Exhibit 10(v)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of April 26, 1999, between
STAR MULTI CARE SERVICES, INC., a New York corporation with principal executive
offices located at 33 Xxxx Xxxxxxx Road, Suite 302, Huntington Station, New York
11746 (the "Company"), and the undersigned ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase from Company, and the Company
desires to issue and sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, (i) 571 shares of the Company's Series A 8%
Convertible Preferred Stock, par value $1.00 per share (the "Preferred Shares")
and 50,000 Common Stock Purchase Warrants in the form attached hereto as EXHIBIT
A (the "Warrants") on the Funding Date (as defined in Section VII below):
WHEREAS, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Amendment to the Company's
Certificate of Incorporation in the form attached hereto as EXHIBIT B (the
"Certificate of Amendment"), the Preferred Shares are convertible into shares of
the Company's common stock, par value $0.001 per share (the "Common Stock"); and
WHEREAS, the Warrants, upon the terms and subject to the conditions
therein, will be exercisable to purchase 50,000 shares of Common Stock for a
period of three (3) years from and after the Funding Date.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
(24) PURCHASE AND SALE OF PREFERRED SHARES AND
WARRANTS
(1) TRANSACTION. Subject to the terms and conditions
contained herein, Buyer hereby agrees to purchase
from the Company, and the Company hereby agrees to
issue and sell to the Buyer in a transaction exempt
from the registration and prospectus delivery
requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Preferred Shares
and the Warrants.
(2) PURCHASE PRICE; FORM OF PAYMENT.
(1) The net purchase price for the Preferred Shares and
the Warrants to be purchased by Buyer hereunder shall
be $500,000 (the "Purchase Price"), after deductions
for fees and expenses..
(2) Buyer shall pay the Purchase Price by wire transfer
of immediately available funds to the escrow agent
(the "Escrow Agent") identified in those certain
Escrow Instructions dated as of the date hereof, a
copy of which is
attached hereto as EXHIBIT C (the "Escrow
Instructions"). Simultaneously against receipt by the
Escrow Agent of the Purchase Price, the Company shall
deliver to the Escrow Agent or its designated
depository one or more duly authorized, issued and
executed certificates (in the name of Buyer or, if
the Company has been notified otherwise, in the name
of Buyer's nominee) evidencing the Preferred Shares
and the Warrants which the Buyer is purchasing. By
executing and delivering this Agreement, Buyer and
the Company each hereby agrees to observe the terms
and conditions of the Escrow Instructions, all of
which are incorporated herein by reference as if
fully set forth herein.
(3) METHOD OF PAYMENT. Payment into escrow of
the Purchase Price shall be made by wire
transfer of immediately available funds to:
Chase Manhattan Bank
1211 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
For the Account of: Xxxxxxx, Xxxxxxxxx LLP
Attorney Trust Account
Account# 967-123445
ABA Reference# 000-000-000
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Preferred Shares and the Warrants representing the securities
to be purchased.
(25) BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Buyer represents and warrants to and covenants and agrees with
the Company as follows:
(1) Buyer is purchasing the Preferred Shares, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares") and the shares of Common Stock issuable upon
conversion of the Preferred Shares (the "Conversion Shares"
and, collectively with the Preferred Shares, the Warrants and
the Warrant Shares, the "Securities") for its own account, for
investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in
violation of the Securities Act.
(2) Buyer is (i) an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii)
experienced in making investments of the kind contemplated by
this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to
afford the loss of its investment in the Securities.
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(3) Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the
registration requirements of the Securities Act and equivalent
state securities and "blue sky" laws, and that the Company is
relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption
and the eligibility of Buyer to purchase the Securities;
(4) Buyer has been furnished with or provided access to all
materials relating to the business, financial position and
results of operations of the Company, and all other materials
requested by Buyer to enable it to make an informed investment
decision with respect to the Securities.
(5) Buyer acknowledges that it has been furnished with all press
releases issued by the Company since May 31, 1998 and with
copies of the Company's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1998, and all other reports and
documents heretofore filed by the Company with the Commission
pursuant to the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), since May 31, 1998
(collectively, the "Commission Filings").
(6) Buyer acknowledges that in making its decision to purchase the
Securities it has been given an opportunity to ask questions
of, and to receive answers from, the Company's executive
officers, directors and management personnel concerning the
terms and conditions of the private placement of the
Securities by the Company.
(7) Buyer understands that the Securities have not been approved
or disapproved by the Commission or any state securities
commission and that the foregoing authorities have not
reviewed any documents or instruments in connection with the
offer and sale to it of the Securities and have not confirmed
or determined the adequacy or accuracy of any such documents
or instruments.
(8) This Agreement has been duly and validly authorized, executed
and delivered by Buyer and is a valid and binding agreement of
Buyer enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally.
(9) Neither Buyer nor its affiliates nor any person acting on its
or their behalf has the intention of entering, or will enter
into, at any time prior to the conversion of the Preferred
Stock or exercise of the Warrants, any put option, short
position or other similar instrument or position with respect
to the Common Stock, and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will
use at any time shares of Common Stock acquired pursuant to
this Agreement to settle any put option, short position or
other similar instrument or position that may have been
entered into prior to the execution of this Agreement.
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(26) COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
(1) CAPITALIZATION.
(1) The authorized capital stock of the Company consists
of: (i) 10,000,000 shares of Common Stock, of which
5,246,516 shares are issued and outstanding and
137,500 are held in treasury on the date hereof; and
(ii) 5,000,000 shares of "blank check" preferred
stock, of which no shares are issued and outstanding
on the date hereof. All of the issued and outstanding
shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable.
As of the date hereof, the Company has outstanding
529,887 stock options warrants to purchase shares of
Common Stock. The Conversion Shares and Warrant
Shares have been duly and validly authorized and
reserved for issuance by the Company, and when issued
by the Company upon conversion of or in lieu of
accrued dividends on the Preferred Shares, or on
exercise of the Warrants, will be duly and validly
issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive,
subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion
Shares and Warrant Shares) that have been issued or
granted to any person, except as disclosed on
Schedule III.A.1. hereto or otherwise previously
disclosed in writing to Buyer.
(2) Except as disclosed on Schedule III.A.2. hereto, the
Company does not own or control, directly or
indirectly, any interest in any other corporation,
partnership, limited liability company,
unincorporated business organization, association,
trust or other business entity.
(2) ORGANIZATION; REPORTING COMPANY STATUS.
(1) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of New York and is duly qualified as a foreign
corporation in all jurisdictions in which the failure
to so qualify would have a material adverse effect on
the business, properties, prospects, condition
(financial or otherwise) or results of operations of
the Company or on the consummation of any of the
transactions contemplated by this Agreement (a
"Material Adverse Effect").
(2) The Company has registered the Common Stock pursuant
to Section 12(g) of the Exchange Act and has timely
filed with the Commission all reports and information
required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as
applicable, of the Exchange Act for the 12-month
period immediately preceding the date hereof. The
Common Stock is listed and traded on The NASDAQ Stock
Market, Inc. national market system ("NMS") and the
Company has not received any
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notice regarding, and to its knowledge there is no
threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
(3) AUTHORIZED SHARES. The Company has duly and
validly authorized and reserved for issuance
shares of Common Stock sufficient in number
for the conversion, of the Preferred Shares
and the exercise of the Warrants. The
Company understands and acknowledges the
potentially dilutive effect to the Common
Stock of the issuance of the Preferred
Shares and Warrant Shares upon conversion of
the Preferred Shares and exercise of the
Warrants. The Company further acknowledges
that its obligation to issue Conversion
Shares upon conversion of the Preferred
Shares and Warrant Shares upon exercise of
the Warrants in accordance with this
Agreement, the Certificate of Amendment and
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.
(4) AUTHORITY; VALIDITY AND ENFORCEABILITY. The
Company has the requisite corporate power
and authority to file and perform its
obligations under the Certificate of
Amendment and to enter into the Documents
(as hereinafter defined), and to perform all
of its obligations hereunder and thereunder
(including the issuance, sale and delivery
to Buyer of the Securities). The execution,
delivery and performance by the Company of
the Documents, and the consummation by the
Company of the transactions contemplated
hereby and thereby (including, without
limitation, the filing of the Certificate of
Amendment with the New York Secretary of
State's office, the issuance of the
Preferred Shares, the Warrants and the
issuance and reservation for issuance of the
Conversion Shares and Warrant Shares), has
been duly authorized by all necessary
corporate action on the part of the Company.
Each of the Documents (as defined below) has
been duly validly executed and delivered by
the Company and the Certificate of Amendment
has been duly filed with the New York
Secretary of State's office by the Company,
and each instrument constitutes a valid and
binding obligation of the Company
enforceable against it in accordance with
its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws
affecting creditors' rights and remedies
generally. The Securities have been duly and
validly authorized for issuance by the
Company and, when executed and delivered by
the Company, will be valid and binding
obligations of the Company enforceable
against it in accordance with their terms,
subject to applicable bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws
affecting creditors' rights and remedies
generally. For purposes of this Agreement,
the term "Documents" means (i) this
Agreement; (ii) the Registration Rights
Agreement of even date herewith between the
Company and
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Buyer, a copy of which is annexed hereto as
EXHIBIT D (the "Registration Rights
Agreement"); (iii) the Warrants; (iv) the
Certificate of Amendment; and (v) the Escrow
Instructions.
(5) AUTHORIZATION OF THE SECURITIES. The
authorization, issuance, sale and delivery
of the Preferred Shares and Warrants has
been duly authorized by all requisite
corporate action on the part of the Company.
As of the Funding Date, the Preferred Shares
and the Warrants, and the Conversion Shares
and the Warrant Shares upon their issuance
in accordance with the Certificate of
Amendment and the Warrants, respectively,
will be validly issued and outstanding,
fully paid and nonassessable, and not
subject to any preemptive rights, rights of
first refusal or other similar rights.
(6) NON-CONTRAVENTION. The execution and
delivery by the Company of the Documents,
the issuance of the Securities, and the
consummation by the Company of the other
transactions contemplated hereby and
thereby, including, without limitation, the
filing of the Certificate of Amendment with
the New York Secretary of State's office, do
not and will not conflict with or result in
a breach by the Company of any of the terms
or provisions of, or constitute a default
(or an event which, with notice, lapse of
time or both, would constitute a default)
under (i) the certificate of incorporation
or by-laws of the Company or (ii) any
indenture, mortgage, deed of trust or other
material agreement or instrument to which
the Company is a party or by which its
properties or assets are bound, or any law,
rule, regulation, decree, judgment or order
of any court or public or governmental
authority having jurisdiction over the
Company or any of the Company's properties
or assets.
(7) APPROVALS. No authorization, approval or
consent of any third party or entity,
including, without limitation, any court or
public or governmental authority is required
to be obtained by the Company for the
issuance and sale of the Securities to Buyer
as contemplated by this Agreement, except
such authorizations, approvals and consents
that have been obtained by the Company prior
to the date hereof.
(8) COMMISSION FILINGS. None of the Commission
Filings contained at the time they were
filed any untrue statement of a material
fact or omitted to state any material fact
required to be stated therein or necessary
to make the statements made therein, in
light of the circumstances under which they
were made, not misleading.
(9) ABSENCE OF CERTAIN CHANGES. Since the
Balance Sheet Date (as defined in Section
III.M.), there has not occurred any change,
event or development in the business,
financial condition, prospects or
results of operations of the Company, and
there has not existed any
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condition having or reasonably likely to
have, a Material Adverse Effect.
(10) FULL DISCLOSURE. There is no fact known to
the Company (other than general economic or
industry conditions known to the public
generally) that has not been fully disclosed
in writing to the Buyer that (i) reasonably
could be expected to have a Material Adverse
Effect or (ii) reasonably could be expected
to materially and adversely affect the
ability of the Company to perform its
obligations pursuant to the Documents.
(11) ABSENCE OF LITIGATION. There is no action,
suit, claim, proceeding, inquiry or
investigation pending or, to the Company's
knowledge, threatened, by or before any
court or public or governmental authority
which, if determined adversely to the
Company, would have a Material Adverse
Effect.
(12) ABSENCE OF EVENTS OF DEFAULT. No "Event of
Default" or "Default" (as each such term is
defined in any agreement or instrument to
which the Company is a party) and no event
which, with notice, lapse of time or both,
would constitute an Event of Default (as so
defined) or Default (as so defined), has
occurred and is continuing, which could have
a Material Adverse Effect.
(13) FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES. The Company has delivered to
Buyer true and complete copies of its
audited balance sheet as at May 31, 1998,
and the related audited statements of
operations and cash flows for the fiscal
year ended May 31, 1998, including the
related notes and schedules thereto
(collectively, the "Financial Statements"),
and all management letters, if any, from the
Company's independent auditors relating to
the dates and periods covered by the
Financial Statements. Each of the Financial
Statements is complete and correct in all
respects, has been prepared in accordance
with United States General Accepted
Accounting Principles ("GAAP") (subject, in
the case of the interim Financial
Statements, to normal year end adjustments
and the absence of footnotes) and in
conformity with the practices consistently
applied by the Company without modification
of the accounting principles used in the
preparation thereof, and fairly presents the
financial position, results of operations
and cash flows of the Company as at the
dates and for the periods indicated. For
purposes hereof, the balance sheet of the
Company as at November 30, 1998, as filed in
connection with the Company's Quarterly
Report on Form 10-Q on January 19, 1999, is
hereinafter referred to as the "Balance
Sheet" and November 30, 1998, is hereinafter
referred to as the "Balance Sheet Date". The
Company has no indebtedness, obligations or
liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and
whether due or to become due) that would
have been required to be
7
reflected in, reserved against or otherwise
described in the Balance Sheet or in the
notes thereto in accordance with GAAP, which
was not fully reflected in, reserved against
or otherwise described in the Balance Sheet
or the notes thereto or was not incurred in
the ordinary course of business consistent
with the Company's past practices since the
Balance Sheet Date.
(14) COMPLIANCE WITH LAWS; PERMITS. The Company
is in compliance with all laws, rules,
regulations, codes, ordinances and statutes
(collectively "Laws") applicable to it or to
the conduct of its business, except for such
noncompliance which would not have a
Material Adverse Effect. The Company
possesses all permits, approvals,
authorizations, licenses, certificates and
consents from all public and governmental
authorities which are necessary to conduct
its business, except for those the absence
of which would not have a Material Adverse
Effect.
(15) RELATED PARTY TRANSACTIONS. Except as set
forth on Schedule III.O. hereto, neither the
Company nor any of its officers, directors
or "Affiliates" (as such term is defined in
Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding
any indebtedness or other similar
obligations to the Company. Except as set
forth on Schedule III.O. hereto, neither the
Company nor any of its officers, directors
or Affiliates (i) owns any direct or
indirect interest constituting more than a
one percent equity (or similar profit
participation) interest in, or controls or
is a director, officer, partner, member or
employee of, or consultant to or lender to
or borrower from, or has the right to
participate in the profits of, any person or
entity which is (x) a competitor, supplier,
customer, landlord, tenant, creditor or
debtor of the Company, (y) engaged in a
business related to the business of the
Company , or (z) a participant in any
transaction to which the Company is a party
(other than in the ordinary course of the
Company's business) or (ii) is a party to
any contract, agreement, commitment or other
arrangement with the Company.
(16) INSURANCE. The Company maintains insurance
coverage with financially sound and
reputable insurers and such insurance
coverage is adequate, consistent with
industry standards and the Company's
historical claims experience, and includes
coverage for such things as property and
casualty, general liability, workers'
compensation, personal injury and other
similar types of insurance. The Company has
not received notice from, and has no
knowledge of any threat by, any insurer
(that has issued any insurance policy to the
Company) that such insurer intends to deny
coverage under or cancel, discontinue or not
renew any insurance policy presently in
force.
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(17) SECURITIES LAW MATTERS. Based, in part, upon
the representations and warranties of Buyer
set forth in Section II hereof, the offer
and sale by the Company of the Securities is
exempt from (i) the registration and
prospectus delivery requirements of the
Securities Act and the rules and regulations
of the Commission thereunder and (ii) the
registration and/or qualification provisions
of all applicable state securities and "blue
sky" laws. Other than pursuant to an
effective registration statement under the
Securities Act, the Company has not issued,
offered or sold the Preferred Shares or any
shares of Common Stock (including for this
purpose any securities of the same or a
similar class as the Preferred Shares or
Common Stock, or any securities convertible
into or exchangeable or exercisable for the
Preferred Shares or Common Stock or any such
other securities) within the one-year
immediately preceding the date hereof,
except as disclosed on Schedule III.Q.
hereto, and the Company shall not directly
or indirectly take, and shall not permit any
of its directors, officers or Affiliates
directly or indirectly to take, any action
(including, without limitation, any offering
or sale to any person or entity of the
Preferred Shares or shares of Common Stock
or any of the other Securities), so as to
make unavailable the exemption from
Securities Act registration being relied
upon by the Company for the offer and sale
to Buyer of the Securities as contemplated
by this Agreement. No form of general
solicitation or advertising has been used or
authorized by the Company or any of its
officers, directors or Affiliates in
connection with the offer or sale of the
Securities as contemplated by this Agreement
or any other agreement to which the Company
is a party.
(18) ENVIRONMENTAL MATTERS.
(1) The operations of the Company are in compliance with
all applicable Environmental Laws (as defined below)
and all permits issued pursuant to Environmental Laws
or otherwise;
(2) the Company has obtained or applied for all permits
required under all applicable Environmental Laws
necessary to operate its business;
(3) the Company is not the subject of any outstanding
written order of or agreement with any governmental
authority or person respecting (i) Environmental
Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of Hazardous Materials;
(4) the Company has not received, since the Balance Sheet
Date, any written communication alleging that it may
be in violation of any Environmental Law or any
permit issued pursuant to any Environmental Law, or
may have any liability under any Environmental Law;
9
(5) the Company does not have any current contingent
liability in connection with any Release of any
Hazardous Materials into the indoor or outdoor
environment (whether on-site or off-site);
(6) except as set forth on Schedule III.R.6 hereto, to
the Company's knowledge, there are no investigations
of the business, operations, or currently or
previously owned, operated or leased property of the
Company pending or threatened which could lead to the
imposition of any liability pursuant to any
Environmental Law;
(7) there is not located at any of the properties of the
Company any (A) underground storage tanks, (B)
asbestos-containing material or (C) equipment
containing polychlorinated biphenyls; and,
(8) the Company has provided to Buyer all environmentally
related audits, studies, reports, analyses, and
results of investigations that have been performed
with respect to the currently or previously owned,
leased or operated properties of the Company.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste
which is regulated by the United States, Canada or any of its provinces, or any
state or local governmental authority including, without limitation, petroleum
and its by-products, asbestos, and any material or substance which is defined as
a "hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or toxic substance" under any provision of any Environmental Law.
"Release" means any release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, or
leaching into the indoor or outdoor environment, or into or out of any property.
"Remedial Action" means all actions to (x) clean up, remove,
treat or in any other way address any Hazardous Material; (y) prevent the
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; or (z)
perform pre-remedial studies and investigations or post-remedial monitoring and
care.
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(19) LABOR MATTERS. The Company is not party to any labor
or collective bargaining agreement and there are no
labor or collective bargaining agreements which
pertain to employees of the Company. No employees of
the Company are represented by any labor organization
and none of such employees has made a pending demand
for recognition, and there are no representation
proceedings or petitions seeking a representation
proceeding presently pending or, to the Company's
knowledge, threatened to be brought or filed, with
the National Labor Relations Board or other labor
relations tribunal. There is no organizing activity
involving the Company pending or to the Company's
knowledge, threatened by any labor organization or
group of employees of the Company. There are no (i)
strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other
labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company.
There are no unfair labor practice charges,
grievances or complaints pending or, to the knowledge
of the Company, threatened by or on behalf of any
employee or group of employees of the Company.
(20) ERISA MATTERS. The Company and its ERISA
Affiliates (as defined below) are in
compliance in all material respects with all
provisions of ERISA (as defined below)
applicable to it. No Reportable Event (as
defined below) has occurred, been waived or
exists as to which the Company or any ERISA
Affiliate was required to file a report with
the Pension Benefits Guaranty Corporation,
and the present value of all liabilities
under all Plans (based on those assumptions
used to fund such Plans) did not, as of the
most recent annual valuation date applicable
thereto, exceed the value of the assets of
all such Plans (as defined below) in the
aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal
Liability that could result in a Material
Adverse Effect. None of the Company or ERISA
Affiliates has received any notification
that any Multiemployer Plan is in
reorganization or has been terminated within
the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to
be in reorganization or termination where
such reorganization or termination has
resulted or could reasonably be expected to
result in increases to the contributions
required to be made to such Plan or
otherwise.
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under ss. 414
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
11
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Internal Revenue Code) is making or accruing an obligation to
make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer
Plan) subject to the provision of Title IV of ERISA or Section 412 of the
Internal Revenue Code that is maintained for employees of the Company or any
ERISA Affiliate.
"Reportable Event" means any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
(21) TAX MATTERS.
(1) The Company has filed all Tax Returns which it is
required to file under applicable Laws, except for
such Tax Returns in respect of which the failure to
so file does not and could not have a Material
Adverse Effect; all such Tax Returns are true and
accurate in all material respects and have been
prepared in compliance with all applicable Laws; the
Company has paid all Taxes (as defined below) due and
owing by it (whether or not such Taxes are required
to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all
Taxes which it is required to withhold from amounts
paid or owing to any employee, stockholder, creditor
or other third parties; and since the Balance Sheet
Date, the charges, accruals and reserves for Taxes
with respect to the Company (including any provisions
for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liabilities
of the Company if its current tax year were treated
as ending on the date hereof.
(2) No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax
returns that such corporation is or may be subject to
taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative
or judicial proceedings pending or being conducted
with respect to the Company; no information related
to Tax matters has been requested by any foreign,
federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an
intent to open an audit or other review has been
received by the Company from any foreign, federal,
state or local taxing authority. There are no
12
material unresolved questions or claims concerning
the Company's Tax liability. The Company (A) has not
executed or entered into a closing agreement pursuant
to Section 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar
provision of state, local or foreign law; or (B) has
not agreed to or is required to make any adjustments
pursuant to Section 481 (a) of the Internal Revenue
Code or any similar provision of state, local or
foreign law by reason of a change in accounting
method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting
method, or has any application pending with any
taxing authority requesting permission for any
changes in accounting methods that relate to the
business or operations of the Company. The Company
has not been a United States real property holding
corporation within the meaning of Section 897(c)(2)
of the Internal Revenue Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
(3) The Company has not made an election under Section
341(f) of the Internal Revenue Code. The Company is
not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg.
Section 1.1502-6 (or comparable provisions of state,
local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax
sharing agreement. The Company has not made any
payments, is obligated to make payments or is a party
to an agreement that could obligate it to make any
payments that would not be deductible under Section
28OG of the Internal Revenue Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
(22) PROPERTY. The Company has good and
marketable title to all real and personal
property owned by it, free and clear of all
liens, encumbrances and defects except such
as are described on Schedule III.V. hereto
or such as do not materially affect the
value of such property and do not interfere
with the use made and proposed to be made of
such property by the Company; and any real
property and buildings held under lease by
the Company are held by it under valid,
subsisting and enforceable leases with such
exceptions as are not
13
material and do not interfere with the use
made and proposed to be made of such
property and buildings by the Company.
(23) INTELLECTUAL PROPERTY. The Company owns or
possesses adequate and enforceable rights to
use all patents, patent applications,
trademarks, trademark applications, trade
names, service marks, copyrights, copyright
applications, licenses, know-how (including
trade secrets and other unpatented and/or
unpatentable proprietary or confidential
information, systems or procedures) and
other similar rights and proprietary
knowledge (collectively, "Intangibles")
necessary for the conduct of its business as
now being conducted including, but not
limited to, those described on Schedule
III.W. hereto. The Company is not infringing
upon or in conflict with any right of any
other person with respect to any
Intangibles. Except as disclosed on Schedule
III.W. hereto, no claims have been asserted
by any person to the ownership or use of any
Intangibles and the Company has no knowledge
of any basis for such claim.
(24) INTERNAL CONTROLS AND PROCEDURES. The
Company maintains accurate books and records
and internal accounting controls which
provide reasonable assurance that (i) all
transactions to which the Company is a party
or by which its properties are bound are
executed with management's authorization;
(ii) the reported accountability of the
Company's assets is compared with existing
assets at regular intervals; (iii) access to
the Company's assets is permitted only in
accordance with management's authorization;
and (iv) all transactions to which the
Company is a party or by which its
properties are bound are recorded as
necessary to permit preparation of the
financial statements of the Company in
accordance with U.S. generally accepted
accounting principles consistently applied.
(25) PAYMENTS AND CONTRIBUTIONS. Neither the
Company nor any of its directors, officers
or, to its knowledge, other employees has
(i) used any Company funds for any unlawful
contribution, endorsement, gift,
entertainment or other unlawful expense
relating to 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 with
respect to Company matters.
(26) NO MISREPRESENTATION. No representation or
warranty of the Company contained in this
Agreement, any schedule, annex or exhibit
hereto or any agreement, instrument or
certificate furnished by the Company to
Buyer pursuant to this Agreement, contains
any untrue statement of a material fact or
omits to state a material fact
14
required to be stated therein or necessary
to make the statements therein, not
misleading.
(27) CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(1) RESTRICTIVE LEGEND. Buyer acknowledges and
agrees that, upon issuance pursuant to this
Agreement, the Preferred Shares and the
Warrants (and any shares of Common Stock
issued in conversion of the Preferred Shares
or exercise of the Warrants) shall have
endorsed thereon a legend in substantially
the following form (and a stop-transfer
order may be placed against transfer of the
Preferred Shares and the Conversion Shares
until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
(2) FILINGS. The Company shall make all
necessary Commission Filings and "blue sky"
filings required to be made by the Company
in connection with the sale of the
Securities to the Buyer as required by all
applicable Laws, and shall provide a copy
thereof to the Buyer promptly after such
filing.
(3) REPORTING STATUS. So long as the Buyer
beneficially owns any of the Securities, the
Company shall timely file all reports
required to be filed by it with the
Commission pursuant to Section 13 or 15(d)
of the Exchange Act.
(4) USE OF PROCEEDS. The Company shall use the
net proceeds from the sale of the Securities
(excluding amounts paid by the Company for
legal fees and finder's fees in connection
with such sale) solely for general corporate
and working capital purposes.
(5) LISTING. Except to the extent the Company
lists its Common Stock on The New York Stock
Exchange, the Company shall use its best
efforts to maintain its listing of the
Common Stock on the OTC/BBS.
15
(6) RESERVED CONVERSION SHARES. The Company at
all times from and after the date hereof
shall have a sufficient number of shares of
Common Stock duly and validly authorized and
reserved for issuance to satisfy the
conversion, in full, of the Preferred Shares
(assuming for purposes of this Section
IV.F., a Conversion Price (as defined in the
Certificate of Amendment of $0.95) and upon
the exercise of the Warrants. In the event
the Current Market Price (as defined in the
Certificate of Amendment) declines to $0.50,
the Company shall, within 10 days of the
occurrence of such event, authorize and
reserve for issuance such additional shares
of Common Stock sufficient in number for the
conversion, in full, of the Preferred
Shares, assuming for purposes of this
Section IV.F. a Conversion Price (as defined
in the Certificate of Amendment of $0.35 per
share.
[ (7) RIGHT OF FIRST REFUSAL. If the Company
should propose (the "Proposal") to issue
Common Stock or securities convertible into
Common Stock at a price less than the
Current Market Price (as defined in the
Certificate of Amendment), or debt at less
than par value or having an effective annual
interest rate in excess of 12% (each a
"Right of First Refusal Security" and
collectively, the "Right of First Refusal
Securities"), in each case on the date of
issuance during the period ending two years
after the Closing Date (the "Right of First
Refusal Period"), the Company shall be
obligated to offer the Buyer on the terms
set forth in the Proposal (the "Offer") and
the Buyer shall have the right, but not the
obligation, to accept such Offer on such
terms. If during the Right of First Refusal
Period, the Company provides written notice
to the Buyer that it proposes to issue any
Right of First Refusal Securities on the
terms set forth in the Proposal, then the
Buyer shall have ten (10) business days to
accept or reject such offer in writing. If
the Company fails to: (i) issue a Proposal
during the Right of First Refusal Period,
(ii) offer the Buyer the opportunity to
complete the transaction as set forth in the
Proposal, or (iii) enter into an agreement
with the Buyer, at such terms after the
Buyer has accepted the Offer, then the
Company shall pay to the Buyer, as
liquidated damages, an amount in total equal
to ten percent (10%) of the amount paid to
the Company for the Right of First Refusal
Securities. The foregoing Right of First
Refusal is and shall be senior in right to
any other right of first refusal issued by
the Company to any other Person (as defined
in the Certificate of Amendment).
Notwithstanding the foregoing, the Buyer
shall have no rights under this Section
IV.G. in respect of Common Stock or any
other securities of the Company issuable (i)
upon the exercise or conversion of options,
warrants or other rights to purchase
securities of the Company outstanding as of
the date hereof or (ii) to officers,
directors or employees of the Company.]
16
(28) TRANSFER AGENT INSTRUCTIONS.
(1) The Company undertakes and agrees that no instruction other
than the instructions referred to in this Section V and
customary stop transfer instructions prior to the registration
and sale of the Common Stock pursuant to an effective
Securities Act registration statement will be given to its
transfer agent for the Common Stock and that the Common Stock
issuable upon conversion of the Preferred Shares and exercise
of the Warrants otherwise shall be freely transferable on the
books and records of the Company as and to the extent provided
in this Agreement, the Registration Rights Agreement and
applicable law. Nothing contained in this Section V.A. shall
affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common
Stock. If, at any time, Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company and
its counsel that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that
the removal of restrictive legends is permitted under
applicable law, the Company shall permit the transfer of such
Common Stock and, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock
without any restrictive legends endorsed thereon.
(2) The Company shall permit Buyer to exercise its right to
convert the Preferred Shares by telecopying an executed and
completed Notice of Conversion to the Company. Each date on
which a Notice of Conversion is telecopied to and received by
the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company shall transmit the
certificates evidencing the shares of Common Stock issuable
upon conversion of any Preferred Shares (together with
certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic
transfer or otherwise, within five business days after receipt
by the Company of the Notice of Conversion (the "Delivery
Date"). Within 30 days after Buyer delivers the Notice of
Conversion to the Company, Buyer shall deliver to the Company
the Preferred Shares being converted.
(3) The Company shall permit Buyer to exercise its right to
purchase shares of Common Stock pursuant to exercise of the
Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of
Common Stock issuable upon any exercise of Warrants is
referred to herein as the "Warrant Delivery Date."
(4) The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on
the Preferred Shares, upon the conversion of the Preferred
Shares or exercise of the Warrants beyond the applicable
Dividend Payment Due Date (as defined in the Certificate
of Amendment), Delivery Date or Warrant Delivery Date
could result in economic loss to Buyer. As compensation
to Buyer for such loss (and not as a penalty), the
Company agrees to pay to Buyer for late issuance of
Common Stock issuable in lieu of cash dividends on the
Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with
the following schedule (where "No. Business Days" is
defined as the number of business days beyond five (5)
days from the Dividend
17
Payment Due Date (as that term is defined in the Certificate
of Amendment), the Delivery Date on the Warrant Delivery Date,
as applicable):
Compensation For Each 10
Shares of Preferred Shares Not
Converted Timely or 500
Shares of Common Stock
Issuable In Payment of
No. Business Days Dividends Not Issued Timely
----------------- ---------------------------
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
(29) DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company to the Escrow
Agent pursuant to Section I.B. hereof on a "delivery-against-payment basis" at
the closing of the transactions contemplated hereby.
18
(30) FUNDING DATE.
The date and time of the issuance and sale of the Preferred
Shares and the Warrants (the "Funding Date") shall be the date hereof or such
other date as shall be mutually agreed upon in writing. The issuance and sale of
the Preferred Shares and the Warrants shall occur on the Funding Date, at the
offices of the Escrow Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent shall not be authorized to release to the Company the
Purchase Price and to Buyer the certificate(s) evidencing the Preferred Shares
and the Warrants unless the conditions set forth in VIII.C. and IX.G hereof have
been satisfied.
(31) CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to sell
the Securities on the Funding Date to Buyer pursuant to this Agreement is
conditioned upon:
(1) Delivery by Buyer to the Escrow Agent of the Purchase Price
on the Funding Date.
(2) The accuracy in all material respects on the Funding Date of
the representations and warranties of Buyer contained in this
Agreement as if made on the Funding Date (except for
representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the
performance by Buyer in all material respects on or before the
Funding Date of all covenants and agreements of Buyer required
to be performed by it pursuant to this Agreement on or before
the Funding Date;
(3) There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any
of the transactions contemplated by this Agreement.
(32) CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to purchase
the Securities on the Funding Date pursuant to this Agreement is conditioned
upon:
(1) Delivery by the Company to the Escrow Agent on or before the
Funding Date of one or more certificates evidencing the
Securities;
(2) The accuracy in all respects on the Funding Dates of the
representations and warranties of the Company contained in
this Agreement as if made on the Funding Date (except
for representations and warranties which, by their
express terms, speak as of and relate to a specified
date, in which case such accuracy shall be measured as
of such specified date) and the performance by the
Company in all respects on or before the Funding Date of
all covenants and agreements of the Company required to
be performed by it pursuant to this Agreement on or
before the Funding Date;
19
(3) Buyer having received an opinion of counsel for the Company,
dated the Funding Date, in form, scope and substance
satisfactory to the Buyer.
(4) There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common
Stock on the NMS, (ii) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the
United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity
directly or indirectly involving the United States or any of
its territories, protectorates or possessions, or (iv) in the
case of the foregoing existing at the date of this Agreement,
a material acceleration or worsening thereof.
(5) There not having occurred any event or development, and there
being in existence no condition, having or which reasonably
and foreseeably could have a Material Adverse Effect.
(6) The Company shall have delivered to Buyer (as provided in the
Escrow Instructions) reimbursement of Buyer's accountable or
unaccountable out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this
Agreement.
(7) There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any
of the transactions contemplated by this Agreement.
(33) TERMINATION.
(1) TERMINATION BY MUTUAL WRITTEN CONSENT. This
Agreement may be terminated and the
transactions contemplated hereby may be
abandoned, for any reason and at any time
prior to the Funding Date, by the mutual
written consent of the Company and Buyer.
(2) TERMINATION BY THE COMPANY OR BUYER. This
Agreement may be terminated and the
transactions contemplated hereby may be
abandoned by action of the Company or Buyer
if (i) the Funding Date shall not have
occurred at or prior to 5:00 p.m., New York
City time, on April 21, 1999; provided,
however, that the right to terminate this
Agreement pursuant to this Section X.B.(i)
shall not be available to any party whose
failure to fulfill any of its obligations
under this Agreement has been the cause of
or resulted in the failure of the Funding
Date to occur at or before such time and
date or (ii) any court or public or
governmental authority shall have issued an
order, ruling, judgment or writ, or there
shall be in effect any Law, restraining,
enjoining or otherwise prohibiting the
consummation of any of the transactions
contemplated by this Agreement.
(3) TERMINATION BY BUYER. This Agreement may be
terminated and the transactions contemplated
hereby may be abandoned by
20
Buyer at any time prior to the Funding Date,
if (i) the Company shall have failed to
comply with any of its covenants or
agreements contained in this Agreement, (ii)
there shall have been a breach by the
Company with respect to any representation
or warranty made by it in this Agreement, or
(iii) there shall have occurred any event or
development, or there shall be in existence
any condition, having or reasonably and
foreseeably likely to have a Material
Adverse Effect.
(4) TERMINATION BY THE COMPANY. This Agreement
may be terminated and the transactions
contemplated hereby may be abandoned by the
Company at any time prior to the Funding
Date, if (i) Buyer shall have failed to
comply with any of its covenants or
agreements contained in this Agreement or
(ii) there shall have been a breach by Buyer
with respect to any representation or
warranty made by it in this Agreement.
(34) SURVIVAL; INDEMNIFICATION.
(1) The representations, warranties and covenants made by each of
the Company and Buyer in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument,
agreement and certificate entered into and delivered by them
pursuant to this Agreement, shall survive the Funding Date and
the consummation of the transactions contemplated hereby. In
the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom
such representations, warranties or covenants have been made
shall have all rights and remedies for such breach or
violation available to it under the provisions of this
Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such
party on or prior to the Funding Date.
(2) The Company hereby agrees to indemnify and hold harmless the
Buyer, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Buyer
Indemnitees"), from and against any and all losses, claims,
damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer
Indemnitees for all out-of-pocket expenses (including the fees
and expenses of legal counsel), in each case promptly as
incurred by the Buyer Indemnitees and to the extent arising
out of or in connection with:
(1) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties
contained in this Agreement or the other Documents,
or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to
this Agreement or the other Documents; or
(2) any failure by the Company to perform any of its
covenants, agreements, undertakings or obligations
set forth in this Agreement or the other Documents,
or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to
this Agreement or the other Documents.
21
(3) Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Losses, and agrees
to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel),
in each case promptly as incurred by the Company Indemnitees
and to the extent arising out of or in connection with:
(1) any misrepresentation, omission of fact, or breach of
any of Buyer's representations or warranties
contained in this Agreement or the other Documents,
or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate
entered into or delivered by Buyer pursuant to this
Agreement or the other Documents; or
(2) any failure by Buyer to perform in any material
respect any of its covenants, agreements,
undertakings or obligations set forth in this
Agreement or the other Documents or any instrument,
certificate or agreement entered into or delivered by
Buyer pursuant to this Agreement or the other
Documents.
(4) Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified
Party") of written notice of any investigation, claim,
proceeding or other action in respect of which indemnification
is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification
pursuant to this Section XI is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so
notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially
prejudiced and forfeits substantive rights and defenses by
reason of such failure. In connection with any Claim as to
which both the Indemnifying Party and the Indemnified Party
are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of
the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate
legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party
and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the
Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by
legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense
of such Claim, or if there may be legal defenses available to
the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party, or (z) the
Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses
(x), (y) or (z) above, the fees, costs and expenses of such
legal
22
counsel shall be borne exclusively by the Indemnified
Party. Except as provided above, the Indemnifying Party shall
not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with
appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment
that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such
Claim or judgment.
(5) In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly
shall deliver notice of such claim to the Indemnifying Party.
If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party
and the Indemnifying Party or by binding arbitration conducted
in accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by
any arbitrators may be entered in any court having competent
jurisdiction thereof.
(35) GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. if any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(36) NOTICES.
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
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(1) if to the Company, to:
STAR MULTI CARE SERVICES, INC.
33 Xxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx,
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxx, PC
0 Xxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(2) if to the Buyer, to
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx 0X
Xxxxxxxxx, Xxxxxx
Attention: Xxx Xxxxxxxx
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(3) if to the Escrow Agent, to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The Company, the Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
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(37) CONFIDENTIALITY.
Each of the Company and Buyer agrees to keep confidential and not
to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 10 of Rule
601 of Regulation S-K under the Securities Act and the Exchange Act).
(38) ASSIGNMENT.
This Agreement shall not be assignable by either of the parties
hereto without the prior written consent of the other party, and any attempted
assignment contrary to the provisions hereby shall be null and void; provided,
however, that Buyer may assign its rights and obligations hereunder, in whole or
in part, to any affiliate of Buyer who furnishes to the Company the
representations and warranties set forth in Section II hereof and otherwise
agrees to be bound by the terms of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first written above.
THE COMPANY:
STAR MULTI CARE SERVICES, INC.
By: s/Xxxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: Chief Executive Officer
BUYER:
THE SHAAR FUND LTD.
By: INTERCARRIBBEAN SERVICES, INC.
By:s/Xxxxxx Xxxxxxxx
Name:
Title:
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