AGREEMENT dated as of
the 16th day of August 2002 (the "Agreement") between CORNELL CAPITAL
PARTNERS, LP, a Delaware limited partnership (the "Investor"), and
AMS HOMECARE INC., a corporation organized and existing under the laws
of the Province of British Columbia (the "Company").
WHEREAS, the parties
desire that, upon the terms and subject to the conditions contained herein,
the Company shall issue and sell to the Investor, from time to time as provided
herein, and the Investor shall purchase from the Company up to Five Million
($5,000,000) Dollars of the Company's common stock, par value, 0 per share (the
"Common Stock"); and
WHEREAS, such investments
will be made in reliance upon the provisions of Regulation D ("Regulation
D") of the Securities Act of 1933, as amended, and the regulations promulgated
there under (the "Securities Act"), and or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments to be made hereunder.
WHEREAS, the Company
has engaged Westrock Advisors, Inc. to act as the Company's exclusive placement
agent in connection with the sale of the Company's Common Stock to the Investor
NOW, THEREFORE, the parties hereto agree as follows:
Section 1.1. "Advance"
shall mean the portion of the Commitment Amount requested by the Company in
the Advance Notice.
Section 1.2. "Advance Date"
shall mean the date Butler Gonzalez LLP/Wachovia Bank, N.A. Bank, N.A. Escrow
Account is in receipt of the funds from the Investor and Butler Gonzalez LLP,
as the Investor's Counsel, is in possession of free trading shares from the
Company and therefore an Advance by the Investor to the Company can be made
and Butler Gonzalez LLP can release the free trading shares to the Investor.
No Advance Date shall be less than six (6) Trading Days after an Advance Notice
Section 1.3. "Advance Notice"
shall mean a written notice to the Investor setting forth the Advance amount
that the Company requests from the Investor and the Advance Date.
Section 1.4. "Advance Notice
Date" shall mean each date the Company delivers to the Investor an Advance
Notice requiring the Investor to advance funds to the Company, subject to the
terms of this Agreement. No Advance Notice Date shall be less than six (6) Trading
Days after the prior Advance Notice Date.
Section 1.5. "Bid Price"
shall mean, on any date, the closing bid price (as reported by Bloomberg L.P.)
of the Common Stock on the Principal Market or if the Common Stock is not traded
on a Principal Market, the highest reported bid price for the Common Stock,
as furnished by the National Association of Securities Dealers, Inc.
Section 1.6. "Closing"
shall mean one of the closings of a purchase and sale of Common Stock pursuant
to Section 2.3.
Section 1.7. "Commitment
Amount" shall mean the aggregate amount of up to Five Million Dollars ($5,000,000)
which the Investor has agreed to provide to the Company in order to purchase
the Company's Common Stock pursuant to the terms and conditions of this Agreement.
Section 1.8. "Commitment
Period" shall mean the period commencing on the earlier to occur of (i)
the Effective Date, or (ii) such earlier date as the Company and the Investor
may mutually agree in writing, and expiring on the earliest to occur of (x)
the date on which the Investor shall have made payment of Advances pursuant
to this Agreement in the aggregate amount of Five Million Dollars ($5,000,000),
(y) the date this Agreement is terminated pursuant to Section 2.5, or (z) the
date occurring twenty-four (24) months after the Effective Date.
Section 1.9. "Common Stock"
shall mean the Company's common stock, par value 0 per share.
Section 1.10. "ConditionSatisfactionDate" shall have the meaning set forth in Section
Section 1.11. "Damages"
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorney's fees and disbursements and costs and
expenses of expert wit nesses and investigation).
Section 1.12. "Effective
Date" shall mean the date on which the SEC first declares effective a Registration
Statement registering the resale of the Registrable Securities as set forth
in Section 7.2(a).
Section 1.13. "Escrow Agreement"
shall mean the escrow agreement among the Company, the Investor, the Investor's
Counsel and Wachovia Bank, N.A., N.A. dated the date hereof.
Section 1.14. "Exchange Act"
shall mean the Securities and Exchange Act of 1934, as amended, and the rules
and regulations promulgated there under.
Section 1.15. "Material Adverse
Effect" shall mean any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement or the Registration
Rights Agreement in any material respect.
Section 1.16. "Market Price"
shall mean the lowest closing Bid Price of the Common 'Stock during the Pricing
Section 1.17. "Maximum Advance
Amount" shall be equal up to Seventy Five Thousand Dollars ($75,000) per
Section 1.18 "Minimum Acceptable
Price" shall mean eighty five percent (85%) of the closing bid price of
the Company's Common Stock on the Advance Notice Date.
Section 1.19 "NASD" shall
mean the National Association of Securities Dealers, Inc.
Section 1.20 "Person"
shall mean an individual, a corporation, a partnership, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
Section 1.21 "Placement Agent"
shall mean Westrock Advisors, Inc. a registered broker-dealer.
Section 1.22 "Pricing Period"
shall mean the five (5) consecutive Trading Days after the Advance Notice Date.
Section 1.23 "Principal Market"
shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American
Stock Exchange, the OTC Bulletin Board or the New York Stock Exchange, whichever
is at the time the principal trading exchange or market for the Common Stock.
Section 1.24 "Purchase Price"
shall be set at ninety five percent (95%) of the Market Price during the Pricing
Section 1.25 "Registrable
Securities" shall mean the shares of Common Stock (i) in respect of which
the Registration Statement has not been declared effective by the SEC, (ii)
which have not been sold under circumstances meeting all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") or (iii) which have not been otherwise transferred to a
holder who may trade such shares without restriction under the Securities Act,
and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend.
Section 1.26 "Registration
Rights Agreement" shall mean the Registration Rights Agreement dated the
date hereof, regarding the filing of the Registration Statement for the resale
of the Registrable Securities, entered into between the Company and the Investor.
