EXHIBIT 10.2
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
XXXXXX HEALTHCARE, INC.
AND
[SEE ATTACHED SCHEDULE I]
Dated as of November 20, 2000
PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 20th day of
November, 2000 (this "AGREEMENT"), by and between XXXXXX HEALTHCARE, INC., a
corporation organized and existing under the laws of the State of Texas (the
"COMPANY"), and each entity named on a signature page hereto (each, an
"Investor") (each agreement with an Investor being deemed a separate and
independent agreement between the Company and such Investor, except that each
Investor acknowledges and consents to the rights granted to each other Investor
under such agreement and the Transaction Agreements, as defined below, referred
to therein).
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to Seven
Million Five Hundred Thousand Dollars ($7,500,000) of the Convertible Preferred
Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933 (the "SECURITIES
ACT"), and Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in Convertible Preferred Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings specified or indicated (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
"AGREEMENT" shall have the meaning specified in the preamble hereof.
"BID PRICE" shall mean the closing bid price of the Common Stock on
the Principal Market.
"BLACKOUT NOTICE" shall have the meaning specified in the
Registration Rights Agreement.
"BLACKOUT SHARES" shall have the meaning specified in
Section 2.6
"BY-LAWS" shall have the meaning specified in Section 4.8.
"ARTICLES" shall have the meaning specified in Section 4.8.
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"CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Rights of Series F Convertible Preferred Stock.
"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).
"CLOSING" shall mean one of the closings of a purchase and sale of
shares of Convertible Preferred Stock pursuant to Section 2.3.
"CLOSING BID PRICE" shall mean the closing bid price of the Common
Stock as reported by Bloomberg, LP.
"CLOSING DATE" shall mean, with respect to a Closing, the FIRST
(1ST) Tuesday that is a Trading Day after a Put Date related to such Closing, or
such earlier date as the Company and Investor shall agree, provided all
conditions to such Closing have been satisfied on or before such Trading Day.
"COMMITMENT PERIOD" shall mean the period commencing on the earlier
to occur of (a) the Effective Date or (b) such earlier date as the Company and
Investor shall agree, and expiring on the earlier to occur of (i)the date on
which Investor shall have purchased Preferred Shares pursuant to this Agreement
for an aggregate Investment Amount of the Maximum Commitment Amount, (ii)the
date this Agreement is terminated pursuant to Section 2.5, or (iii) the date
occurring twenty-four (24) months from the date of commencement of the
Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, par value $.01
per share, and any shares of any other class of common stock whether now or
hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONDITION SATISFACTION DATE" shall have the meaning specified in
Section 7.2.
"CONVERTIBLE PREFERRED STOCK" shall mean the Series F Convertible
Preferred Stock, $.10 par value per share, of the Company.
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"DAMAGES" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).
"EFFECTIVE DATE" shall mean the date on which the SEC first declares
effective a Registration Statement registering resale of the Registrable
Securities as set forth in Section 7.2(a).
"ESCROW AGENT" shall mean Xxxxxxx & Xxxxxx, LLP, or any successor
Escrow Agent as shall be mutually agreed to by the parties.
"ESCROW AGREEMENT" shall mean the Escrow Agreement annexed hereto as
Exhibit A.
"EXCHANGE ACT" shall mean the Securities Exchange Act of1934 and the
rules and regulations promulgated thereunder.
"INDEMNIFIED PARTY" shall have the meaning specified in Section
9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section
9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in Section
9.3(b).
"INITIAL REGISTRABLE SECURITIES" shall have the meaning specified in
the Registration Rights Agreement.
"INITIAL REGISTRATION STATEMENT" shall have the meaning specified in
the Registration Rights Agreement.
"INVESTMENT AMOUNT" shall mean the dollar amount to be invested by
Investor to purchase Preferred Shares with respect to any Put Date as notified
by the Company to Investor in accordance with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to this
Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MARKET PRICE" on any given date shall mean the average of the
lowest three (3) Closing Bid Prices for any Trading Day during the twenty-two
(22) trading day period immediately following the Put Date.
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"MINIMUM COMMITMENT AMOUNT" shall mean One Million Dollars
($1,000,000.00).
"MAXIMUM COMMITMENT AMOUNT" shall mean Seven Million Five Hundred
Thousand Dollars ($7,500,000), subject to increase as agreed to by the Company
and Investor.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, or financial condition of the Company that is material
and adverse to the Company or to the Company and such other entities controlling
or controlled by the Company, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform its obligations under
any of (a) this Agreement and (b) the Registration Rights Agreement.
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, fifteen
(15%) percent of the aggregate VWAP of the Common Stock traded on the Principal
Market during the thirty (30) days preceding a Put Notice for such Put.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"NEW BID PRICE" shall have the meaning specified in Section 2.6.
"OLD BID PRICE" shall have the meaning specified in Section 2.6.
"OUTSTANDING" shall mean, with respect to the Common Stock, at any
date as of which the number of shares of Common Stock is to be determined, all
issued and outstanding shares of Common Stock, including all shares of Common
Stock issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock; provided, however, that
Outstanding shall not include any shares of Common Stock then directly or
indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"PREFERRED SHARES" shall mean the Convertible Preferred Stock issued
hereunder.
"PRINCIPAL MARKET" shall mean OTC Bulletin Board, the Nasdaq
National Market, the Nasdaq SmallCap Market, the American
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Stock Exchange or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
"PROPORTIONATE SHARE" means the fraction, of which the numerator is
the relevant Investor's Commitment Amount as set forth at the foot hereof, and
the denominator is the Maximum Commitment Amount.
"PUT" shall mean each occasion that the Company elects to exercise
its right to tender a Put Notice requiring Investor to purchase shares of
Convertible Preferred Stock, subject to the terms and conditions of this
Agreement.
