by the Transaction Documents under such of the securities laws of
jurisdictions in the United States as shall be applicable thereto.
Notwithstanding the foregoing obligations of the Company in this Section 5(e),
the Company shall not be required (1) to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 5(e), (2) to subject itself to general taxation in any such
jurisdiction, (3) to file a general consent to service of process in any such
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or burden to the Company or (5) to make any change in its charter or
by-laws which the Company determines to be contrary to the best interests of
the Company and its stockholders. The Company shall furnish the Buyer with
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities laws on or before the Closing Date.
(e) Use of Proceeds. The Company represents and agrees that:
(1) it does not own or have any present intention of acquiring any Margin
Stock; (2) the proceeds of sale of the Note and the Warrant Shares will be
used for general working capital purposes and in the operation of the
Company's business; (3) none of such proceeds will be used, directly or
indirectly (A) except as disclosed on Schedule 5(e), to pay any existing debt
obligations (B) to make any loan to or investment in any other Person or (C)
for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any stock that is currently a Margin Stock or for any other purpose which
might constitute the transactions contemplated by this Agreement a "purpose
credit" within the meaning of such Regulation U of the Board of Governors of
the Federal Reserve System; and (4) neither the Company nor any agent acting
on its behalf has taken or will take any action which might cause this
Agreement or the transactions contemplated hereby to violate Regulation T,
Regulation U or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the 1934 Act, in each case as in effect now or as
the same may hereafter be in effect.
(f) Right of First Refusal. If the Company shall make an
offering permitted by clause (y) of the first proviso of Section 1.8 of the
Note the Buyer shall be provided rights of first refusal in the manner set
forth in this Section 5(f) and in accordance with the second proviso of
Section 1.8 of the Note. In order to permit the Buyer to exercise its rights
of first refusal, prior to selling any such securities to any Person other
than the Buyer, the Company shall give notice to the Buyer of the detailed
terms of the proposed offering and terms of the securities proposed to be
issued and, promptly after being requested by the Buyer, such other
information as requested by the Buyer. The Buyer may, by notice to the
Company, exercise such right of first refusal at any time until the later of
(x) ten Business Days after such notice from the Company to the Buyer and (y)
five Business Days after the Company provides such additional information as
shall have been requested by the Buyer. The Buyer shall be entitled to
purchase all or any portion of such offering specified by the Buyer at the
time it notifies the Company of the Buyer's exercise of its right of first
refusal. In the event that the terms of the proposed offering or securities
proposed to be issued change prior to consummation of the proposed offering,
the Buyer shall provide another notice to Buyer as described above, and the
time period periods for the exercise by Buyer of its rights under this section
shall re-commence.
(g) Certain Issuances of Securities. Notwithstanding anything
herein or in any of the Transaction Documents to the contrary, so long as
Buyer holds any of the Securities, the Company shall not issue any securities,
including Common Stock and Common Stock Equivalents, without the consent of
Buyer. The Company shall also cause its Subsidiaries not to issue any
securities so long as any of the Securities are held by Buyer.
6. CLOSING DELIVERIES BY THE COMPANY.
The Company shall deliver or cause to be delivered to Buyer at the
Closing the following:
(a) An executed Note and Warrant in the name of the Buyer;
(b) An executed Agreement;
(c) A certificate, dated the Closing Date, of the Secretary of the
Company certifying (1) the Certificate of Incorporation and By-Laws of the
Company as in effect on the Closing Date, (2) all resolutions of the Board of
Directors (and committees thereof) of the Company relating to this Agreement
and the other Transaction Documents and the transactions contemplated hereby
and thereby and (3) such other matters as reasonably requested by the Buyer;
and
7. CLOSING DELIVERIES BY THE BUYER.
The Buyer shall deliver or cause to be delivered to the Company at
the Closing the following:
(a) The Purchase Price; and
(b) An executed Agreement.
8. REGISTRATION RIGHTS.
(a) Mandatory Registration. (1) The Company shall prepare and
file with the SEC, as expeditiously as possible, but in no event later than
the date which is 90 days after the Closing Date, a Registration Statement
which covers the resale by the Buyer of a number of shares of Common Stock
equal to the number of Warrant Shares issuable upon exercise of the Warrant,
as Registrable Securities, and which Registration Statement shall state that,
in accordance with Rule 416 under the 1933 Act, the Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon exercise of the Warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(2) Prior to the SEC Effective Date, and during any time
subsequent to the SEC Effective Date when the Registration Statement for any
reason is not available for use by any Investor for the resale of any
Registrable Securities, the Company shall not file any other registration
statement or any amendment thereto with the SEC under the 1933 Act or request
the acceleration of the effectiveness of any other registration statement
previously filed with the SEC, other than (A) any registration statement on
Form S-8.