Section 1.27 "Registration
Statement" shall mean a registration statement on Form S-1 or SB-2 (if use
of such form is then available to the Company pursuant to the rules of the SEC
and, if not, on such other form promulgated by the SEC for which the Company
then qualifies and which counsel for the Company shall deem appropriate, and
which form shall be available for the resale of the Registrable Securities to
be registered there under in accordance with the provisions of this Agreement
and the Registration Rights Agreement, and in accordance with the intended method
of distribution of such securities), for the registration of the resale by the
Investor of the Registrable Securities under the Securities Act.
Section 1.28 "Regulation D" shall have
the meaning set forth in the recitals of this Agreement.
Section 1.29 "SEC" shall mean the Securities
and Exchange Commission.
Section 1.30 "Securities Act" shall have the meaning set forth in the recitals of this Agreement.
Section 1.31 "SEC Documents"
shall mean Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB,
Current Reports on Form 8-K and Proxy Statements of the Company as supplemented
to the date hereof, filed by the Company for a period of at least twelve (12)
months immediately preceding the date hereof or the Advance Date, as the case
may be, until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Section 1.32 "Trading Day"
shall mean any day during which the New York Stock Exchange shall be open for
Section 2.1. Investments.
Advances. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Advance Notice
Date the Company may request an Advance by the Investor by the delivery of an
Advance Notice. The number of shares of Common Stock that the Investor shall
receive for each Advance shall be determined by dividing the amount of the Advance
by the Purchase Price. No fractional shares shall be issued. Fractional shares
shall be rounded to the next higher whole number of shares. The aggregate maximum
amount of all Advances that the Investor shall be obligated to make under this
Agreement shall not exceed the Commitment Amount.
Notwithstanding the foregoing the Company shall only be entitled to an Advance
if the Company's Common Stock has an active bid at all times during the Pricing
The Company acknowledges that the Investor may sell the Company's Common Stock
purchased pursuant to an Advance Notice during the corresponding Pricing Period.
Section 2.2. Mechanics.
Advance Notice. At any time during the Commitment Period, the Company
may deliver an Advance Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, unless waived by the Investor, the
amount for each Advance as designated by the Company in the applicable Advance
Notice, shall not be more than the Maximum Advance Amount. The aggregate amount
of the Advances pursuant to this =Agreement shall not exceed the Commitment
Amount, unless otherwise agreed by the Investor in
the Investor's sole and absolute discretion. The Company acknowledges
that the Investor may sell shares of the Company's Common Stock corresponding
with a particular Advance Notice on the day the Advance Notice is received by
the Investor. There will be a minimum of six (6) Trading Days between each Advance
Date of Delivery of Advance Notice. An Advance Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by
the Investor if such notice is received prior to 12:00 noon Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon- Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day. No Advance Notice may be deemed delivered,
on a day that is not a Trading Day.
Pre-Closing Share Credit. Within .two (2) business days after the Advance
Notice Date, the Company shall credit shares of the Company's Common Stock to
the Investor's balance account with The Depository Trust Company through its
Deposit Withdrawal At Custodian system, in an amount equal to the amount of
the requested Advance divided by the closing Bid Price of the Company's Common
Stock as of the Advance Notice Date multiplied by one point one (1.1). Any adjustments
to the number of shares to be delivered to the Investor at the Closing as a
result of fluctuations in the closing Bid Price of the Company's Common Stock
shall be made as of the date of the Closing. Any excess shares shall be credited
to the next Advance. In no event shall the number of shares issuable to the
Investor pursuant to an Advance cause the Investor to own in excess of nine
and 9/10 percent (9.9%) of the then outstanding Common Stock of the Company.
Withdrawal of Advance Notice. The Company shall automatically withdraw
a pro rata portion of the Advance amount based on the number of days the closing
bid price of the Company's Common Stock (as reported by Bloomberg, L.P.) during
the Pricing Period is lower than eighty five percent (85%) of the closing bid
price of the Company's Common Stock on the Advance Notice Date (the "Minimum
Acceptable Price"). The shares of Common Stock issued shall also be reduced
to correspond with the reduction in the Advance amount. For example, if the
closing bid price on the date hereof is $0.07, the Minimum Acceptable Price
is $0.0595 (85% of $0.07 =$0.0595). For every day dur ing the Pricing Period
that the closing bid price is below $0.0595 the Advance amount shall be reduced
by Twenty Percent (20%). If the Advance amount is Seventy Five Thousand Dollars
($75,000) and the closing bid price is below the Minimum Acceptable Price for
two (2) of the seven (7) days of the Pricing Period, the Purchase Amount shall
be reduced by 40% (2 x 20%) or $ Thirty Thousand Dollars ($30,000) (40% of $75,000
= $30,000) and therefore the reduced Advance amount shall be Forty Five Thousand
Dollars ($45,000) (the "Reduced Advanceamount") ($75,000-$30,000
=$45,000). Accordingly the number of shares of Common Stock issued shall be
reduced and calculated by dividing the Reduced Advance amount by the Purchase
Hardship. In the event the Investor sells the Company's Common Stock
pursuant to subsection (c) above and the Company fails to perform its obligations
as mandated in Section 2.5 and 2.2 (c), and specifically fails to provide the
Investor with the shares of Common Stock for the applicable Advance, the Company
acknowledges that the Investor shall suffer
financial hardship and therefore shall be liable for any and
all losses, commissions, fees, or financial hardship caused to the Investor.
Section 2.3. Closings.