"PUT DATE" shall mean the Trading Day during the Commitment Period
that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the form
of Exhibit B hereto, to Investor setting forth the Investment Amount with
respect to which the Company intends to require Investor to purchase shares of
Convertible Preferred Stock pursuant to the terms of this Agreement.
"PUT SHARES" shall mean all shares of Common Stock issued or
issuable pursuant to a Conversion Notice (as defined in the Certificate of
Designations) for the Convertible Preferred Stock that has been exercised or may
be exercised in accordance with the terms and conditions of this Agreement as
the context may require.
"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b)the
Blackout Shares, (c) all of the shares issuable pursuant to the warrants granted
hereunder in Section 2.4, (d) any and all shares issuable as liquidated damages
in the event of a default hereof, such as Sections 2.1(b) and 2.7, and (e) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a Registration
Statement has been declared effective by the SEC and such Registrable Securities
have been disposed of pursuant to a Registration Statement, (ii) such
Registrable Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 are met, (iii) such time as such Registrable
Securities have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to
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Investor, such Registrable Securities may be sold without registration under the
Securities Act without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement in the form of Exhibit C hereto.
"REGISTRATION STATEMENT" shall mean a registration statement on Form
S-1 (if use of such form is then available to the Company pursuant to the rules
of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement and in accordance with the intended method
of distribution of such securities), for the registration of the resale by
Investor of the Registrable Securities under the Securities Act.
"REGULATION D" shall have the meaning specified in the recitals of
this Agreement.
"REMAINING PUT SHARES" shall have the meaning specified in Section
2.6.
"RULE 144" shall mean Rule 144 under the Securities Act or any
similar provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the recitals of
this Agreement.
"SECURITIES ACT" shall have the meaning specified in the recitals of
this Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports and
other documents filed by the Company pursuant to Section 13(a) or15(d) of the
Exchange Act since the beginning of the Company's then most recently completed
fiscal year as of the time in question (provided that if the date in question is
within ninety days of the beginning of the Company's fiscal year, the term shall
include all documents filed since the beginning of the second preceding fiscal
year).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is
executed and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in Section
9.3(a).
"TRADING CUSHION" shall mean a minimum of twenty
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(20)Trading Days between Put Dates, unless a shorter period is agreed to by the
Company and Investor.
"TRADING DAY" shall mean any day during which the Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" means the Securities Purchase Agreement for
the Series E Convertible Preferred Stock, this Agreement, the Registration
Rights Agreement, the Warrant, Closing Certificate, and the Transfer Agent
Instructions.
"TRANSFER AGENT" shall mean the transfer agent for the Common Stock
(and to any substitute or replacement transfer agent for the Common Stock upon
the Company's appointment of any such substitute or replacement transfer agent).
"UNDERWRITER" shall mean any underwriter participating in any
disposition of the Registrable Securities on behalf of Investor pursuant to a
Registration Statement.
"VALUATION EVENT" shall mean an event in which the Company at any
time during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or makes any
other distribution of shares of Common Stock, except for
dividends paid with respect to the Series A, Series B,
Series C, Series D and Series E Preferred Stock;
(c) issues any warrants, options or other rights to
subscribe for or purchase shares of Common Stock and the
price per share for which shares of Common Stock may at
any time thereafter be issuable pursuant to such
warrants, options or other rights shall be less than the
Bid Price in effect immediately prior to such issuance
(d) issues any securities convertible into or exchangeable
for shares of Common Stock and the consideration per
share for which shares of Common Stock may at any time
thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less
than the Bid Price in effect immediately prior to such
issuance;
(e) issues shares of Common Stock otherwise than as provided
in the foregoing subsections (a) through (d), at a price
per share less, or for other consideration lower, than
the Bid Price in effect immediately prior to such
issuance, or without consideration;
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(f) makes a distribution of its assets or evidences of
indebtedness to the holders of Common Stock as a
dividend in liquidation or by way of return of capital
or other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable
law or any distribution to such holders made in respect
of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for
in the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding
Common Stock, other than an action described in any of
the foregoing subsections (a) through (f) hereof,
inclusive, which in the opinion of the Company's Board
of Directors, determined in good faith, would have a
materially adverse effect upon the rights of Investor at
the time of a Put.
"VWAP" shall mean the daily weighted volume (based on
a trading day from 9:30 a.m. to 4:00 p.m., E.S.T.) of the Company
on the Principal Market (or any successor thereto) as reported by
Bloomberg Financial LP using the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII), on any Put Date, and
provided at least ten (10) days prior written notice has been given to the
Investors, the Company may exercise a Put by the delivery of a Put Notice. The
number of Preferred Shares that Investor shall receive pursuant to such Put
shall be determined by the Investment Amount specified in the Put Notice divided
by the Stated Value of the Preferred Stock.
(b) MINIMUM AMOUNT OF PUTS. The Company shall, in accordance with
Section 2.2(a), deliver to Investor during the Commitment Period, Put Notices
with an aggregate Investment Amount at least equal to the Minimum Commitment
Amount. If the Company for any reason fails to issue and deliver such Preferred
Shares during the Commitment Period, on the first Trading Day after the
expiration of the Commitment Period, the Company shall wire to Investor a sum in
immediately available funds equal to the product of (i) the Minimum Commitment
Amount minus the aggregate Investment Amounts of the Put Notices delivered to
Investor hereunder and (ii) Fifteen (15%) percent.
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(c) MAXIMUM AMOUNT OF PUTS. If required by the regulations of the
Principal Market, until the Company obtains the requisite approval of its
shareholders in accordance with the corporate laws of the State of Texas, and
the applicable rules of the Principal Market, on the closing date no more than
$1,607,428 of Convertible Preferred Stock which is then convertible into shares
of Common Stock (representing approximately 19.99% of the Outstanding Common
Stock on the date hereof) may be issued and sold to Investor pursuant to this
Agreement.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period, the
Company may deliver a Put Notice to Investor, subject to the conditions set
forth in Section 7.2; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall not be more than
the Maximum Put Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by
Investor if such notice is received on or prior to 12:00 noon New York time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon New York time on a Trading Day or at anytime on a day
which is not a Trading Day.
Section 2.3 CLOSINGS. (a) On or prior to each Closing Date for a Put, (A)
the Company shall deliver to Escrow Agent one or more certificates, at
Investor's option, representing the proportionate share of the Preferred Shares
to be purchased by Investor pursuant to Section 2.1 herein, registered in the
name of Investor, and (B) Investor shall deliver to the Escrow Agent the
Proportionate Share of the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to an account designated by the Escrow
Agent on or before the Closing Date.
(b) In addition, on or prior to such Closing Date, each of the
Company and Investor shall deliver to the Escrow Agent all documents,
instruments and writings required to be delivered or reasonably requested by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. On the Closing Date and provided all
conditions to Closing have been satisfied by the Company, the Escrow agent shall
wire transfer to the Company, the Investment Amount, less any applicable fees
and expenses.
Section 2.4 WARRANTS. The Company agrees to issue to Investor on each
Closing Date, transferable divisible warrants (the "Warrants"), to purchase
shares of Common Stock equal to fifty percent (50%) percent of the number of
Shares of Common Stock issuable upon conversion of the Preferred Shares using a
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Fixed Conversion Price (as defined in the Certificate of Designations) at the
respective Closing Date. Such Warrants (substantially in the form of Exhibit D),
shall bear an exercise price per share of Common Stock equal to one hundred ten
(110%) of the Market Price with respect to such relevant Put, and shall be
exercisable immediately upon issuance, and for a period of five (5) years
thereafter, together with cashless exercise and registration rights under the
Registration Rights Agreement.
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor pursuant to this Agreement to purchase shares of Convertible Preferred
Stock shall, at the Investor's option, terminate permanently (including with
respect to a Closing Date that has not yet occurred)in the event that (a) there
shall occur any stop order or suspension of the effectiveness of any
Registration Statement for an aggregate of thirty (30)Trading Days during the
Commitment Period, for any reason other than deferrals or suspension during a
Blackout Period in accordance with the Registration Rights Agreement, as a
result of corporate developments subsequent to the Subscription Date that would
require such Registration Statement to be amended to reflect such event in order
to maintain its compliance with the disclosure requirements of the Securities
Act or (b) the Company shall at any time fail to comply with the requirements of
Section 6.3, 6.4, 6.5 or 6.6 and such failure shall continue for more than
thirty (30) days.
Section 2.6 BLACKOUT SHARES. In the event that, (a) within twenty (20)
Trading Days following any Conversion Date, the Company gives a Blackout Notice
to Investor of a Blackout Period in accordance with the Registration Rights
Agreement, and (b) the Conversion Price on the Trading Day immediately preceding
such Blackout Period ("OLD CONVERSION PRICE") is greater than the Conversion
Price on the first Trading Day following such Blackout Period that Investor may
sell its Registrable Securities pursuant to an effective Registration Statement
("NEW BID PRICE"), then the Company shall issue to Investor the number of
additional shares of Registrable Securities (the "BLACKOUT SHARES") equal to the
difference between (i) the product of the number of Put Shares held by Investor
immediately prior to the Blackout Period ("REMAINING PUT SHARES") multiplied by
the Old Conversion Price, divided by the New Conversion Price, and (ii) the
Remaining Put Shares.
Section 2.7 MINIMUM COMMITMENT. If the Company for any reason fails to
issue and deliver such Preferred Shares equal to or exceeding the Minimum
Commitment Amount during the Commitment Period, then on the first business day
after the expiration of the Commitment Period, the Company shall issue to the
Investor warrants to purchase a number of shares equal to the Minimum Commitment
Amount divided by the Bid Price. Such warrants shall be for the period of four
(4) four years, shall have cashless exercise provisions, and shall be deemed
shares under the
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Registration Rights Agreement annexed hereto, and shall be exercisable at a
price equal to sixty (60%) percent of the Bid Price.
Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor acknowledge
and agree that the sums payable under Section 2.1(b) and Section 2.7 and the
requirement to issue Blackout Shares under Section 2.6 shall give rise to
liquidated damages and not penalties. Each of the Company and Investor further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by Investor in
connection with the failure by the Company to make Puts with aggregate
Investment Amount totaling at least the Minimum Commitment Amount or in
connection with a Blackout Period under the Registration Rights Agreement, and
(c) each of the Company and Investor are sophisticated business parties and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its own
account and Investor has no present arrangement (whether or not legally binding)
at any time to sell the Preferred Stock to or through any person or entity;
provided, however, that by making the representations herein, Investor does not
agree to hold the Preferred Stock for any minimum or other specific term and
reserves the right to dispose of the Preferred Stock at any time in accordance
with federal and state securities laws applicable to such disposition.
Section 3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Preferred Stock. Investor acknowledges that an
investment in the Preferred Stock is speculative and involves a high degree of
risk. The Investor understands that no United States federal or state agency, or
any other government or governmental agency has passed or made any
recommendation or endorsement of the Preferred Shares.