(3) If a Registration Event occurs, then the Company will make
payments to the Buyer as partial liquidated damages for the minimum amount of
damages to the Buyer by reason thereof, and not as a penalty, at the rate of
2% per month of the Purchase Price paid by the Buyer pursuant to this
Agreement (excluding the Purchase Price with respect to Warrant Shares already
sold or which may be sold pursuant to Rule 144(k), for each calendar month of
the Registration Default Period (pro rated for any period less than 30 days);
provided that in no event shall such payments begin to accrue until June 30,
2006. Each such payment shall be due and payable within five (5) days after
the end of each calendar month of the Registration Default Period until the
termination of the Registration Default Period and within five (5) days after
such termination. Such payments shall be in partial compensation to the Buyer,
and shall not constitute the Buyer's exclusive remedy for such events. The
Registration Default Period shall terminate upon (u) the filing of the
Registration Statement in the case of clause (i) of the definition of
"Registration Event"; (v) the SEC Effective Date in the case of clause (ii) of
the definition of "Registration Event"; (w) the ability of the Buyer to effect
sales pursuant to the Registration Statement in the case of clause (iii) of
the definition of "Registration Event"; (x) the listing or inclusion and/or
trading of the Common Stock on a Trading Market, as the case may be, in the
case of clause (iv) of the definition of "Registration Event"; (y) the
delivery of such shares or certificates in the case of clause (v) of the
definition of "Registration Event"; and (z) in the case of the events
described in clauses (ii) and (iii) of the definition of "Registration Event",
the earlier termination of the Registration Period and in each such case any
Registration Default Period that commenced by reason of the occurrence of such
event shall terminate if at the time no other Registration Event is
continuing. The amounts payable as partial liquidated damages pursuant to
this paragraph shall be payable in lawful money of the United States. Amounts
payable as partial liquidated damages hereunder shall cease when the Buyer no
longer holds the Warrant or Registrable Securities.
(b) Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(1) use its best efforts to cause the Registration Statement to
become effective as promptly as possible after the Closing Date and to keep
the Registration Statement effective at all times during the Registration
Period. The Company shall submit to the SEC, within three Business Days after
the Company learns that no review of the Registration Statement will be made
by the staff of the SEC or that the staff of the SEC has no further comments
on the Registration Statement, as the case may be, a request for acceleration
of effectiveness of the Registration Statement to a time and date not later
than 48 hours after the submission of such request. The Company represents
and warrants to the Investors that (a) the Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein), at
the time it is first filed with the SEC, at the time it is ordered effective
by the SEC and at all times during which it is required to be effective
hereunder (and each such amendment and supplement at the time it is filed with
the SEC and at all times during which it is available for use in connection
with the offer and sale of the Registrable Securities) shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (b) the Prospectus, at the time the Registration Statement is
declared effective by the SEC and at all times that the Prospectus is required
by this Agreement to be available for use by any Investor and, in accordance
with Section 8(c)(4), any Investor is entitled to sell Registrable Securities
pursuant to the Prospectus, shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading;
(2) subject to Section 8(b)(5), prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective, and the Prospectus current, at all times
during the Registration Period, and, during the Registration Period (other
than during any Blackout Period during which the provision of Section
8(b)(5)(B) as applicable), comply with the provisions of the 1933 Act
applicable to the Company in order to permit the disposition by the Investors
of all Registrable Securities covered by the Registration Statement;
(3) furnish to Investors whose Registrable Securities are
included in the Registration Statement and such Investors' respective legal
counsel, promptly after the same is prepared and publicly distributed, filed
with the SEC or received by the Company, (1) five copies of the Registration
Statement and any amendment thereto and the Prospectus and each amendment or
supplement thereto, (2) one copy of each letter written by or on behalf of the
Company to the SEC or the staff of the SEC and each item of correspondence
from the SEC or the staff of the SEC relating to the Registration Statement
(other than any portion of any thereof which contains information for which
the Company has sought confidential treatment), each of which the Company
hereby determines to be confidential information and which each investor
hereby agrees to keep confidential as a confidential Record in accordance with
Section 8(b)(9) and (3) such number of copies of the Prospectus and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(4) subject to Section 8(b)(5), use its best efforts (i) to
register and qualify the Registrable Securities covered by the Registration
Statement under the securities or blue sky laws of such jurisdictions as any
Investor who owns or holds any Registrable Securities reasonably requests,
(ii) to prepare and to file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at
all times during the Registration Period and (iii) to take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for
sale by the Investors in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto (I) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 8(b)(4), (II) to subject
itself to general taxation in any such jurisdiction, (III) to file a general
consent to service of process in any such jurisdiction, (IV) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(V) to make any change in its charter or by-laws which the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its stockholders;
(5) (A) as promptly as practicable after becoming aware of such
event or circumstance, notify each Investor of the occurrence of any event or
circumstance of which the Company has knowledge (x) as a result of which the
Prospectus, as then in effect, includes an untrue statement of a material fact
or omits 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 or (y) which requires the Company to amend or
supplement the Registration Statement due to the receipt from an Investor or
any other selling stockholder named in the Prospectus of new or additional
information about such Investor or selling stockholder or its intended plan of
distribution of its Registrable Securities or other securities covered by such
Registration Statement, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement and Prospectus to
correct such untrue statement or omission or to add any new or additional
information, and deliver a number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request;
(B) notwithstanding Section 8(b)(5)(A) above, if at any time the
Company notifies the Investors as contemplated by Section 8(b)(5)(A) the
Company also notifies the Investors that the event giving rise to such notice
relates to a development involving the Company which occurred subsequent to
the later of (x) the SEC Effective Date and (y) the latest date prior to such
notice on which the Company has amended or supplemented the Registration
Statement, then the Company shall not be required to use best efforts to make
such amendment during a Blackout Period; provided, however, that in any period
of 365 consecutive days the Company shall not be entitled to avail itself of
its rights under this Section 8(b)(5)(B) with respect to more than two
Blackout Periods; and provided further, however, that no Blackout Period may
commence sooner than 90 days after the end of an earlier Blackout Period;
(6) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being offered or
sold pursuant to the Registration Statement of the issuance by the SEC of any
stop order or other suspension of effectiveness of the Registration Statement
at the earliest possible time;
(7) permit the Investors who hold Registrable Securities being
included in the Registration Statement, (or their designee) and their counsel
at such Investors' sole expense to review and have a reasonable opportunity to
comment on the Registration Statement and all amendments and supplements
thereto at least two Business Days (or such shorter period as may reasonably
be specified by the Company) prior to their filing with the SEC.
(8) make generally available to its security holders as soon as
practical, but not later than 90 days after the close of the period covered
thereby, an earning statement (in form complying with the provisions of Rule
158 under the 0000 Xxx) covering a 12-month period beginning not later than
the first day of the Company's fiscal quarter next following the SEC Effective
Date of the Registration Statement;
(9) make available for inspection by any Investor and any
Inspector retained by such Investor, at such Investor's sole expense, all
Records as shall be reasonably necessary to enable such Investor to exercise
its due diligence responsibility and cause the Company's and the Subsidiaries
officers, directors and employees to supply all information which such
Investor or Inspector may reasonably request for purposes of such due
diligence; provided, however, that such Investor shall hold in confidence and
shall not make any disclosure of any Record or other information which the
Company determines in good faith to be confidential, and of which
determination such Investor is so notified, unless (i) the disclosure of such
Record is necessary to avoid or correct a misstatement or omission in the
Registration Statement and a reasonable time prior to such disclosure the
Investor shall have informed the Company of the need to so correct such
misstatement or omission and the Company shall have failed to correct such
misstatement or omission, (ii) the release of such Record is ordered pursuant
to a subpoena or other order from a court or governmental body of competent
jurisdiction or (iii) the information in such Record has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless
such Inspector shall have entered into a confidentiality agreement with the
Company with respect thereto, substantially in the form of this Section
8(b)(9), which agreement shall permit such Inspector to disclose Records to
the Investor who has retained such Inspector. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. The Company
shall hold in confidence and shall not make any disclosure of information
concerning an Investor provided to the Company pursuant to this Agreement
unless (i) the disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in the Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor and allow such Investor, at such Investor's
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information;
(10) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement as of the SEC Effective Date to be
listed or quoted on the principal securities market on which securities of the
same class or series issued by the Company are then listed or traded;
(11) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities at all times;
(12) cooperate with the Investors who hold Registrable Securities
being offered pursuant to the Registration Statement to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates to be in such denominations or amounts
as the Investors may reasonably request and registered in such names as the
Investors may request; and, not later than the SEC Effective Date, the Company
shall cause legal counsel selected by the Company to deliver to the Investors
whose Registrable Securities are included in the Registration Statement
opinions of counsel in form and substance as is customarily given to
underwriters in an underwritten public offering;
(13) during the Registration Period, the Company shall not bid
for or purchase any Common Stock or any right to purchase Common Stock or
attempt to induce any Person to purchase any such security or right if such
bid, purchase or attempt would in any way limit the right of the Investors to
sell Registrable Securities by reason of the limitations set forth in
Regulation M under the 1934 Act; and
(14) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement relating thereto.
(c) Obligations of the Buyer and other Investors. In connection
with the registration of the Registrable Securities, the Investors shall have
the following obligations:
(1) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company the Required Information and shall execute such
documents in connection with such registration as the Company may reasonably
request.
(2) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(3) Each Investor agrees that it will not effect any disposition
of the Registrable Securities except as contemplated in the Registration
Statement or as otherwise is in compliance with applicable securities laws and
that it will promptly notify the Company of any material changes in the
information set forth in the Registration Statement regarding such Investor or
its plan of distribution; each Investor agrees (a) to notify the Company in
writing in the event that such Investor enters into any material agreement
with a broker or a dealer for the sale of the Registrable Securities through a
block trade, special offering, exchange distribution or a purchase by a broker
or dealer and (b) in connection with such agreement, to provide to the Company
in writing the information necessary to prepare any supplemental prospectus
pursuant to Rule 424(c) under the 1933 Act which is required with respect to
such transaction;
(4) Each Investor acknowledges that there may occasionally be
times as specified in Section 8(b)(5) or 8(b)(6) when the Company must suspend
the use of the Prospectus until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC, the
Company has prepared a supplement to the Prospectus or the Company has filed
an appropriate report with the SEC pursuant to the 1934 Act. Each Investor
hereby covenants that it will not sell any Registrable Securities pursuant to
the Prospectus during the period commencing at the time at which the Company
gives such Investor notice of the suspension of the use of the Prospectus in
accordance with Section 8(b)(5) or 8(b)(6) and ending at the time the Company
gives such Investor notice that such Investor may thereafter effect sales
pursuant to the Prospectus, or until the Company delivers to such Investor or
files with the SEC an amended or supplemented Prospectus; and
(5) In connection with any sale of Registrable Securities which
is made by an Investor pursuant to the Registration Statement (A) if such sale
is made through a broker, such Investor shall instruct such broker to deliver
the Prospectus to the purchaser or purchasers (or the broker or brokers
therefor) in connection with such sale, shall supply copies of the Prospectus
to such broker or brokers and shall instruct such broker or brokers to deliver
such Prospectus to the purchaser in such sale or such purchaser's broker; (B)
if such sale is made in a transaction directly with a purchaser and not
through the facilities of any securities exchange or market, such Investor
shall deliver, or cause to be delivered, the Prospectus to such purchaser; and
(C) if such sale is made by any means other than those described in the
immediately preceding clauses (A) and (B), such Investor shall otherwise use
its reasonable best efforts to comply with the prospectus delivery
requirements of the 1933 Act applicable to such sale.
(d) Rule 144. With a view to making available to each Investor
the benefits of Rule 144, the Company agrees:
(1) so long as any Investor owns Registrable Securities,
promptly upon request of such Investor, to furnish to such Investor such
information as may be necessary to permit such Investor to sell Registrable
Securities pursuant to Rule 144 without registration and otherwise reasonably
to cooperate with such Investor and
(2) if at any time the Company is not required to file reports
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, to use its best
efforts, upon the request of an Investor, to make publicly available other
information so long as is necessary to permit publication by brokers and
dealers of quotations for the Common Stock and sales of the Registrable
Securities in accordance with Rule 15c2-11 under the 1934 Act.
(e) Piggy-Back Registrations. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Investor who is entitled to registration
rights under this Section 8(e) written notice of such determination and, if
within ten (10) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement
all or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, such limitation is necessary to effect an orderly public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities the holders of which
are not entitled by right to inclusion of securities in such Registration
Statement; and provided further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall
be made pro rata with holders of other securities having the right to include
such securities in the Registration Statement, based on the number of
securities for which registration is requested except to the extent such pro
rata exclusion of such other securities is prohibited under any written
agreement entered into by the Company with the holder of such other securities
prior to the date of this Agreement, in which case such other securities shall
be excluded, if at all, in accordance with the terms of such agreement. No
right to registration of Registrable Securities under this Section 8(e) shall
be construed to limit any registration required under Section 8(a) hereof.
Notwithstanding any other provision of this Agreement, if the Registration
Statement required to be filed pursuant to Section 8(a) of this Agreement
shall have been ordered effective by the SEC and the Company shall have
maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all
material respects with its obligations under this Agreement, then the Company
shall not be obligated to register any Registrable Securities on such
Registration Statement referred to in this Section 8(e).
9. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification. (1) To the extent not prohibited by
applicable law, the Company will indemnify and hold harmless each Indemnified
Person against any Claims to which any of them may become subject under the
1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any Violation or any of the transactions contemplated by
this Agreement. Subject to the restrictions set forth in Section 9(a)(3) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such controlling Person, promptly as such expenses are
incurred and are due and payable, for any documented reasonable legal fees or
other documented and reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 9(a)(1) shall not apply to: (I) a Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
relating to an Indemnified Person furnished in writing to the Company by such
Indemnified Person or an underwriter for such Indemnified Person expressly for
use in connection with the preparation of any Registration Statement or any
such amendment thereof or supplement thereto; (II) any Claim arising out of or
based on any statement or omission in any Prospectus, which statement or
omission was corrected in any subsequent Prospectus that was delivered to the
Indemnified Person prior to the pertinent sale or sales of Registrable
Securities by such Indemnified Person; and (III) amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors.
(2) In connection with the Registration Statement, each Investor
agrees to indemnify and hold harmless, to the same extent and in the same
manner set forth in Section 9(a)(1), each Indemnified Party against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such
Registration Statement or any amendment thereof or supplement thereto; and
such Investor will reimburse any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section
9(a)(2) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor;
provided, further, however, that the Investor shall be liable under this
Section 9(a)(2) for only that amount of all Claims in the aggregate as does
not exceed the amount by which the proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement
exceeds the amount paid by such Investor for such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 9(a)(2) with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in such preliminary
prospectus was corrected on a timely basis in the related Prospectus, as then
amended or supplemented.
(3) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 9(a) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 9(a), deliver to the indemnifying
party a notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel reasonably satisfactory to
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right
to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding, in which case the indemnifying party shall not be responsible for
more than one such separate counsel, and one local counsel in each
jurisdiction in which an Action is pending, for all Indemnified Persons or
Indemnified Parties, as the case may be. The failure to deliver notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 9(a), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 9(a) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
(b) Contribution. To the extent any indemnification by an
indemnifying party as set forth in Section 9(a) above is applicable by its
terms but is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 9(a) to the fullest extent permitted by law.
In determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative fault of each party, the
parties' relative knowledge of and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable considerations
appropriate under the circumstances; provided, however, that (a) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
9(a), (b) no Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
other Person who was not guilty of such fraudulent misrepresentation and (c)
the aggregate contribution by any seller of Registrable Securities shall be
limited to the amount by which the proceeds received by such seller from the
sale of such Registrable Securities exceeds the amount paid by such Investor
for such Registrable Securities.
(c) Other Rights. The indemnification and contribution provided
in this Section shall be in addition to any other rights and remedies
available at law or in equity.
10. MISCELLANEOUS.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) Headings. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
(c) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(d) Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be in writing and shall be sent by
mail, personal delivery, telephone line facsimile transmission or courier and
shall be effective five days after being placed in the mail, if mailed, or
upon receipt, if delivered personally, by telephone line facsimile
transmission or by courier, in each case addressed to a party at such party's
address (or telephone line facsimile transmission number) shown in the
introductory paragraph or on the signature page of this Agreement or such
other address (or telephone line facsimile transmission number) as a party
shall have provided by notice to the other party in accordance with this
provision. In the case of any notice to the Company, such notice shall be
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
number: (719 213-2330), and in the case of any notice to the Buyer, a copy
shall be given to: Sigma Opportunity Fund, LLC, 000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, XX 00000, Attention: Xxxx Xxxx (telephone line facsimile
transmission number (212-937-3558), and a copy shall also be give to Xxxxxxxx
& Xxxxx, LLP, 000 Xxxxxxx Xxxxxxxxxx, Xxxxxxx, XX 00000, Attention: Xxxxx X.
Xxxxx, Esq. (telephone line facsimile transmission number (000) 000-0000)
(e) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, each of which
shall be deemed to be an original and all of which together shall constitute
one and the same instrument. A telephone line facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party. Although this Agreement is dated as of the date first
set forth above, the actual date of execution and delivery of this Agreement
by each party is the date set forth below such party's signature on the
signature page hereof. Any reference in this Agreement or in any of the
documents executed and delivered by the parties hereto in connection herewith
to (1) the date of execution and delivery of this Agreement by the Buyer shall
be deemed a reference to the date set forth below the Buyer's signature on the
signature page hereof, (2) the date of execution and delivery of this
Agreement by the Company shall be deemed a reference to the date set forth
below the Company's signature on the signature page hereof and (3) the date of
execution and delivery of this Agreement, or the date of execution and
delivery of this Agreement by the Buyer and the Company, shall be deemed a
reference to the later of the dates set forth below the signatures of the
parties on the signature page hereof.
(f) Entire Agreement; Benefit. This Agreement, including the
Annexes and Schedules hereto, and the Transaction Documents, constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties, or undertakings,
other than those set forth or referred to herein. This Agreement, including
the Annexes, supersedes all prior agreements and understandings, whether
written or oral, between the parties hereto with respect to the subject matter
hereof. This Agreement and the terms and provisions hereof are for the sole
benefit of only the Company, the Buyer and their respective successors and
permitted assigns.
(g) Waiver. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, or any course of dealing between the parties, shall not
operate as a waiver thereof or an amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or exercise of any other right or power.
(h) Amendment. (1) No amendment, modification, waiver,
discharge or termination of any provision of this Agreement on or prior to the
Closing Date nor consent to any departure by the Buyer or the Company
therefrom on or prior to the Closing Date shall in any event be effective
unless the same shall be in writing and signed by the party to be charged with
enforcement, and in any such case shall be effective only in the specific
instance and for the purpose for which given.
(2) No amendment, modification, waiver, discharge or termination
of any provision of this Agreement after the Closing Date nor consent to any
departure by the Company therefrom after the Closing Date shall in any event
be effective unless the same shall be in writing and signed (x) by the Company
if the Company is to be charged with enforcement or (y) by the Buyer, if the
Buyer is to be charged with enforcement, and in any such case shall be
effective only in the specific instance and for the purpose for which given.
(3) No course of dealing between the parties hereto shall
operate as an amendment of this Agreement.
(i) Further Assurances. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(j) Assignment of Certain Rights and Obligations. The rights of
an Investor under Sections 5(a), 5(b), 8, 9, and 10 of this Agreement shall be
automatically assigned by such Investor to any transferee of all or any
portion of such Investor's Registrable Securities (or all or any portion of
the Note or the Warrants) only if: (1) such Investor agrees in writing with
such transferee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (2)
the Company is, within a reasonable time after such transfer, furnished with
notice of (A) the name and address of such transferee and (B) the securities
with respect to which such rights and obligations are being transferred, (3)
immediately following such transfer or assignment the further disposition of
Registrable Securities by the transferee or assignee is restricted under the
1933 Act and applicable state securities laws, and (4) at or before the time
the Company received the notice contemplated by clause (2) of this sentence
the transferee agrees in writing with the Company to be bound by all of the
provisions contained in Sections 5(a), 5(b), 8, 9, and 10 hereof. Upon any
such transfer, the Company shall be obligated to such transferee to perform
all of its covenants under Sections 5(a), 5(b), 8, 9, and 10 of this Agreement
as if such transferee were the Buyer. In connection with any such transfer
the Company shall, at its sole cost and expense, promptly after such transfer
take such actions as shall be reasonably acceptable to the transferring
Investor and such transferee to assure that the Registration Statement and
related Prospectus for which the transferring Investor is a selling
stockholder are available for use by such transferee for sales of the
Registrable Securities in respect of which such rights and obligations have
been so transferred. The Buyer shall have the right to assign its rights
under Section 5(j) in full or a proportionate amount of such rights to a
purchaser of the Notes or a portion thereof. Transfer of the Note shall be
limited as provided therein and transfer of the Warrants shall be limited as
provided therein.
(k) Fees and Expenses. The Company shall pay to Sigma a closing
fee of $75,000. The Company shall be responsible for its expenses (including,
without limitation, the legal fees and expenses of its counsel), incurred by
it in connection with the negotiation and execution of, and closing under, and
performance of, this Agreement. Whether or not the closing occurs, the
Company shall be obligated to pay or reimburse the legal fees and expenses and
out-of-pocket due diligence expenses of Buyer, not in excess of $25,000 in
connection with the negotiation and execution of, and closing under, this
Agreement. The Company agrees to the offset by Sigma against the Purchase
Price of $100,000 at Closing to be applied against amounts owing pursuant to
this Section. Any amounts in excess of amounts due pursuant to this Section
shall be applied to legal fees and expenses incurred after the Closing in
connection with a proposed follow-on investment from Sigma, which excess may
be applied by Sigma against such fees and expenses whether or not such follow-
on financing occurs. All reasonable expenses incurred in connection with
registrations, filings or qualifications pursuant to Sections 5(d), 5(e),
5(g)and 8 of this Agreement shall be paid by the Company, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees and the fees and disbursements of counsel for the Company and
the Investors but excluding (a) fees and expenses of investment bankers
retained by any Investor and (b) brokerage commissions incurred by any
Investor. The Company shall pay on demand all expenses incurred by the Buyer
after the Closing Date, including reasonable attorneys' fees and expenses, as
a consequence of, or in connection with (1) the negotiation, preparation or
execution of any amendment, modification or waiver of any of the Transaction
Documents, (2) any default or breach of any of the Company's obligations set
forth in any of the Transaction Documents, and (3) the enforcement or
restructuring of any right of, including the collection of any payments due,
the Buyer under any of the Transaction Documents, including any action or
proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Buyer.
Except as otherwise provided in this Section 10(k), each of the Company and
the Buyer shall bear its own expenses in connection with this Agreement and
the transactions contemplated hereby.
(l) Survival. The respective representations, warranties,
covenants and agreements of the Company and the Buyer contained in this
Agreement and the documents delivered in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Transaction
Documents and the closing hereunder and delivery of and payment for the Note
and issuance of the Warrants, and shall remain in full force and effect
regardless of any investigation made by or on behalf of the Buyer or any
Person controlling or acting on behalf of the Buyer or by the Company or any
Person controlling or acting on behalf of the Company for a period ending on
the later of (x) the date which is six years after the Closing Date and (y)
the date which is two years after the Company shall have paid in full all
amounts due from the Company under the Transaction Documents and performed in
full all of its obligations under the Transaction Documents.
(m) Public Statements, Press Releases, Etc. The Company and the
Buyer shall have the right to approve before issuance any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions as is required by applicable law
or applicable requirements of any stock market on which securities of the
Company are listed for trading (although the Buyer shall be consulted by the
Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
(n) Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers or other representatives
thereunto duly authorized on the respective dates set forth below their
signatures hereto.
Principal Amount: $ 400,000
Purchase Price: $ 400,000
OMNI MEDICAL HOLDINGS, INC.
By:
Name:
Title:
Date: October 26, 2005
SIGMA OPPORTUNITY, LLC
By: SIGMA CAPTIAL ADVISORS, LLC.
By:
Name:
Title:
Date: October 26, 2005
Address:
c/o Sigma Capital Advisors, LLC
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Schedule 4(a)
Omni Medical Holdings, Inc.
Omni Medical of Nevada, Inc.
Omni Medical Services, Inc.
Plum Creek Outpatient
Datafuzion Inc.
Schedule 4(c)
Omni Medical Holdings, Inc. 50 million shares authorized, 50 million shares
issued
Omni Medical of Nevada, Inc. 50 million shares authorized, 8.3 million
issued, 81% owned by Omni Medical Holdings, Inc.
Omni Medical Services, Inc. 100% owned by Omni Medical Holdings, Inc.
Plum Creek Outpatient 100% owned by Omni Medical Holdings, Inc.
Datafuzion 50,000,000 shares authorized, 36.7 million shares issued. 92%
owned by Omni Medical Holdings, Inc. $2.5 million principal and interest
convertible into shares of DataFuzion. Options exercisable for 750,000 shares
of Datafuzion.
Registration Rights - none