On each Advance Date, which shall be six (6) Trading Days after an Advance Notice
Date, (i) the Company shall deliver to the Investor's Counsel, as defined pursuant
to the Escrow Agreement, shares of the Company's Common Stock, representing
the amount of the Advance by the Investor pursuant to Section 2.1 herein, registered
in the name of the Investor which shall be delivered to the Investor, or otherwise
in accordance with the Escrow Agreement and (ii) the Investor shall deliver
to Wachovia Bank, N.A., N.A. (the "EscrowAgent") the amount of
the Advance specified in the Advance Notice by wire transfer of immediately
available funds which shall be delivered to the Company, or otherwise in accordance
with the Escrow Agreement. In addition, on or prior to the Advance Date, each
of the Company and the Investor shall deliver to the other through the Investor's
Counsel all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein. Payment of funds
to the Company and delivery of the Company's Common Stock to the Investor shall
occur in accordance with the conditions set forth above and those contained
in the Escrow Agreement; provided,however, that to the extent
the Company has not paid the fees, expenses, and disbursements of the Investor,
the Investor's counsel or Kirkpatrick & Lockhart LLP in accordance with
Section 12.4, the amount of such fees, expenses, and disbursements may be deducted
by the Investor (and shall be paid to the relevant party) from the amount of
the Advance with no reduction in the amount of shares of the Company's Common
Stock to be delivered on such Advance Date.
Section 2.4. Termination
of Investment. The obligation of the Investor to make an Advance to the
Company pursuant to this Agreement shall terminate permanently (including with
respect to an Advance Date that has not yet occurred) in the event that (i)
there shall occur any stop order or suspension of the effectiveness of the Registration
Statement for an aggregate of fifty (50) Trading Days, other than due to the
acts of the Investor, during the Commitment Period, and (ii) the Company shall
at any time fail materially to comply with the requirements of Article VI and
such failure is not cured within thirty (30) days after receipt of written notice
from the Investor, provided,however, that this termination provision
shall not apply to any period commencing upon the filing of a post-effective
amendment to such Registration Statement and ending upon the date on which such
post effective amendment is declared effective by the SEC..
Section 2.5. Agreement to Advance Funds.
The Investor agrees to advance the amount specified in the Advance Notice to
the Company after the completion of each of the following conditions and the
other conditions set forth in this Agreement:
the execution and delivery by the Company, and the Investor, of this Agreement,
and the Exhibits hereto;
Investor's Counsel shall have received the shares of Common Stock applicable
to the Advance in accordance with Section 2.2(c) hereof,
the Company's Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the Registration Rights Agreement
shall have been declared effective by the SEC;
the Company shall have obtained all material permits and qualifications required
by any applicable state for the offer and sale of the Registrable Securities,
or shall have the availability of exemptions there from. The sale and issuance
of the Registrable Securities shall be legally permitted by all laws and regulations
to which the Company is subject;
the Company shall have filed with the Commission in a timely manner all reports,
notices and other documents required of a "reporting company" under the Exchange
Act and applicable Commission regulations;
The Company shall maintain the Common Stock's authorization for quotation on
the National Association of Securities Dealers Over the Counter Bulletin Board;
the fees as set forth in Section 12.4 below shall have been paid or can be withheld
as provided in Section 2.3; (viii) the conditions set forth in Section 7.2 shall
have been satisfied.
The Company shall have provided to the Investor an acknowledgement, to the satisfaction
of the Investor, from Grant Thornton, the Company's accountant, as to the accountant's
ability to provide all consents required in order to file a registration statement
in connection with this transaction;
The Company's transfer agent shall be DWAC eligible.
Section 2.6. Lock Up Period.
The Company shall not, without the prior consent of the Investor, issue or sell
(i) any Common Stock without consideration or for a consideration per share
less than the Bid Price on the date of issuance or (ii) issue or sell any warrant,
option, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire Common Stock without consideration or for
a consideration per share less than the Bid Price on the date of issuance.
On the date hereof, the Company shall obtain from each officer and director
a lock-up agreement, as defined below, in the form annexed hereto as Schedule
2.6(b) agreeing to only sell in compliance with the volume limitation of Rule
ARTICLE III. Representations and Warranties of Investor
Investor hereby represents and
warrants to, and agrees with, the Company that the following are true and as
of the date hereof and as of each Advance Date:
Section 3.1. Organization
and Authorization. The Investor is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite power and authority to purchase and hold the securities
issuable hereunder. The decision to invest and the execution and delivery of
this Agreement by such Investor, the performance by such Investor of its obligations
hereunder and the consummation by such Investor of the transactions contemplated
hereby have been duly authorized and requires no other proceedings on the part
of the Investor. The undersigned has the right, power and authority to execute
and deliver this Agreement and all other instruments (including, without limitations,
the Registration Rights Agreement), on behalf of the Investor. This Agreement
has been duly executed and delivered by the Investor and, assuming the execution
and delivery hereof and acceptance thereof by the Company, will constitute the
legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with its terms.
Section 3.2. Evaluation of
Risks. The Investor has such knowledge and experience in financial tax and
business matters as to be capable of evaluating the merits and risks of, and
bearing the economic risks entailed by, an investment in the Company and of
protecting its interests in connection with this transaction. It recognizes
that its investment in the Company involves a high degree of risk.
Section 3.3. No Legal Advice
From the Company. The Investor acknowledges that it had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with his or its own legal counsel and investment and tax advisors. The Investor
is relying solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents for legal,
tax or investment advice with respect to this investment, the transactions contemplated
by this Agreement or the securities laws of any jurisdiction.
Section 3.4. Investment Purpose.
The securities are being purchased by the Investor for its own account, for
investment and without any view to the distribution, assignment or resale to
others or fractionalization in whole or in part. The Investor agrees not to
assign or in any way transfer the Investor's rights to the securities or any
interest therein and acknowledges that the Company will not recognize any purported
assignment or transfer except in accordance with applicable Federal and state
securities laws. No other person has or will have a direct or indirect beneficial
interest in the securities. The Investor agrees not to sell, hypothecate or
otherwise transfer the Investor's securities unless the securities are registered
under Federal and applicable state securities laws or unless, in the opinion
of counsel satisfactory to the Company, an exemption from such laws is available.
Section 3.5. Accredited Investor.
Investor is an "Accredited Investor" as that term is defined in Rule
501(a)(3) of Regulation D of the Securities Act.
Section 3.6. Information.
The Investor and its advisors (and its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information it deemed material to making an informed investment
decision. The Investor and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and its management. Neither such inquiries nor
any other due diligence investigations conducted by such Investor or its advisors,
if any, or its representatives shall modify, amend or affect the Investor's
right to rely on the Company's representations and warranties contained in ,this
Agreement. The Investor understands that its investment involves a high degree
The Investor is in a position regarding the Company, which,
based upon employment, family relationship or economic bargaining power, enabled
and enables such Investor to obtain information from the Company in order to
evaluate the merits and risks of this investment. The Investor has sought such
accounting, legal and tax advice, as it has considered necessary to make an
informed investment decision with respect to this transaction.
Section 3.7. Receipt of Documents.
The Investor and its counsel has received and read in their entirety: (i) this
Agreement and the Exhibits annexed hereto; (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the year ended
year ended December 31, 2001 and Form 10-QSB for the periods ended March 31,
2002 and June 30, 2002; and (iv) answers to all questions the Investor submitted
to the Company regarding an investment in the Company; and the Investor has
relied on the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
Section 3.8. Registration
Rights Agreement and Escrow Agreement. The parties have entered into the
Registration Rights Agreement and the Escrow Agreement, each dated the date
Section 3.9. No General Solicitation.
Neither the Company, nor any of its affiliates, nor any person acting on its
or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the shares of Common Stock offered hereby.
Section 3.10. Not an Affiliate.
The Investor is not an officer, director or a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with the Company or any "Affiliate" of the Company (as
that term is defined in Rule 405 of the Securities Act). Neither the Investor
nor its Affiliates has an open short position in the Common Stock of the Company,
and the Investor agrees that it will not, and that it will cause its Affiliates
not to, engage in any short sales of or hedging transactions with respect to
the Common Stock, provided that the Company acknowledges and agrees that
upon receipt of an Advance Notice the Investor will sell the Shares to be issued
to the Investor pursuant to the Advance Notice, even if the Shares have not
been delivered to the Investor.
ARTICLE IV. Representations and Warranties of the Company
Except as stated below, on the
disclosure schedules attached hereto or in the SEC Documents (as defined herein),
the Company hereby represents and warrants to, and covenants with, the Investor
that the following are true and correct as of the date hereof:
Section 4.1. Organization
and Qualification. The Company is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite power and authority corporate power to own its properties and to carry
on its business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a
Material Adverse Effect on the Company and its subsidiaries taken as a whole.
Section 4.2. Authorization,
Enforcement, Compliance with Other Instruments. (i) The Company has the
requisite corporate power and authority to enter into and perform this Agreement,
the Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and any related agreements, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Placement Agent Agreement and any
related agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent Agreement
and any related agreements have been duly executed and delivered by the Company,
(iv) this Agreement, the Registration Rights Agreement, the Escrow Agreement,
the Placement Agent Agreement and assuming the execution and delivery thereof
and acceptance by the Investor and any related agreements constitute the valid
and binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
Section 4.3. Capitalization.
As of the date hereof, the authorized capital stock of the Company consists
of 300,000,000 shares of Common Stock, par value 0 per share and 200,000,000
shares of Preferred Stock, par value $0 per share, of which 46,065,558 shares
of Common Stock and 0 shares of Preferred Stock were issued and outstanding
as of the date hereof. All of such outstanding shares have been validly issued
and are fully paid and nonassessable. Except as disclosed in the SEC Documents,
no shares of Common Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company. Except
as disclosed in the SEC Documents, as of the date hereof, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt securities
and (iii) there are no agreements or arrangements under which the Company or
any of its subsidiaries is obligated to register the sale of any of their securities
under the Securities Act (except pursuant to the Registration Rights Agreement).
There are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by this Agreement or any related agreement or the consummation
of the transactions described herein or therein.. The Company has furnished
to the Investor true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "Certificate ofIncorporation"),
and the Company's By-laws, as in effect on the date hereof (the "By-laws"),
and the terms of all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect thereto.
Section 4.4. No Conflict.
The execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby will
not (i) result in a violation of the Certificate of Incorporation, any certificate
of designations of any outstanding series of preferred stock of the Company
or By-laws or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market on which the Common Stock
is quoted) applicable to the Company or any of its subsidiaries or by which
any material property or asset of the Company or any of its subsidiaries is
bound or affected and which would cause a Material Adverse Effect. Except as
disclosed in the SEC Documents, neither the Company nor its subsidiaries is
in violation of any term of or in default under its Certificate of Incorporation
or By-laws or their organizational charter or by-laws, respectively, or any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries. The business of the Company and its subsidiaries
is not being conducted in violation of any material law, ordinance, regulation
of any governmental entity. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency
in order for it to execute, deliver or perform any of its obligations under
or contemplated by this Agreement or the Registration Rights Agreement in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which might
give rise to any of the foregoing.
Section 4.5. SEC Documents;
Financial Statements. Since March 1, 2002, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC under of the Exchange Act. The Company has delivered to the Investor
or its representatives, or made available through the SEC's website at http://www.sec.gov,
true and complete copies of the SEC Documents. As of their respective dates,
the financial statements of the Company disclosed in the SEC Documents (the
"Financial Statements") complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other information provided
by or on behalf of the Company to the Investor which is not included in the
SEC Documents contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Section 4.6. 10b-5. The
SEC Documents do not include any untrue statements of material fact, nor do
they omit to state any material fact required to be stated therein necessary
to make the statements made, in light of the circumstances under which they
were made, not misleading.
Section 4.7. No Default.
Except as disclosed in Section 4.4 or the SEC Documents, the Company is not
in default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it
is or its property is bound and neither the execution, nor the delivery by the
Company, nor the performance by the Company of its obligations under this Agreement
or any of the exhibits or attachments hereto will conflict with or result in
the breach or violation of any of the terms or provisions of, or constitute
a default or result in the creation or imposition of any lien or charge on any
assets or properties of the Company under its Certificate of Incorporation,
By-Laws, any material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, or any statute, or any decree, judgment, order, rules or
regulation of any court or governmental agency or body having juris diction
over the Company or its properties, in each case which default, lien or charge
is likely to cause a Material Adverse Effect on the Company's business or financial
Section 4.8. Absence of Events
of Default. Except for matters described in the SEC Documents and/or this
Agreement, no Event of Default, as defined in the respective agreement to which
the Company is a party, and no event which, with the giving of notice or the
passage of time or both, would become an Event of Default (as so defined), has
occurred and is continuing, which would have a Material Adverse Effect on the
Company's business, properties, prospects, financial condition or results of
Section 4.9. Intellectual
Property Rights. The Company and its subsidiaries own or possess adequate
rights or licenses to use all material trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets
and rights necessary to conduct their respective businesses as now conducted.
The Company and its subsidiaries do not have any knowledge of any infringement
by the Company or its subsidiaries of trademark, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secret or other similar rights of others,
and, to the knowledge of the Company, there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company or its subsidiaries regarding trademark, trade name, patents,
patent rights, invention, copyright, license, service names, service marks,
service mark registrations, trade secret or other infringement; and the Company
and its subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
Section 4.10. Employee Relations.
Neither the Company nor any of its subsidiaries is involved in any labor dispute
nor, to the knowledge of the Company or any of its subsidiaries, is any such
dispute threatened. None of the Company's or its subsidiaries' employees is
a member of a union and the Company and its subsidiaries believe that their
relations with their employees are good.
Section 4.11. Environmental
Laws. The Company and its subsidiaries are (i) in compliance with any and
all applicable material foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval.
Section 4.12. Title.
Except as set forth in the SEC Documents, the Company has good and marketable
title to its properties and material assets owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other
than such as are not material to the business of the Company. Any real property
and facilities held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
Section 4.13. Insurance.
The Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
Section 4.14. Regulatory
Permits. The Company and its subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization
Section 4.15. Internal Accounting
Controls. The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.16. No Material
Adverse Breaches, etc. Except as set forth in the SEC Documents, neither
the Company nor any of its subsidiaries is subject to any charter, corporate
or other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect on the business, properties, operations, financial
condition, results of operations or
prospects of the Company or its subsidiaries. Except as set
forth in the SEC Documents, neither the Company nor any of its subsidiaries
is in breach of any contract or agreement which breach, in the judgment of the
Company's officers, has or is expected to have a Material Adverse Effect on
the business, properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries.
Section 4.17. Absence of
Litigation. Except as set forth in the SEC Documents, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self -regulatory organization or body pending against or
affecting the Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a Material
Adverse Effect on the transactions contemplated hereby (ii) adversely affect
the validity or enforceability of, or the authority or ability of the Company
to perform its obligations under, this Agreement or any of the documents contemplated
herein, or (iii) except as expressly disclosed in the SEC Documents, have a
Material Adverse Effect on the business, operations, properties, financial condition
or results of operation of the Company and its subsidiaries taken as a whole.
Section 4.18. Subsidiaries.
Except as disclosed in the SEC Documents, the Company does not presently own
or control, directly or indirectly, any interest in any other corporation, partnership,
association or other business entity.
Section 4.19. Tax Status.
The Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject and (unless and only to the extent that the Company and
each of its subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and decla rations, except those being contested
in good faith and has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid ta xes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
Section 4.20. Certain Transactions.
Except as set forth in the SEC Documents none of the officers, directors, or
employees of the Company is presently a party to any transaction with the Company
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has. a substantial interest
or is an officer, director, trustee or partner.
Section 4.21. Fees and Rights
of First Refusal. Except as set forth in the SEC Documents, the Company
is not obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
Section 4.22. Use of Proceeds.
The Company represents that the net proceeds from this offering will be used
for general corporate purposes. However, in no event shall the net proceeds
from this offering be used by the Company for the payment (or loaned to any
such person for the payment) of any judgment, or other liability, incurred by
any executive officer, officer, director or employee of the Company, except
for any liability owed to such person for services rendered, or if any judgment
or other liability is incurred by such person originating from services rendered
to the Company, or the Company has indemnified such person from liability.
Section 4.23. Further Representation
and Warranties of the Company. For so long as any securities issuable hereunder
held by the Investor remain outstanding, the Company acknowledges, represents,
warrants and agrees that it will maintain the listing of its Common Stock on
the Principal Market
Section 4.24. Opinion of
Counsel. Investor shall receive an opinion letter from Miles Alperstein,
counsel to the Company (updated where applicable) on the date hereof.
Section 4.25. Opinion of
Counsel. The Company will obtain for the Investor, at the Company's expense,
any and all opinions of counsel which may be reasonably required in order to
sell the securities issuable hereunder without restriction.
Section 4.26. Dilution.
The Company is aware and acknowledges that issuance of shares of the Company's
Common Stock could cause dilution to existing shareholders and could significantly
increase the outstanding number of shares of Common Stock.
The Investor and the Company represent to the
other the following with respect to itself:
Section 5.1. Indemnification.
In consideration of the Investor's execution and delivery of this Agreement,
and in addition to all of the Company's other obligations under this Agreement,
the Company shall defend, protect, indemnify and hold harmless the Investor,
and all of its officers, directors, partners, employees and agents (including,
without limitation, those retained in connection with the transactions contemplated
by this Agreement) (collectively, the "InvestorIndemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and dama ges, and expenses in connection
therewith (irrespective of whether any such Investor Indemnitee is a party to
the action for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred
by the Investor Indemnitees or any of them as a result of, or arising out of,
or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement or the Registration Rights Agreement or any other certificate,
instrument or doc ument contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Investor 'Indemnitee not
arising out of any action or inaction of an Investor Indemnitee, and arising
or resulting from the execution, de livery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Investor Indemnitees. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
In consideration of the Company's execution and delivery of this Agreement,
and in addition to all of the Investor's other obligations under this Agreement,
the Investor shall defend, protect, indemnify and hold harmless the Company
and all of its officers, directors, shareholders, employees and agents (including,
without limitation, those retained in connection with the transactions contemplated
by this Agreement) (collectively, the "CompanyIndemnitees") from
and against any and all Indemnified Liabilities incurred by the Company Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any misrepresentation
or breach of any representation or warranty made by the Investor in this Agreement,
the Registration Rights Agreement, or any instrument or document contemplated
hereby or thereby executed by the Investor, (b) any breach of any covenant,
agreement or obligation of the Investor(s) contained in this Agreement, the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Investor, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based
on misrepresentations or due to a breach by the Investor and arising out of
or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other ins trument, document or agreement executed pursuant
hereto by any of the Company Indemnitees. To the extent that the foregoing undertaking
by the Investor may be unenforceable for any reason, the Investor shall make
the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
Covenants of the Company
Section 6.1. Registration
Rights. The Company shall cause the Registration Rights Agreement to remain
in full force and effect and the Company shall comply in all material respects
with the terms thereof.
Section 6.2. Listing of Common
Stock. The Company shall maintain the Common Stock's authorization for quotation
on the National Association of Securities Dealers Over the Counter Bulletin
Section 6.3. Exchange Act
Registration. The Company will cause its Common Stock to continue to be
registered under Section 12(g) of the Exchange Act, will file in a timely manner
all reports and other documents required of it as a reporting company under
the Exchange Act and will not take any action or file any document (whether
or not permitted by Exchange Act or the rules there under to terminate or suspend
such registration or to terminate or suspend its reporting and filing obliga
tions under said Exchange Act.
Section 6.4 BCSC; Toronto Stock Exchange; Canadian
Venture Exchange Approval.
The Company will attempt to
receive the necessary approvals of the BCSC and TSXV for the sale, issuance
and registration of the shares of the Company's Common Stock to be sold pursuant
to this Agreement as well as the issuance of the Investor's Shares and the Placement
Agent Shares (as this term is defined in the Placement Agent Agreement dated
the date hereof).
Section 6.4. Transfer Agent
Instructions. Not later than two (2) business days after each Advance Notice
Date and prior to each Closing and the effectiveness of the Registration Statement
and resale of the Common Stock by the Investor, the Company will deliver instructions
to its transfer agent to issue shares of Common Stock free of restrictive legends.
Section 6.5. Corporate Existence.
The Company will take all steps necessary to preserve and continue the corporate
existence of the Company.
Section 6.6. Notice of Certain
Events Affecting Registration; Suspension of Right toMake anAdvance.
The Company will immediately notify the Investor upon its becoming aware of
the occurrence of any of the following events in respect of a registration statement
or related prospectus relating to an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other Federal
or state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other Federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in the Registration Statement
or related prospectus of any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents
so that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (v) the
Company's reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available
to the Investor any such supplement or amendment to the related prospectus.
The Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
Section 6.7. Expectations
Regarding Advance Notices. Within ten (10) days after the commencement of
each calendar quarter occurring subsequent to the commencement of the Commitment
Period, the Company must notify the Investor, in writing, as to its reasonable
expectations as to the dollar amount it intends to raise during such calendar
quarter, if any, through the issuance of Advance Notices. Such notification
shall constitute only the Company's good faith estimate and shall in no way
obligate the Company to raise such amount, or any amount, or otherwise limit
its ability to deliver Advance Notices. The failure by the Company to
comply with this provision can be cured by the Company's notifying
the Investor, in writing, at any time as to its reasonable expectations with
respect to the current calendar quarter.
Section 6.8. Consent of Investor
to Sell Common Stock. During the Commitment Period, the Company shall not
issue or sell (i) any Common Stock without consideration or for a consideration
per share less than its Bid Price determined immediately prior to its issuance,
(ii) issue or sell any warrant, option, right, contract, call, or other security
or instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than such Common
Stock's Bid Price determined immediately prior to its issuance, or (iii) file
any registration statement on Form S-8.
Section 6.9. Consolidation;
Merger. The Company shall not, at any time after the date hereof, effect
any merger or consolidation of the Company with or into, or a transfer of all
or substantially all the assets of the Company to another entity (a "Consolidation
Event") unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to the Investor such
shares of stock and/or securities as the Investor is entitled to receive pursuant
to this Agreement.
Section 6.10. Issuance of
the Company's Common Stock. The sale of the shares of Common Stock shall
be made in accordance with the provisions and requirements of RegulationD and
any applicable state securities law.
ARTICLE VII. Conditions for Advance and Conditions to Closing
Section 7.1. Conditions Precedent
to the Obligations of the Company. The obligation hereunder of the Company
to issue and sell the shares of Common Stock to the Investor incident to each
Closing is subject to the satisfaction, or waiver by the Company, at or before
each such Closing, of each of the conditions set forth below.
Accuracy of the Investor'sRepresentationsandWarranties.
The representations and warranties of the Investor shall be true and correct
in all material respects.
Performance by the Investor. The Investor shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions required
by this Agreement and the Registration Rights Agreement to be performed, satisfied
or complied with by the Investor at or prior to such Closing.
Section 7.2. Conditions Precedent
to the Right of the Company to Deliver an AdvanceNotice and the Obligation
of the Investor to Purchase Shares of Common Stock. The right of the Company
to deliver an Advance Notice and the obligation of the Investor hereunder to
acquire and' pay for shares of the Company's Common Stock incident to a Closing
is subject to the satisfaction or waiver by the Investor, on (i) the date of
delivery of such Advance Notice and (ii) the applicable Advance Date (each a
"Condition Satisfaction Date"), of each of the following conditions:
Registration of the Common Stock with the SEC. The Company shall 'have
filed with the SEC a Registration Statement with respect to the resale of the
Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective
on each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and the Investor is reasonably satisfied
that the SEC no longer is considering or intends to take such action), and (ii)
no other suspension of the use or withdrawal of the effectiveness of the Registration
Statement or related prospectus shall exist. The Registration Statement must
have been declared effective by the SEC prior to the first Advance Notice Date.
Authority. The Company shall have obtained all permits and qualifications
required by any applicable state in accordance with the Registration Rights
Agreement for the offer and sale of the shares of Common Stock, or shall have
the availability of exemptions there from. The sale and issuance of the shares
of Common Stock shall be legally permitted by all laws a nd regulations to which
the Company is subject.
Fundamental Changes. There shall not exist any fundamental changes to
the information set forth in the Registration Statement which would require
the Company to file a post-effective amendment to the Registration Statement.
Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and conditions
required by this Agreement (including, without limitation, the conditions specified
in Section 2.5 hereof) and the Registration Rights Agreement to be performed,
satisfied or complied with by the Company at or prior to each Condition Satisfaction
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
or directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
Listing, No Suspension of Trading in or Delisting of CommonStock.
The Common Stock shall be trading on the National Association of Securities
Dealers Over the Counter Bulletin Board. The trading of the Common Stock is
not suspended by the SEC or the Principal Market (if the Common Stock is traded
on a Principal Market). The issuance of shares of Common Stock with respect
to the applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market (if the Common Stock is traded on a Principal
market). The Company shall not have received any notice threatening the continued
listing of the Common Stock on the Principal Market (if the Common Stock is
traded on a Principal Market).
Maximum Advance Amount. The amount of the individual Advance requested
by the Company does not exceed the Maximum Advance Amount unless waived by
the Investor. In addition, in no event shall the number of
shares issuable to the Investor pursuant to an Advance cause the Investor to
own in excess of nine and 9/10 percent (9.9%) of the then outstanding Common
Stock of the Company.
No Knowledge. The Company has no knowledge of any event more likely than
not to have the effect of causing such Registration Statement to be suspended
or otherwise ineffective.
Other. On each Condition Satisfaction -Date, the Investor shall have
received and been reasonably satisfied with such other certificates and documents
as shall have been reasonably requested by the Investor in order for the Investor
to confirm the Company's satisfaction of the conditions set forth in this Section
7.2, including, without limitation, a certificate executed by an executive officer
of the Company and to the effect that all the conditions to such Closing shall
have been satisfied as at the date of each such certificate substantially in
the form annexed hereto on Exhibit A.
ARTICLE VIII. Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1. Due Diligence
Review. Prior to the filing of the Registration Statement the Company shall
make available for inspection and review by the Investor, advisors to and representatives
of the Investor, any underwriter participating in any disposition of the Registrable
Securities on behalf of the Investor pursuant to the Registration Statement,
any such registration statement or amendment or supplement thereto or any blue
sky, NASD or other filing, all financial and other records, all SEC Documents
and other filings with the SEC, and all other corporate documents and properties
of the Company as may be reasonably necessary for the purpose of such review,
and cause the Company's officers, directors and employees to supply all such
information reasonably requested by the Investor or any such representative,
advisor or underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose
of enabling the Investor and such representatives, advisors and underwriters
and their respective accountants and attorneys to conduct initial and ongoing
due diligence with respect to the Company and the accuracy of the Registration
Section 8.2. Non-Disclosure of Non-Public
The Company shall not disclose non-public information to the Investor, advisors
to or representatives of the Investor unless prior to disclosure of such information
the Company identifies such information as being non-public information and
provides the Investor, such advisors and representatives with the opportunity
to accept or refuse to accept such nonpublic information for review. The Company
may, as a condition to disclosing any non-public information hereunder, require
the Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
Nothing herein shall require the Company to disclose non-public information
to the Investor or its advisors or representatives, and the Company represents
does not disseminate non-public information to any investors
who purchase stock in the Company ina public offering, to money managers or
to securities analysts, provided, however, thatnotwithstanding anything herein
to the contrary, the Company will, as hereinabove provided,immediately notify
the advisors and representatives of the Investor and, if any, underwriters,
of anyevent or the existence of any circumstance (without any obligation to
disclose the specific event orcircumstance) of which it becomes aware, constituting
non-public information (whether or notrequested of the Company specifically
or generally during the course of due diligence by suchpersons or entities),
which, if not disclosed in the prospectus included in the Registration Statementwould
cause such prospectus to include a material misstatement or to omit a material
fact required tobe stated therein in order to make the statements, therein,
in light of the circumstances in which theywere made, not misleading. Nothing
contained in this Section 8.2 shall be construed to mean thatsuch persons or
entities other than the Investor (without the written consent of the Investor
prior todisclosure of such information) may not obtain nonpublic information
in the course of conductingdue diligence in accordance with the terms of this
Agreement and nothing herein shall prevent anysuch persons or entities from
notifying the Company of their opinion that based on such duediligence by such
persons or entities, that the Registration Statement contains an untrue statement
ofmaterial fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of
the circumstances in which they were made, notmisleading.
Choice of Law/Jurisdiction
Section 9.1. Governing Law.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Hudson
County, New Jersey, and expressly consent to the jurisdiction and venue of the
Superior Court of New Jersey, sitting in Hudson County, New Jersey and the United
States District Court of New Jersey, sitting in Newark, New Jersey, for the
adjudication of any civil action asserted pursuant to this paragraph.
Section 10.1. Assignment.
Neither this Agreement nor any rights of the Company hereunder may be assigned
to any other Person.
Section 10.2. Termination.
The obligations of the Investor to make Advances under Article II hereof shall
terminate twenty-four (24) months after the Effective Date.
ARTICLE XI. Notices
Section 11.1. Notices.
Any notices, consents, waivers, or other communications required or permitted
to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered (i) upon receipt, when delivered personally; (ii)
upon receipt, ,when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified
mail, return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications
Each party shall provide five (5) days' prior written notice to the other party of any change in address or facsimile number.
Section 12.1. Counterparts.
This Agreement maybe executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. In the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4) additional original
executed signature pages to be physically =delivered to the other party within
five (5) days of the execution and delivery hereof.
Section 12.2. Entire Agreement;
Amendments. This Agreement supersedes all other prior oral or written agreements
between the Investor, the Company, their affiliates and persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and
the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by an instrument
in writing signed by the party to be charged with enforcement.
Section 12.3. Reporting Entity
for the Common Stock. The reporting entity relied upon for the determination
of the trading price or trading volume of the Common Stock on any given Trading
Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company shall be
required to employ any other reporting entity.
Section 12.4. Fees and Expenses. The Company hereby agrees to pay the following fees:
Legal Fees. Each of the parties shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated hereby,
except that the Company will pay the sum of Ten Thousand Dollars ($10,000),
to Butler Gonzalez LLP for legal, administrative, and escrow fees upon the execution
of this Agreement. Subsequently on each advance date, the Company will pay Butler
Gonzalez LLP, the sum of Five Hundred Dollars ($500) for legal, administrative
and escrow fees directly out the proceeds of any Advances hereunder.
(b) Commitment Fees.
On each Advance Date the Company shall pay to the Investor , directly from the
gross proceeds held in escrow, an amount equal to five percent (5%) of the amount
of each Advance. The Company hereby agrees that if such payment, as is described
above, is not made by the Company on the Advance Date, such payment will be
made at the direction of the Investor as outlined and mandated by Section 2.3
of this Agreement.
Upon the execution of this Agreement the Company shall pay the sum of Fifty
Thousand Dollars ($50,000) to the Investor.
Furthermore upon the execution of this Agreement the Company shall issue to
the Investor one million (1,000,000) shares of the Company's Common Stock (the
Earned. Any Investor's Shares issued to the Investor shall be deemed fully
earned as of the date hereof.
Rights. The Investor's Shares will have demand and "piggy-back" registration
Section 12.5. Brokerage.
Each of the parties hereto represents that it has had no dealings in connection
with this transaction with any finder or broker who will demand payment of any
fee or commission from the other party. The Company on the one hand, and the
Investor, on the other hand, agree to indemnify the other against and hold the
other harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have been rendered
on behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby.
Section 12.6. Confidentiality.
If for any reason the transactions contemplated by this Agreement are not consummated,
each of the parties hereto shall keep confidential any information obtained
from any other party (except information publicly available or in such party's
domain prior to the date hereof, and except as required by court order) and
shall promptly return to the other parties all schedules, documents, instruments,
work papers or other written information without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the
parties hereto have caused this Line of Credit Agreement to be executed by the
undersigned, thereunto duly author ized, as of the date first set forth above.
AMS HOMECARE INC.
By: /s/ Rani Gill
Name: Rani Gill
CORNELL CAPITAL PARTNERS, LP
By:Yorkville Advisors, LLC
Its: General Partner
By: /s/ Mark Angelo
Name: Mark Angelo
Title: Portfolio Manager
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
AMS HOMECARE INC.
The undersigned, _________________________________
hereby certifies, with respect to the sale of shares of Common Stock of AMS
Homecare Inc. (the "Company"), issuable in connection with this Advance
Notice and Compliance Certificate dated _______________ (the "Notice"),
delivered pursuant to the Equity Line of Credit Agreement (the "Agreement"),
1. The undersigned is the duly elected
President and Chief Executive Officer of the Company.
2. There are no fundamental
changes to the information set forth in the RegistrationStatement which would
require the Company to file a post effective amendment to the Registration Statement.
3. The Company has performed
in all material respects all covenants and agreements to be performed by the
Company on or prior to the Advance Date related to the Notice and has complied
in all material respects with all obligations and conditions contained in the
4. The Advance requested is _______________.
The undersigned has executed this Certificate
this ______ day of ________________.
The undersigned hereby agrees
that for a period commencing on the date hereof and expiring on the termination
of the Agreement dated _______________________________ between AMS Homecare
Inc. (the "Company"), and Cornell Capital Partners, LP, (the "Investor")
(the "LockupPeriod"), he, she or it will not, directly or indirectly,
without the prior written consent of the Investor, issue, offer, agree or offer
to sell, sell, grant an option for the purchase or sale of, transfer, pledge,
assign, hypothecate, distribute or otherwise encumber or dispose of except pursuant
to Rule 144 of the General Rules and Regulations under the Securities Act of
1933, any securities of the Company, including common stock or options, rights,
warrants or other securities underlying, convertible into, exchangeable or exercisable
for or evidencing any right to purchase or subscribe for any common stock (whether
or not beneficially owned by the undersigned), or any beneficial interest therein
(collectively, the "Securities").
In order to enable the aforesaid
covenants to be enforced, the undersigned hereby consents to the placing of
legends and/or stop-transfer orders with the transfer agent of the Company's
securities with respect to any of the Securities registered in the name of the
undersigned or beneficially owned by the undersigned, and the undersigned hereby
confirms the undersigned's investment in the Company.