Section 3.3 AUTHORITY. (a) Investor has the requisite power and authority
to enter into and perform its obligations under this Agreement and the
transactions contemplated hereby in
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accordance with its terms; (b) the execution and delivery of this Agreement and
the Registration Rights Agreement, and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action and no further consent or authorization of Investor or its
partners is required; and (c) this Agreement and the Registration Rights
Agreement have been duly authorized and validly executed and delivered by
Investor and each is a valid and binding agreement of Investor enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 ORGANIZATION AND STANDING. Investor is duly organized, validly
existing and in good standing under the laws of the state of its organization,
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Investor is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a material adverse effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement, the Transaction Documents, and any other document or instrument
contemplated hereby and thereby, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof, will not (a) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on Investor, (b) violate any provision of
any indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound, or conflict with or
constitute a material default thereunder, (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party, or (d) require the approval of any third-party (that has not
been obtained) pursuant to any material contract, instrument, agreement,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor
has received all documents, records, books and other information
pertaining to Investor's investment in the Company that have been
requested by Investor. Investor has reviewed or received copies
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of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 FINANCIAL CAPABILITY. Investor presently has the financial
capacity and the necessary capital to perform its obligations hereunder and
shall and has provided to the Company such financial and other information that
the Company has requested to demonstrate such capacity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as disclosed
in the SEC Documents, or as otherwise provided in the Disclosure Schedule
attached hereto:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Texas,and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and to issue the Preferred Shares, the Put
Shares and the Blackout Shares, if any; (b) the execution and delivery of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required; and (c) each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.3 CAPITALIZATION. The authorized capital stock
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of the Company consists of (i)50,000,000 shares of Common Stock, $.01 value per
share, of which approximately 15,172,001 shares have been issued and outstanding
as of the date hereof and (ii) 10,000,000 shares of Preferred Stock, par value $
.10 per share, which have been issued in four series as follows:
SERIES AUTHORIZED ISSUED OUTSTANDING
------ ---------- ------ -----------
Series A Convertible Preferred Stock 5,000 2,500 100
Series B Convertible Preferred Stock 8,000 4,700 2,900
Series C Convertible Preferred Stock 2,250 750 750
Series D Convertible Preferred Stock 3,885 2,775 1,170.46
All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares as required by this Agreement. The Shares have been duly
authorized and, when issued upon conversion of, or as dividends on, the
Preferred Stock or upon exercise of the Warrants, each in accordance with its
respective terms, 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.
Section 4.4 COMMON STOCK. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of the Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date of this Agreement, the Principal Market is the NASDAQ
SmallCap Market. The Company meets the registration requirements for filing of
Form S-3.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made available to
Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to Investor any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by the
Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the
15
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. The sale and
issuance of the Preferred Shares, the Put Shares and the Blackout Shares, if
any, in accordance with the terms and on the bases of the representations and
warranties set forth in this Agreement, may and shall be properly issued by the
Company to Investor pursuant to applicable state law. When issued and paid for
as herein provided, the Put Shares, and the Blackout Shares, if any, shall be
duly and validly issued, fully paid, and nonassessable. Neither the sales of the
Preferred Shares, the issuance of the Put Shares, or the Blackout Shares, if
any, pursuant to, nor the Company's performance of its obligations under, this
Agreement or the Registration Rights Agreement shall (a) result in the creation
or imposition of any liens, charges, claims or other encumbrances upon the Put
Shares or the Blackout Shares, if any, or any of the assets of the Company, or
(b) entitle the holders of Outstanding Common Stock to preemptive or other
rights to subscribe to or acquire the Common Stock or other securities of the
Company. The Put Shares and the Blackout Shares, if any, shall not subject
Investor to personal liability by reason of the ownership thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Preferred Shares or the Blackout Shares,
if any, or (b) made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Common Stock under the Securities Act.
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the"ARTICLES"), and
the Company's By- Laws, as amended and in effect on the date hereof (the "BY-
LAWS").
Section 4.9 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put Shares
and the Blackout Shares, if any, do not and will not(a) result in a violation of
the Articles or By-Laws or (b) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)applicable to the
Company or by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect) nor is the Company otherwise in violation of,
conflict with or in default under any of the foregoing; provided, however, that
for purposes of the Company's representations and warranties as to violations of
foreign law, rule or regulation referenced in clause (c), such representations
and warranties are made only to the best of the Company's knowledge insofar as
the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby are or may
be affected by the status of Investor under or pursuant to any such foreign law,
rule or regulation. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations that either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or issue and sell the Common Stock in accordance with the
terms hereof(other than any SEC, NASD or state securities filings that may be
required to be made by the Company subsequent to any Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on the
Nasdaq SmallCap Market); provided that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of Investor herein.
Section 4.10 NO MATERIAL ADVERSE CHANGE. Since June 30,
2000, no event has occurred that would have a Material Adverse
16
Effect on the Company, except as disclosed in the SEC Documents.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents, the Disclosure Schedule, or otherwise
publicly announced, other than those incurred in the ordinary course of the
Company's businesses since June 30, 2000 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since June 30, 2000,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the SEC Documents.
Section 4.13 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement and the Transaction
Documents, under circumstances that would require registration of the Common
Stock under the Securities Act.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may be set forth
in the SEC Documents or the Disclosure Schedule, there are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which would have a Material Adverse
Effect. Except as set forth in the SEC Documents, or the Disclosure Schedule, no
judgment, order, writ, injunction or decree or award has been issued by or, so
far as is known by the Company, requested of any court, arbitrator or
governmental agency which would have a Material Adverse Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any
Person representing the Company, and, to the knowledge of the Company, any other
Person selling or offering to sell the Preferred Shares, the Put Shares, or the
Blackout Shares, if any, in connection with the transactions contemplated by
this Agreement, have not made, at any time, any oral communication in connection
with the offer or sale of the same which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16 MATERIAL NON-PUBLIC INFORMATION. The Company
is not in possession of, nor has the Company or its agents
17
disclosed to Investor, any material non-public information that (a) if
disclosed, would reasonably be expected to have a materially adverse effect on
the price of the Common Stock or(b) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with
respect to shares of the Convertible Preferred Stock and the Common Stock will
be in compliance with all applicable state and federal securities laws, rules
and regulations and the rules and regulations of the NASD and the Principal
Market on which the Common stock is listed.
Section 5.2 LIMITATIONS ON SHORT SALES. The Investor has the right to sell
Put Shares equal in number to the number of the Put Shares reasonably expected
to be issued pursuant to this Agreement. Except as set forth above, Investor
covenants, however, that neither the Investor nor any of its affiliates nor any
entity managed by the Investor will ever be in a net short position with respect
to shares of the Common Stock of the Company.
Section 5.3 CONSENTS. By its execution and delivery of this Agreement,
Investor which is also a party to the Securities Purchase Agreement dated as of
May 19, 2000 between the Company and each entity named on a signature page
thereto (the "Series D Securities Purchase Agreement"), and the Transaction
Documents consents to the transactions contemplated hereby and waives any rights
it otherwise might have under (i) the Series D Securities Purchase Agreement,
the Series D Convertible Preferred Stock Statement of Designations or the
Registration Rights Agreement dated as of May 19, 2000 between the Company and
each entity named on a signature page thereto, and (ii) the Stock Purchase
Agreement for the Series E Convertible Preferred Stock, the Series E Convertible
Preferred Stock Statement of Designations or the Registration Rights Agreement
dated as of the date hereof between the Company and each entity named on a
signature page thereto, with respect to any rights of first refusal or
registration rights it may have pursuant to the terms thereof, or to take or
refrain from taking any other action, as a result of the execution and delivery
of this Agreement or the consummation of any of the transactions contemplated
hereby.
ARTICLE VI
COVENANTS OF THE COMPANY
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Section 6.1 REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the Closing Date, the
Company shall have available and the Company shall reserve and keep available at
all times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Put Shares, the
Warrant Shares and the Blackout Shares, if any; such amount of shares of Common
Stock to be reserved shall be calculated based upon a [minimum of $.24 (50% of
current Price)] for the Put Shares under the terms and conditions of this
Agreement and a good faith estimate by the Company in consultation with Investor
of the number of Blackout Shares, if any, that will need to be issued. The
number of shares so reserved from time to time, as theretofore increased or
reduced as hereinafter provided, may be reduced by the number of shares actually
delivered hereunder.
Section 6.3 LISTING OF COMMON STOCK. The Company shall maintain the
listing of the Common Stock on a Principal Market, and will cause the Put
Shares, the Warrant Shares, and the Blackout Shares, if any, to be listed on the
Principal Market. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such application
the Put Shares and the Blackout Shares, if any, and shall take such other action
as is necessary or desirable in the reasonable opinion of Investor to cause the
Common Stock to be listed on such other Principal Market as promptly as
possible. The Company shall use its commercially reasonable efforts to continue
the listing and trading of the Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action or
file any document (whether or not permitted by said Act or the rules
thereunder)to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.5 TRANSFER RESTRICTIONS. (i) The Investor acknowledges that (1)
the Convertible Preferred Stock have not been and are not being registered under
the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement, the Put Shares, Warrant Shares and Black-Out Shares, if any,
have not been and are not being registered under the 1933
19
Act, and may not be transferred unless (A) subsequently registered thereunder or
(B) the Investor shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any sale of the Securities
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
(ii) The Investor acknowledges and agrees that the Convertible
Preferred Stock and the Warrants, and, until such time as the Common Stock has
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Registrable
Securities shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of any such
Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION
OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Section 6.6 CORPORATE EXISTENCE. The Company shall take all commercially
reasonable steps necessary to preserve and continue the corporate existence of
the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver to
Investor, promptly after the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE A PUT. The Company shall promptly notify Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities: (a)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority
20
during the period of effectiveness of the registration statement for amendments
or supplements to the registration statement or related prospectus; (b) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose; (c) receipt of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; (d) the
happening of any event that makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the registration statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (e) the Company's reasonable determination that a post-effective
amendment to the registration statement would be appropriate, and the Company
shall promptly make available to Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events.
Section 6.9 EXPECTATIONS REGARDING PUT NOTICES. Within ten(10) days after
the Effective Date of the Registration Statement and commencement of each
calendar quarter occurring subsequent thereto, the Company undertakes to notify
Investor as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate with
respect to such calendar quarter and shall in no way obligate the Company to
raise such amount during such calendar quarter or otherwise limit its ability to
deliver Put Notices during such calendar quarter. The failure by the Company to
comply with this provision can be cured by the Company's notifying Investor at
any time as to its reasonable expectations with respect to the current calendar
quarter.
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to Investor
such shares of Convertible Preferred Stock
21
and/or securities as Investor is entitled to receive pursuant to
this Agreement.
Section 6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of the
Preferred Shares and the issuance of the Put Shares and Blackout Shares, if any,
shall be made in accordance with the provisions and requirements of any
applicable state law.
Section 6.12 REIMBURSEMENT. If (i) Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded or
becomes involved in any capacity in any such action, proceeding or investigation
by any person, or (ii) Investor, other than by reason of its gross negligence or
willful misconduct or by reason of its trading of the Convertible Preferred
Stock or Common Stock in a manner that is illegal under the federal securities
laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Investor for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Investor is a named party, the Company will pay to
Investor the charges, as reasonably determined by Investor, for the time of any
officers or employees of Investor devoted to appearing and preparing to appear
as witnesses, assisting in preparation for hearings, trials or pretrial matters,
or otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any affiliates of Investor that are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such affiliate and
any such person.
Section 6.13 DILUTION. The number of shares of Common Stock issuable as
Put Shares may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines during the period between the Effective Date and the end
of the Commitment Period. The Company's executive officers and directors have
studied and fully understand the nature of the
22
transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Put Shares is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
Section 6.14 USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow fees in connection with the sale of the Preferred
Stock) for internal working capital purposes, and, unless specifically consented
to in advance in each instance by the Investor, the Company shall not, directly
or indirectly, use such proceeds for any loan to or investment in any other
corporation (other than 80% owned subsidiaries), partnership enterprise or other
person or for the repayment of any outstanding loan by the Company to any other
party (Other than repayment of a portion of the Company's loans from Comerica
Bank, Texas.)
Section 6.15 CERTAIN AGREEMENTS. (i) The Company covenants and agrees that
it will not, without the prior written consent of the Buyer, enter into
(x) any subsequent or further offer or sale of Common Stock or securities
convertible into Common Stock (collectively, "New Common Stock"), or
(y) any subsequent offer or contract for an equity
line or similar arrangement which contemplates the
issuance of New Common Stock
with any third party (a "New Investor") on any date which is before the end of
the Commitment period.
(ii) The foregoing provisions shall not restrict the Company from
issuing (A) shares of Common Stock upon the exercise of certain warrants and
options for the purchase of shares outstanding as of the date hereof, or as
contemplated under the Transaction Documents, (B) additional shares of Common
Stock or other securities issued pursuant to the Company's existing stock option
plans, (C) shares issued as required by the terms of the Company's currently
outstanding shares of Series A, B, C, D or E Preferred Stock or other currently
outstanding convertible securities identified in the Company's SEC Documents,
(D) up to an aggregate of 2,000,000 shares or warrants to purchase shares of
restricted Common Stock to satisfy unpaid accounts payable as of December 31,
2000; provided, however, that only the holders of 1,201,000 of such Common Stock
may be granted registration rights in connection with the issuance thereof, (E)
shares of Common Stock issuable under the terms of the Company's convertible
promissory note in favor of Maxxim Medical, Inc., as amended, (F)
23
in the event the Company has not sold its Cybex Medical division as required by
the terms of its Seconded Amended and Restated Loan Agreement with Comerica
Bank-Texas, (I) by November 1, 2000, 200,000 shares of Common Stock or warrants
to purchase Common Stock, and, (II) by the first day of each month thereafter,
an additional 25,000 shares of Common Stock or warrants to purchase Common
Stock, or (G) up to 225 shares of the Series E Convertible Preferred Stock and
warrants to purchase up to 500,000 shares to the Placement Agent or its
designees in connection with the transactions contemplated hereby and the shares
of Common Stock issuable thereon pursuant to the terms of the Certificate of
Designations. In addition, the limitations contained in Section 6.15(i) shall
not apply to any transaction involving issuance of securities as consideration
in a merger, consolidation or acquisition of assets or in connection with a
transaction with a Strategic Partner (the primary purpose of which is not to
raise equity capital or other financing capital), or as consideration for the
acquisition of a business, product or license by the Company.
(iii) In the event the Company breaches the provisions of this
Section 6.15, the Conversion Price (as defined in the Certificate of
Designations) shall be amended to be equal to (x) 90% of (y) the amount
determined in accordance with the provisions of the Certificate of Designations
without regard to this provision.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL CONVERTIBLE PREFERRED STOCK. The obligation hereunder of the Company to
issue and sell the Preferred Shares to Investor incident to each Closing is
subject to the satisfaction, at or before each such Closing, of each of the
conditions set forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time, except for changes which have not
had a Material Adverse Effect.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A
PUT NOTICE AND THE OBLIGATION OF INVESTOR TO
24
PURCHASE PREFERRED SHARES. The right of the Company to deliver a Put Notice and
the obligation of Investor hereunder to acquire and pay for the Preferred Shares
incident to a Closing is subject to the satisfaction, on (a) the date of
delivery of such Put Notice and (b) the applicable Closing Date (each a
"CONDITION SATISFACTION DATE"), of each of the following conditions:
(a) REGISTRATION OF REGISTRABLE SECURITIES WITH THE SEC. As set
forth in the Registration Rights Agreement, the Company shall have filed with
the SEC the Initial Registration Statement with respect to the resale of the
Initial Registrable Securities by Investor and such Registration Statement shall
have been declared effective by the SEC prior to the first Put Date. For the
purposes of any Put Notice with respect to the Registrable Securities other than
the Initial Registrable Securities, the Company shall have filed with the SEC a
Registration Statement with respect to the resale of such Registrable Securities
by Investor which shall have been declared effective by the SEC prior to the Put
Date therefor.
(b) EFFECTIVE REGISTRATION STATEMENT. As set forth in the
Registration Rights Agreement, a Registration Statement shall have previously
become effective for the resale by Investor of the Registrable Securities
subject to such Put Notice and such Registration Statement shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
Investor shall have received notice that the SEC has issued or intends to issue
a stop order with respect to such Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of such Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such
action),and (ii) no other suspension of the use or withdrawal of the
effectiveness of such Registration Statement or related prospectus shall exist.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, and the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to each
25
Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
adopted by any court or governmental authority of competent jurisdiction that
prohibits or directly and materially adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced that
may have the effect of prohibiting or materially adversely affecting any of the
transactions contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The
trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the NASD and the Common Stock shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market.
(h) LEGAL OPINION. The Company shall have caused to be delivered to
Investor at the Initial Closing, and within five (5) Trading Days of the
effective date of the Initial Registration Statement and each subsequent
Registration Statement, an opinion of the Company's legal counsel in the form of
Exhibits E-1 and E-2 hereto, addressed to Investor.
(i) DUE DILIGENCE. No dispute between the Company and
Investor shall exist pursuant to Section 7.3 as to the adequacy
of the disclosure contained in any Registration Statement.
(j) 9.9% PERCENT LIMITATION. Unless waived by the Investor with
sixty-five (65) days prior notice the number of Put Shares into which the
Preferred Shares can be convertible by Investor shall not exceed the number of
such shares that, when aggregated with all Common Stock then owned by Investor
beneficially or deemed beneficially owned by Investor, but without giving effect
to the unconverted portion of the Preferred Shares or unexercised portion of
Warrants, would result in Investor owning no more than 9.99% of all of such
Common Stock as would be outstanding on such Date, as determined in accordance
with Section 16 of the Exchange Act and the regulations promulgated thereunder.
(k) NO KNOWLEDGE. The Company shall have no knowledge of any event
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than not to
occur within the fifteen Trading Days following the Trading Day on which such
Notice is deemed delivered).
26
(l) TRADING CUSHION. On the Put Date, the Trading Cushion shall have
elapsed since the immediately preceding Put Date.
(m) SHAREHOLDER VOTE. The issuance of shares of Common Stock
issuable upon conversion of the Preferred Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market.
(n) NO VALUATION EVENT. No Valuation Event shall have occurred since
the Put Date.
(o) OTHER. On each Condition Satisfaction Date, Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by Investor in order for
Investor to confirm the Company's satisfaction of the conditions set forth in
this Section 7.2, including, without limitation, a certificate in substantially
the form and substance of Exhibit F hereto, executed by an executive officer of
the Company and to the effect that all the conditions to such Closing shall have
been satisfied as at the date of each such certificate.
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON- PUBLIC
INFORMATION.
(a) The Company shall make available for inspection and review by
Investor, advisors to and representatives of Investor (who may or may not be
affiliated with Investor and who are reasonably acceptable to the Company), any
Underwriter, any Registration Statement or amendment or supplement thereto or
any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees to supply all
such information reasonably requested by Investor or any such representative,
advisor or Underwriter in connection with such Registration Statement
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to time
after the filing and effectiveness of such Registration Statement for the sole
purpose of enabling Investor and such representatives, advisors and Underwriters
and their respective accountants and attorneys to conduct initial and ongoing
due diligence with respect to the Company and the accuracy of such Registration
Statement.
(b) Each of the Company, its officers, directors, employees and
agents shall in no event disclose non-public information to Investor, advisors
to or representatives of Investor, unless prior to disclosure of such
information the Company identifies such information as being non-public
information and provides Investor, such advisors and
27
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require Investor's advisors and
representatives to enter into a confidentiality agreement in form and substance
reasonably satisfactory to the Company and Investor.
(c) Nothing herein shall require the Company to disclose non-public
information to Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts; provided, however, that notwithstanding anything herein to
the contrary, the Company shall, as hereinabove provided, immediately notify the
advisors and representatives of Investor and any Underwriters of any event or
the existence of any circumstance(without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in a Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 7.3 shall be construed to mean that such
persons or entities other than Investor (without the written consent of Investor
prior to disclosure of such information) may not obtain non-public information
in the course of conducting due diligence in accordance with the terms and
conditions of this Agreement and nothing herein shall prevent any such persons
or entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, any Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in such Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VIII
TRANSFER AGENT INSTRUCTIONS
a. The Company warrants that, with respect to the Put Shares, other
than the stop transfer instructions to give effect to Section 6.5 hereof, it
will give its transfer agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Convertible
Preferred Stock in such amounts as specified from time to time by the Company to
the transfer agent, bearing the restrictive legend specified in Section 6.5 of
this Agreement prior to registration of the Shares under the 1933 Act,
registered in the name of the Buyer or its nominee and in such denominations to
be specified by
28
the Investor in connection with each conversion of the Convertible Preferred
Stock. Except as so provided, the Put Shares shall otherwise 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 in this Section shall affect in any way the Investor's obligations
and agreement to comply with all applicable securities laws upon resale of the
Securities. If the Investor provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Investor of any of the Registrable Securities accordance with clause (i)(1)(B)
of Section 6.5 of this Agreement is not required under the 1933 Act, the Company
shall (except as provided in clause (i)(2) of Section 6.5 of this Agreement)
permit the transfer of the Registrable Securities and, in the case of the Put
Shares or the Warrant Shares, as the case may be, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the
Investor.
b. Subject to the provisions of this Agreement, the Company will
permit the Investor to exercise its right to convert the Convertible Preferred
Stock in the manner contemplated by the Certificate of Designations.
c. The Company understands that a delay in the issuance of the Put
Shares beyond the Delivery Date (as defined in the Certificate of Designations)
could result in economic loss to the Investor. As compensation to the Investor
for such loss, the Company agrees to pay late payments to the Investor for late
issuance of Put Shares upon conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
two (2) business days from the Delivery Date):
LATE PAYMENT FOR EACH
$10,000 OF STATED VALUE OR
NO. BUSINESS DAYS LATE DIVIDEND AMOUNT BEING CONVERTED
---------------------- -------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
29
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. For purposes of this Section 5(c), in connection
with a Mandatory Conversion (as defined in the Certificate of Designations), the
term "Delivery Date" shall refer to the earlier of (i) the Delivery Date
determined in relation to a Notice of Conversion actually submitted by the
Investor to the Company or (ii) the third or fifth business date, as the case
may be, after written notice from the Investor that the delivery of shares to
the Investor in connection with the Mandatory Conversion has not been
accomplished. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue and
deliver the Common Stock to the Investor. Furthermore, in addition to any other
remedies which may be available to the Investor, in the event that the Company
fails for any reason to effect delivery of such shares of Common Stock within
two (2) business days after the Delivery Date, the Investor will be entitled to
revoke the relevant Notice of Conversion by delivering a notice to such effect
to the Company whereupon the Company and the Investor shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion.
d. If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Put Shares to be issued upon conversion of the Convertible
Preferred Stock and after such Delivery Date, the holder of the Preferred Stock
being converted (a "Converting Holder") purchases, in an arm's-length open
market transaction or otherwise, shares of Common Stock (the "Covering Shares")
in order to make delivery in satisfaction of a sale of Common Stock by the
Converting Holder (the "Sold Shares"), which delivery such Converting Holder
anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Converting Holder shall have the right, to require the Company to
pay to the Converting Holder, in lieu and instead of the amounts due under
Section(c) hereof (but in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu of any such other
amounts), the Buy-In Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Converting Holder's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Company in
immediately available funds immediately upon demand by the Converting Holder. By
way of illustration and not in limitation of the foregoing, if the Converting
Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares
30
of Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment
Amount which Company will be required to pay to the Converting Holder will be
$1,000.
e. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Investor and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Investor thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Investor by crediting the account of
Investor's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
f. If, at any time (i) the Company challenges, disputes or denies
the right of a holder of Preferred Stock to effect a conversion of the Preferred
Stock into Common Stock or otherwise dishonors or rejects any Conversion Notice
(as defined in the Certificate of Designations) delivered in accordance with the
terms of this Agreement or the Certificate of Designations, or (ii) any third
party who is not and has never been an Affiliate of such holder commences any
lawsuit or proceeding or otherwise asserts any claim before any court or public
or governmental authority, which lawsuit, proceeding or claim seeks to
challenge, deny, enjoin, limit, modify, delay or dispute the right of such
holder to effect the conversion of the Preferred Stock into Common Stock, and
the Company refuses to honor any such Conversion Notice, then such holder shall
have the right, by written notice to the Company, to require the Company to
promptly redeem the Preferred Stock for cash at a redemption price (the
"Mandatory Purchase Amount") equal to the Cap Redemption Amount (as defined in
the Certificate of Designations) of the unconverted Preferred Stock held by such
holder; provided, however, that the Company shall have a period of thirty (30)
days within which to (i) have the lawsuit or proceeding dismissed and honor the
Conversion Notice or (ii) raise the capital required to redeem the Mandatory
Purchase Amount, as the case may be. Under any of the circumstances set forth
above, the Company shall be responsible for the payment of all costs and
expenses of such holder, including, but not necessarily limited to, reasonable
legal fees and expenses, as and when incurred in connection with such holder's
disputing any such action or pursuing such holder's rights hereunder (in
addition to any other rights such holder may have hereunder or otherwise). The
Mandatory Purchase Amount will be payable to such holder in cash within five (5)
business days from the date such holder gives the Company written notice that it
is exercising its rights under this paragraph.
g. The holder of any Preferred Stock shall be entitled to exercise
its conversion privilege with respect to the
31
Preferred Stock notwithstanding the commencement of any case under 11 U.S.C.
ss.101 ET SEQ. (the "Bankruptcy Code"). In the event the Company is a debtor
under the Bankruptcy Code, the Company hereby waives, to the fullest extent
permitted, any rights to relief it may have under 11 U.S.C. ss.362 in respect of
such holder's conversion privilege. The Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. ss.362 in
respect of the conversion of the Convertible Preferred Stock. The Company
agrees, without cost or expense to such holder, to take or to consent to any and
all action necessary to effectuate relief under 11 U.S.C. ss.362.
h. The Company will authorize its transfer agent to give information
relating to the Company directly to the Investor or the Investor's
representatives upon the request of the Investor or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Investor in connection with a Notice of
Conversion, or (ii) the number of outstanding shares of Common Stock of all
stockholders as of a current or other specified date. The Company will provide
the Investor with a copy of the authorization so given to the transfer agent.
Nothing contained in this Article VIII shall be construed to require the
Company to pay to the Investor any of the amounts contemplated by this Article
VIII for late delivery of any certificates or refusal to honor a Notice of
Conversion or Warrant Exercise to the extent that such delay or refusal is
caused by the Investor (but exclusion of the delay or refusal of the Company
shall be limited only to the period of such delay or refusal which was directly
caused by an uncured action or omission of the Investor and not to periods
beyond the cure of such action or omission by or on behalf of the Investor).
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (a) personally served,(b)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal
32
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (ii) on the second
business day following the date of mailing by express courier service or on the
fifth business day after deposited in the mail, in each case, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company:
Xxxxxx Healthcare, Inc.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, Xxxxx 00000
ATTENTION: Xxxxx X. Xxxxxxxx
Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
If to Investor:
SEE ATTACHED SCHEDULE I
With a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
ATTENTION: Xxxxxx X. Xxxxxxx, Esq.
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 9.2 INDEMNIFICATION.
33
The Company agrees to indemnify and hold harmless Investor and its
officers, directors, employees, and agents, and each Person or entity, if any,
who controls Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, except to the
extent such Damages result primarily from Investor's failure to perform any
covenant or agreement contained in this Agreement or Investor's or its
officer's, director's, employee's, agent's or Controlling Person's negligence,
recklessness or bad faith in performing its obligations under this Agreement.
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 9.2 (an"INDEMNIFIED
PARTY") might seek indemnity under Section 9.2 is asserted against or sought to
be collected from such Indemnified Party by a person other than a party hereto
or an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim for indemnification that is being asserted under any
provision of Section 9.2 against any person (the"INDEMNIFYING PARTY"), together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with
reasonable promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to such Third
Party Claim to the extent that the Indemnifying Party's ability to defend has
been prejudiced by such failure of the Indemnified Party. The Indemnifying Party
shall notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying