HEALTH SYSTEMS SOLUTIONS, INC.
A Nevada Corporation
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT, dated as of July 6, 2004 (the
"Agreement"), is entered into by and between Health Systems Solutions, Inc.,
a Nevada corporation (the "Company") and Stanford Venture Capital
Holdings, Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Health Quality Solutions, Inc., a Florida corporation
("HQS") is a wholly-owned subsidiary of the Company;
WHEREAS, the Purchaser and HQS entered into a Loan and Security
Agreement of even date herewith pursuant to which, among other things, HQS
borrowed from the Purchaser up to an aggregate of $1,600,000 (the "Loan
Agreement"); and
WHEREAS, as partial consideration for the Purchaser entering into the
Loan Agreement and upon the terms and conditions of this Agreement, the
Purchaser has agreed to purchase, and the Company wishes to issue and sell,
warrants to purchase up to an aggregate of 720,000 of the Company's common stock
$0.001 par value per share (the "Common Stock"), at an exercise price of $0.001
per share (the "Warrants"), which Warrants will be in the form attached hereto
as Exhibit A; and
WHEREAS, the Company and the Purchaser are executing and delivering
this Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act.
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. AGREEMENT TO PURCHASE; PURCHASE PRICE
(a) Capitalized terms used herein not otherwise defined herein shall have the
same meaning ascribed to such terms as in the Loan Agreement.
(b) Subject to the terms and conditions in this Agreement, the Purchaser hereby
agrees to purchase from the Company, and the Company hereby agrees to issue
and sell to the Purchaser, the Warrants as additional consideration for the
funding of the Loan in the aggregate principal amount of $1,600,000, on the
date hereof.
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2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION
The Purchaser represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) Qualified Investor. The Purchaser is (i) experienced in making investments
of the kind described in this Agreement and the related documents, (ii) able
to afford the entire loss of its investment in the Warrants, and (iii) an
"Accredited Investor" as defined in Rule 501(a) of Regulation D and knows of
no reason to anticipate any material change in its financial condition for
the foreseeable future.
(b) Restricted Securities. The Warrants are "restricted Securities" as defined
in Rule 144 promulgated under the Securities Act. All subsequent offers and
sales by the Purchaser of the Warrants and the Common Stock issuable upon
exercise of the Warrants shall be made pursuant to an effective registration
statement under the Securities Act or pursuant to an applicable exemption
from such registration.
(c) Reliance on Representations. The Purchaser understands that the Warrants are
being offered and sold to it in reliance upon exemptions from the
registration requirements of the United States federal Securities laws, and
that the Company is relying upon the truthfulness and accuracy of the
Purchaser's representations and warranties, and the Purchaser's compliance
with its covenants and agreements, each as set forth herein, in order to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Warrants.
(d) Legality. The Purchaser has the requisite corporate power and authority to
enter into this Agreement.
(e) Authorization. This Agreement and any related agreements, and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Purchaser, and such agreements, when executed and delivered
by each of the Purchaser and the Company will each be a valid and binding
agreement of the Purchaser, enforceable in accordance with their respective
terms, except to the extent that enforcement of each such agreement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors rights generally and to general principles of equity.
(f) Broker's Fees and Commissions. Neither the Purchaser nor any of its
officers, partners, employees or agents has employed any investment banker,
broker, or finder in connection with the transactions contemplated by the
Primary Documents (as defined below).
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to, and covenants and agrees with,
the Purchaser that:
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(a) Organization. The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Nevada and has
all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted after the consummation of the
transactions contemplated by this Agreement. The Company is duly qualified as
a foreign corporation and in good standing in all jurisdictions in which
either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification. The
minute books and stock record books and other similar records of the Company
have been provided or made available to the Purchaser or its counsel prior to
the execution of this Agreement, are complete and correct in all material
respects and have been maintained in accordance with sound business
practices. Such minute books contain true and complete records of all actions
taken at all meetings and by all written consents in lieu of meetings of the
directors, stockholders and committees of the board of directors of the
Company from the date of organization through the date hereof. The Company
has, prior to the execution of this Agreement, delivered to the Purchaser
true and complete copies of the Company's Articles of Incorporation, and
Bylaws, each as amended through the date hereof. The Company is not in
violation of any provisions of its Articles of Incorporation or Bylaws.
(b) Capitalization. On the date hereof, the authorized capital of the Company
consists of:
(i) Common Stock; $.001 par value; 150,000,000 shares authorized; 5,523,199
shares issued and outstanding.
(ii) Preferred Stock; 15,000,000 authorized:
a. Series A $1.17 Convertible; 1,880,341 shares authorized issued and
outstanding.
b. Series B $.80 Convertible; 2,500,000 shares authorized issued and
outstanding.
The Company has no authorized or outstanding options or warrants issued and
outstanding except for the Warrants to purchase 720,000 shares of Common Stock
to be issued to the Purchaser hereunder, there are no outstanding rights,
agreements, arrangements or understandings to which the Company is a party
(written or oral) which would obligate the Company to issue any equity interest,
option, warrant, convertible note, or other types of Warrants or to register any
shares in a registration statement filed with the Commission. There is no
agreement, arrangement or understanding between or among any entities or
individuals which affects, restricts or relates to voting, giving of written
consents, dividend rights or transferability of shares with respect to any
voting shares of the Company, including without limitation any voting trust
agreement or proxy. There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire for value any outstanding shares of
capital stock or other ownership interests of the Company or to provide funds to
or make any investment (in the form of a loan, capital contribution or
otherwise) in any other entity. There are no anti-dilution or price adjustment
provisions regarding any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Warrants.
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(c) Concerning the Warrants. The Common Stock issuable upon exercise of the
Warrants shall 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 a holder.
(d) Authorized Shares. The Company has available and has reserved a sufficient
number of authorized and unissued shares of Common Stock as may be necessary
to effect exercise of the Warrants. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock of the issuance of shares
of Common Stock upon the exercise of the Warrants. The Company further
acknowledges that its obligation to issue shares of Common Stock upon
exercise of the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.
(e) Legality. The Company has the requisite corporate power and authority to
enter into this Agreement, and to issue and deliver the Common Stock issuable
upon exercise of the Warrants.
(f) Transaction Agreements. This Agreement, the Warrants, and the Registration
Rights Agreement of even date herewith among the Company and the Purchaser
(the "Registration Rights Agreement") (collectively, the "Primary
Documents"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company; this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the other
Primary Documents, when executed and delivered by the Company, will each be,
a valid and binding agreement of the Company, enforceable in accordance with
their respective terms, except to the extent that enforcement of each of the
Primary Documents may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and to general principles of
equity.
(g) Financial Statements. The financial statements and related notes thereto
contained in the Company's filings with the Commission (the "Company
Financials") are correct and complete in all material respects, comply in all
material respects with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission promulgated
thereunder and have been prepared in accordance with United States generally
accepted accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other. The Company Financials
present fairly and accurately the financial condition and operating results
of the Company in all material respects as of the dates and during the
periods indicated therein and are consistent with the books and records of
the Company. Except as set forth in the Company Financials, the Company has
no material liabilities, contingent or otherwise, other than liabilities
disclosed on the balance sheet as of March 31, 2004. Since January 1, 2004,
there has been no change in any accounting policies, principles, methods or
practices, including any change with respect to reserves (whether for bad
debts, contingent liabilities or otherwise), of the Company.
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(h) Commission Filings. The Company has made all filings with the Commission
that it has been required to make under the Securities Act and the Exchange
Act and has furnished or made available to the Purchaser true and complete
copies of all the documents it has filed with the Commission since its
inception, all in the forms so filed. As of their respective filing dates,
such filings already filed by the Company or to be filed by the Company after
the date hereof complied or, if filed after the date hereof, will comply in
all material respects with the requirements of the Securities Act and the
Exchange Act, and the rules and regulations of the Commission promulgated
thereunder, as the case may be, and none of the filings with the Commission
contained or will contain any untrue statement of a material fact or omitted
or will omit any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent such filings have been all
prior to the date of this Agreement corrected, updated or superseded by a
document subsequently filed with Commission.
(i) Non-Contravention. The execution and delivery of this Agreement and each of
the other Primary Documents, and the consummation by the Company of the
transactions contemplated by this Agreement and each of the other Primary
Documents, do not and will not conflict with, or result in a breach by the
Company of, or give any third party any right of termination, cancellation,
acceleration or modification in or with respect to, any of the terms or
provisions of, or constitute a default under, (A) its Articles of
Incorporation or Bylaws, as amended through the date hereof, (B) any material
indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Company is a party or by which it or any of its properties or
assets are bound, or (C) any existing applicable law, rule, or regulation or
any applicable decree, judgment or order of any court or federal, state,
securities industry or foreign regulatory body, administrative agency, or any
other governmental body having jurisdiction over the Company or any of their
properties or assets (collectively, "Legal Requirements"), other than those
which have been waived or satisfied on or prior to the date hereof.
(j) Approvals and Filings. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be
obtained by the Company for the entry into or the performance of this
Agreement and the other Primary Documents.
(k) Compliance With Legal Requirements. The Company has not violated in any
material respect, and is not currently in material default under, any Legal
Requirement applicable to the Company, or any of the assets or properties of
the Company, where such violation could reasonably be expected to have
material adverse effect on the business or financial condition of the
Company.
(l) Absence of Certain Changes. There has been no material adverse change nor
any material adverse development in the business, properties, operations,
financial condition, prospects, outstanding securities or results of
operations of the Company, and no event has occurred or circumstance exists
that may result in such a material adverse change.
(m) Indebtedness to Officers, Directors and Stockholders. Except as set
disclosed in the Company Financials, the Company is not indebted to any of
the Company's stockholders, officers or directors or their Affiliates in any
amount whatsoever (including, without limitation, any deferred compensation,
salaries or rent payable).
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(n) Relationships With Related Persons. Except as set forth in the SEC filings
of the Company, no officer, director, or principal stockholder of the Company
nor any Related Person (as defined below) of any of the foregoing has had any
interest in any property (whether real, personal, or mixed and whether
tangible or intangible) used in or pertaining to the business of the Company.
No officer, director, or principal stockholder of the Company nor any Related
Person of the any of the foregoing is or has owned an equity interest or any
other financial or profit interest in, a Person (as defined below) that has
(i) had business dealings or a material financial interest in any transaction
with the Company, or (ii) engaged in competition with the Company with
respect to any line of the merchandise or services of such company (a
"Competing Business") in any market presently served by such company except
for ownership of less than one percent of the outstanding capital stock of
any Competing Business that is publicly traded on any recognized exchange or
in the over-the-counter market. No director, officer, or principal
stockholder of the Company nor any Related Person of any of the foregoing is
a party to any Contract with, or has claim or right against, the Company. As
used in this Agreement, "Person" means any individual, corporation (including
any non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
labor union, or other entity or any governmental body; "Related Person"
means, (X) with respect to a particular individual, (a) each other member of
such individual's Family (as defined below); (b) any Person that is directly
or indirectly controlled by such individual or one or more members of such
individual's Family; (c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest (as defined below); and (d) any Person with respect to which such
individual or one or more members of such individual's Family serves as a
director, officer, partner, executor, or trustee (or in a similar capacity);
(Y) with respect to a specified Person other than an individual, (a) any
Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person; (b) any Person that holds a Material Interest in such
specified Person; (c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity); (d) any Person in which such specified Person holds a Material
Interest; (e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and (f) any
Related Person of any individual described in clause (b) or (c). For purposes
of the foregoing definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's
spouse within the second degree, and (iv) any other natural person who
resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership of voting Warrants or other voting interests
representing at least 1% of the outstanding voting power of a Person or
equity Warrants or other equity interests representing at least 1% of the
outstanding equity Warrants or equity Warrants in a Person.
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(o) Title to Properties; Liens and Encumbrances. Except as set forth in the SEC
filings of the Company, the Company has good and marketable title to all of
its material properties and assets, both real and personal, and has good
title to all its leasehold interests. All material properties and assets
reflected in the Company Financials are free and clear of all Encumbrances
(as defined below) except liens for current Taxes not yet due and except as
disclosed in the Company Financials. As used in this Agreement, "Encumbrance"
means any charge, claim, community property interest, condition, equitable
interest, lien, pledge, security interest, right of first refusal, or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership.
(p) Permits. The Company has all permits, licenses and any similar authority
necessary for the conduct of its business as now conducted, the lack of which
would materially and adversely affect the business or financial condition of
such company. The Company is not in default in any respect under any of such
permits, licenses or similar authority.
(q) Absence of Litigation. Except as set forth in the Company SEC Filings, there
is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body, or arbitration tribunal pending or, to the
Knowledge of the Company, threatened against or affecting the Company, in
which an unfavorable decision, ruling or finding would have a material
adverse effect on the properties, business, condition (financial or other) or
results of operations of the Company, taken as a whole, or the transactions
contemplated by the Primary Documents, or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, the Primary Documents. All references to the
"Knowledge of the Company" in this Agreement shall mean the actual knowledge
of the Company or any of its officers or the knowledge that the Company or
any of its officers could reasonably be expected to have, after reasonable
investigation and due diligence.
(r) No Default. The Company is not in default in the performance or observance
of any obligation, covenant or condition contained in any indenture,
mortgage, deed of trust or other instrument or agreement to which it is a
party or by which it or its property may be bound.
(s) Taxes.
(i) All Tax Returns (as defined below) required to have been filed by or with
respect to the Company (including any extensions) have been filed. All such
Tax Returns are true, complete and correct in all material respects. All
Taxes (as defined below) due and payable by the Company, whether or not shown
on any Tax Return, or claimed to be due by any Taxing Authority (as defined
below), have been paid.
(ii) The Company does not have any material liability for Taxes outstanding.
(iii) The Company is not a party to any agreement extending the time within
which to file any Tax Return. No claim has ever been made by a Taxing
Authority of any jurisdiction in which the Company does not file Tax Returns
that the Company is or may be subject to taxation by that jurisdiction.
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(iv) The Company has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor
or independent contractor.
(v) There has been no action by any Taxing Authority in connection with
assessing additional Taxes against, or in respect of, the Company for any
past period. There is no dispute or claim concerning any Tax liability of the
Company either (i) claimed, raised or, to the Knowledge of the Company,
threatened by any Taxing Authority or (ii) of which the Company is otherwise
aware. There are no liens for Taxes upon the assets and properties of the
Company other than liens for Taxes not yet due.
(vi) There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any Tax Returns required to be filed by,
or which include or are treated as including, the Company or with respect to
any Tax assessment or deficiency affecting the Company.
(vii) The Company has not received any written ruling related to Taxes or
entered into any agreement with a Taxing Authority relating to Taxes.
(viii) The Company does not have any liability for the Taxes of any person or
entity other than the Company (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign Legal
Requirements), (ii) as a transferee or successor, (iii) by contract or (iv)
otherwise, except for assumed liabilities of the assignee of Provider
Solutions Corp. in an amount not to exceed $400,000.
(ix) The Company (i) has not agreed to make nor is required to make any
adjustment under Section 481 of the Internal Revenue Code by reason of a
change in accounting method and (ii) is not a "consenting corporation" within
the meaning of Section 341(f)(1) of the Internal Revenue Code.
(x) The Company is not a party to or bound by any obligations under any tax
sharing, tax allocation, tax indemnity or similar agreement or arrangement.
(xi) The Company is not involved in, subject to, or a party to any joint
venture, partnership, contract or other arrangement that is treated as a
partnership for federal, state, local or foreign Tax purposes.
(xii) The Company was not included nor is includible, in the Tax Return of any
other entity.
As used in this Agreement, a "Tax Return" means any return, report, information
return, schedule, certificate, statement or other document (including any
related or supporting information) filed or required to be filed with, or, where
none is required to be filed with a Taxing Authority, the statement or other
document issued by, a Taxing Authority in connection with any Tax; "Tax" means
any and all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross, receipts, excise, real or personal property,
sales, withholding, social security, retirement, unemployment, occupation, use,
service, service use, license, net worth, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by Taxing Authority, whether computed
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on a separate, consolidated, unitary, combined or any other basis; and such term
includes any interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such taxes,
charges, fees, levies or other assessments; and "Taxing Authority" means any
governmental agency, board, bureau, body, department or authority of any United
States federal, state or local jurisdiction or any foreign jurisdiction, having
or purporting to exercise jurisdiction with respect to any Tax.
(t) Certain Prohibited Activities. Neither the Company nor any of its directors,
officers or other employees has (i) used any Company funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful expense
relating to any political activity, (ii) made any direct or indirect unlawful
payment of Company funds to any foreign or domestic government official or
employee, (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person.
(u) Contracts. As used in this Agreement, "Contract" means any agreement,
contract, obligation, promise, or undertaking (whether written or oral and
whether express or implied) that is legally binding; or any Contract (a)
under which the Company has or may acquire any rights, (b) under which the
Company has or may become subject to any obligation or liability, or (c) by
which the Company or any of the assets owned or used by it is or may become
bound.
With respect to each Contract (i) the Company is, and has been, in material
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any obligation or liability or by which the Company
or any of the assets owned or used by it is or was bound; (ii) each other person
or entity that has or had any obligation or liability under any Contract under
which the Company has or had any rights is, and has been, in material compliance
with all applicable terms and requirements of such Contract; (iii) no event has
occurred or circumstance exists that (with or without notice or lapse of time)
may contravene, conflict with, or result in a material violation or breach of,
or give the Company or other person or entity the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Contract; and (iv) the Company has not
given to or received from any other person or entity any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any Contract.
Each Contract is valid, in full force, and binding on and enforceable against
the other party or parties to such contract in accordance with its terms and
provisions.
There have been no renegotiation of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the Company under
current or completed Contracts with any person or entity and no such person or
entity has made written demand for such renegotiation.
(v) Agent Fees. The Company has not incurred any liability for any finder's or
brokerage fees or agent's commissions in connection with the transactions
contemplated by this Agreement.
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(w) Employees. The Company has no accrued vacation or sick pay due any
employees, except as set forth in the Financial Statements.
(x) Employee Benefits.
(i) The Company does not have, and has not at any time had, any Plans (as
defined below).
As used in this Agreement, "Plan" means (i) each of the "employee benefit plans"
(as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA")), of which any of the Company or any member of
the same controlled group of businesses as the Company within the meaning of
Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is or ever was a sponsor or
participating employer or as to which the Company or any of its ERISA Affiliates
makes contributions or is required to make contributions, and (ii) any similar
employment, severance or other arrangement or policy of any of the Company or
any of its ERISA Affiliates (whether written or oral) providing for health,
life, vision or dental insurance coverage (including self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits or retirement benefits, fringe benefits, or for profit
sharing, deferred compensation, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits.
(y) Private Offering. Subject to the accuracy of the Purchaser's representations
and warranties set forth in Section 2 hereof, (i) the offer, sale and
issuance of the Warrants, and (ii) the issuance of Common Stock pursuant to
the exercise of the Warrants as contemplated by the Primary Documents, are
exempt from the registration requirements of the Securities Act. The Company
agrees that neither the Company nor anyone acting on its behalf will offer
any of the Warrants or any similar Warrants for issuance or sale, or solicit
any offer to acquire any of the same from anyone so as to render the issuance
and sale of such Warrants subject to the registration requirements of the
Securities Act
(z) Mergers, Acquisitions and Divestitures. Except as set forth in the SEC
filings of the Company, the Company has never acquired any equity interest in
or any major assets of any other Person, or sold the equity interest or any
major asset owned by it in a transaction the terms of which were not based on
arms' length negotiations. None of the officers and directors of the Company
has received any benefit in connection with any of the foregoing transactions
or is under any agreement or understanding with any Person (including
agreements or understandings among themselves) with respect to the receipt of
or entitlement to any such benefit.
(aa) Full Disclosure. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been
disclosed to the Purchaser that could (i) reasonably be expected to have a
material adverse effect upon the condition (financial or otherwise) or the
earnings, business affairs, properties or assets of the Company or (ii)
reasonably be expected to materially and adversely affect the ability of the
Company to perform the obligations set forth in the Primary Documents. The
representations and warranties of the Company set forth in this Agreement do
not contain any untrue statement of a material fact or omit any material fact
necessary to make the statements contained herein, in light of the
circumstances under which they were made, not misleading.
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4. CERTAIN COVENANTS, ACKNOWLEDGMENTS AND RESTRICTIONS
(a) Transfer Restrictions. The Purchaser acknowledges that (i) neither the
Warrants nor the Common Stock issuable upon exercise of the Warrants have
been registered under the Securities Act, and such Warrants may not be
transferred unless (A) subsequently registered thereunder or (B) they are
transferred pursuant to an exemption from such registration, and (ii) any
sale of the Warrants or the Common Stock issuable upon exercise or exchange
thereof (collectively, the "Covered Warrants") made in reliance upon Rule 144
under the Securities Act ("Rule 144") may be made only in accordance with the
terms of said Rule 144. The provisions of Section 4(a) and 4(b) hereof,
together with the rights of the Purchaser under this Agreement and the other
Primary Documents, shall be binding upon any subsequent transferee of the
Common Stock.
(b) Restrictive Legend. The Purchaser acknowledges and agrees that, until such
time as the Covered Warrants shall have been registered under the Securities
Act or the Purchaser demonstrates to the reasonable satisfaction of the
Company and its counsel that such registration shall no longer be required,
such Covered Warrants may be subject to a stop-transfer order placed against
the transfer of such Covered Warrants, and such Covered Warrants shall bear a
restrictive legend in substantially the following form:
THESE WARRANTS (INCLUDING ANY UNDERLYING CAPITAL STOCK) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE WARRANTS UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO
LONGER BE REQUIRED.
(c) Filings. The Company undertakes and agrees that it will make all required
filings in connection with the sale of the Securities to the Purchaser as
required by federal and state laws and regulations, or by any domestic
securities exchange or trading market, and if applicable, the filing of a
notice on Form D (at such time and in such manner as required by the rules
and regulations of the Commission), and to provide copies thereof to the
Purchaser promptly after such filing or filings. With a view to making
available to the holders of the Securities the benefits of Rule 144 and any
other rule or regulation of the Commission that may at any time permit such
holder to sell securities of the Company to the public without registration
or pursuant to a registration on Form S-3 or Form SB-2, the Company shall (a)
at all times make and keep public information available, as those terms are
understood and defined in Rule 144, (b) file on a timely basis with the
Commission all information that the Commission may require under either of
Section 13 or Section 15(d) of the Exchange Act and, so long as it is
required to file such information, take all actions that may be required as a
condition to the availability of Rule 144 (or any successor exemptive rule
hereafter in effect) with respect to the Common Stock; and (d) furnish to any
holder of the Securities forthwith upon request (i) a written statement by
the Company as to its compliance with the reporting requirements of Rule 144,
(ii) a copy of the most recent annual or quarterly report of the Company as
filed with the Commission, and (iii) any other reports and documents that a
holder of the Securities may reasonably request in order to avail itself of
any rule or regulation of the Commission allowing such holder to sell any
such Securities without registration.
11
(d) Reservation of Common Stock. The Company will at all times have authorized
and reserved for the purpose of issuance a sufficient number of shares of
Common Stock to provide for the conversion of the exercise of the Warrants.
(e) Return of Certificates on Conversion. Upon any exercise by any holder of the
Warrants of less than all of the shares of Common Stock into which such
Warrants are exercisable, the Company shall issue and deliver to the holder
thereof, within seven business days of the date of exercise, a new Warrant
exercisable for the total number of shares of Common Stock which the holder
has not yet elected to exercise.
(f) Replacement Certificates. The Warrants will be exchangeable, at the option
of the Purchaser, at any time and from time to time at the office of the
Company, for other Warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Common
Stock as are purchasable under such Warrants. No service charge will be made
for such transfer or exchange.
(g) Financial Statements. At the expense of the Company, the Company's
accountant shall annually prepare for each calendar year, a report of the
Company, including a balance sheet, annual profit and loss statement, and
annual cash flow statement to be furnished to the Purchaser within one
hundred twenty (120) days after the end of each calendar year. In addition
the Company shall cause to be prepared and distributed to the Purchaser for
each calendar quarter during the term of this Agreement a report of the
Company, including a balance sheet, quarterly profit and loss statement, and
quarterly cash flow statement for such calendar quarter to be furnished to
the Purchaser within forty-five (45) days after the end of each calendar
quarter. The Company shall also cause to be prepared and filed all Federal,
state and local income tax returns and information returns, if any, which the
Company is required to file.
5. FEES AND EXPENSES
The Company shall bear its own costs, including attorney's fees,
incurred in the negotiation of this Agreement and consummating of the
transactions contemplated herein and in the corporate proceedings of the Company
in contemplation hereof and thereof. At the date of execution and delivery
hereof, the Company shall reimburse the Purchaser for all of the Purchaser's
reasonable out-of-pocket expenses incurred in connection with the negotiation or
performance of this Agreement, including without limitation, reasonable fees and
disbursements of counsel to the Purchaser.
12
6. SURVIVAL
The agreements, covenants, representations and warranties of the
Company and the Purchaser shall survive the execution and delivery of this
Agreement and the delivery of the Warrants hereunder for a period of two years
from the date hereof, except that:
(a) the Company's representations and warranties regarding Taxes contained in
Section 3(s) of this Agreement shall survive as long as the Company remains
statutorily liable for any obligation referenced in Section 3(s), and
(b) the Company's representations and warranties contained in Section 3(b) shall
survive until the Purchaser and any of its affiliates are no longer holders
of any of the Warrants purchased hereunder.
7. INDEMNIFICATION
(a) The Company, on the one side, and the Purchaser (each in such capacity under
this section, the "Indemnifying Party") agrees to indemnify the other party
and each officer, director, employee, agent, partner, stockholder, member and
affiliate of such other party (collectively, the "Indemnified Parties") for,
and hold each Indemnified Party harmless from and against: (i) any and all
damages, losses, claims, diminution in value and other liabilities of any and
every kind, including, without limitation, judgments and costs of settlement,
and (ii) any and all reasonable out-of-pocket costs and expenses of any and
every kind, including, without limitation, reasonable fees and disbursements
of counsel for such Indemnified Parties (all of which expenses periodically
shall be reimbursed as incurred), in each case, arising out of or suffered or
incurred in connection with any of the following, whether or not involving a
third party claim: (a) any misrepresentation or any breach of any warranty
made by the Indemnifying Party herein or in any of the other Primary
Documents, (b) any breach or non-fulfillment of any covenant or agreement
made by the Indemnifying Party herein or in any of the other Primary
Documents, or (c) any claim relating to or arising out of a violation of
applicable federal or state Warrants laws by the Indemnifying Party in
connection with the sale or issuance of the Warrants by the Indemnifying
Party to the Indemnified Party (collectively, the "Indemnified Liabilities").
To the extent that the foregoing undertaking by the Indemnifying Party may be
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
8. NOTICES
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free transmission
and mailing a copy of such confirmation, postage prepaid by certified mail,
return receipt requested) or three business days following deposit of such
notice with an internationally recognized courier service, with postage prepaid
and addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by five days
advance written notice to each of the other parties hereto.
13
Company: Health Systems Solutions, Inc.
000 Xxxxx Xxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: X. X. Xxxxxxx, President
Telephone: 000-000-0000
Facsimile: 813-282-8907
with a copy to: Stanford Financial Group
0000 Xxxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Purchaser: Stanford Venture Capital Holdings, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Stanford Financial Group
0000 Xxxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
9. GOVERNING LAW; JURISDICTION
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Florida, without regard to its principles of conflict
of laws. Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any party in
the federal courts of Florida or the state courts of the State of Florida,
Miami-Dade County and each of the parties consents to the jurisdiction of such
courts and hereby waives, to the maximum extent permitted by law, any objection,
including any objections based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
14
10. MISCELLANEOUS
(a) Entire Agreement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement, together with the other Primary Documents, including
any certificate, schedule, exhibit or other document delivered pursuant to
their terms, constitutes the entire agreement among the parties hereto with
respect to the subject matters hereof and thereof, and supersedes all prior
agreements and understandings, whether written or oral, among the parties
with respect to such subject matters.
(b) Amendments. This Agreement may not be amended except by an instrument in
writing signed by the party to be charged with enforcement.
(c) Waiver. No waiver of any provision of this Agreement shall be deemed a
waiver of any other provisions or shall a waiver of the performance of a
provision in one or more instances be deemed a waiver of future performance
thereof.
(d) Construction. This Agreement and each of the Primary Documents have been
entered into freely by each of the parties, following consultation with their
respective counsel, and shall be interpreted fairly in accordance with its
respective terms, without any construction in favor of or against either
party.
(e) Binding Effect of Agreement. This Agreement shall inure to the benefit of,
and be binding upon the successors and assigns of each of the parties hereto,
including any transferees of the Warrants.
(f) 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 unenforceability of this Agreement in any other
jurisdiction.
(g) Attorneys' Fees. If any action should arise between the parties hereto to
enforce or interpret the provisions of this Agreement, the prevailing party
in such action shall be reimbursed for all reasonable expenses incurred in
connection with such action, including reasonable attorneys' fees.
(h) Headings. The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of this
Agreement.
(i) Counterparts. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original and all of which, when taken together,
will be deemed to constitute one and the same agreement.
[SIGNATURES ON FOLLOWING PAGE]
15
IN WITNESS WHEREOF, this Agreement has been duly executed by each of
the undersigned as of the date first written above.
HEALTH SYSTEMS SOLUTIONS, INC.
By:
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
STANFORD VENTURE CAPITAL HOLDINGS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
16
EXHIBIT INDEX
EXHIBIT A WARRANT
EXHIBIT B HSS CLOSING CERTIFICATE
EXHIBIT C SVCH CLOSING CERTIFICATE
EXHIBIT B
HEALTH SYSTEMS SOLUTIONS, INC.
A Nevada Corporation
CLOSING CERTIFICATE
The undersigned, X.X. Xxxxxxx, hereby certifies to Stanford Venture
Capital Holdings, Inc., a Delaware Corporation ("SVCH"), that he is the duly
elected and acting President of Health Systems Solutions, Inc., a
Nevada corporation (the "Company"), and hereby further certifies to SVCH as
follows:
All capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms as in the Warrant Purchase Agreement dated
as of July 6, 2004 and entered into by and among the Company and SVCH (the
"Warrant Purchase Agreement"):
1. Representations and Warranties. The representations and warranties
made by the Company in the Warrant Purchase Agreement are true and
correct in all respects on and as of the date hereof, as though
made on and as of such date, except to the extent that any such
representation or warranty expressly relates solely to an earlier
date, in which case such representation or warranty is true and
correct in all respects on and as of such earlier date.
2. Covenants and Agreements. The Company has performed all covenants
and agreements required to be performed pursuant to the Warrant
Purchase Agreement in all respects on and as of the date hereof.
3. Recent Events. Except as disclosed in the Warrant Purchase
Agreement, there has not been any: (a) material adverse change or
any material adverse development in the business, properties,
operations, financial condition, prospects, outstanding securities
or results or operations of the Company and no event has occurred
or no circumstances exist that may result in such material adverse
change; (b) no incurrence of any liability, fixed or contingent by
the Company. The Company has not engaged in any practice, taken
any action, or entered into any transaction, except as
contemplated by the Warrant Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Officers'
Certificate this ___ day of July 2004.
___________________
X.X. Xxxxxxx
President
EXHIBIT C
STANFORD VENTURE CAPITAL HOLDINGS, INC.
A Delaware Corporation
CLOSING CERTIFICATE
The undersigned, ______________, hereby certifies to Health Systems
Solutions, Inc., a Nevada corporation ("HSS"), that he is the duly elected and
acting President of Stanford Venture Capital Holdings, Inc., a Delaware
Corporation (the "Company"), and hereby further certifies to HSS as follows:
All capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms as in the Warrant Purchase Agreement dated
as of July 6, 2004 and entered into by and among the Company and HSS (the
"Warrant Purchase Agreement"):
1. Representations and Warranties. The representations and warranties
made by the Company in the Warrant Purchase Agreement are true and
correct in all respects on and as of the date hereof, as though
made on and as of such date, except to the extent that any such
representation or warranty expressly relates solely to an earlier
date, in which case such representation or warranty is true and
correct in all respects on and as of such earlier date.
2. Covenants and Agreements. The Company has performed all covenants
and agreements required to be performed pursuant to the Warrant
Purchase Agreement in all respects on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Officers'
Certificate this ___ day of July 2004.
_________________
X.X. Xxxxxxx
President
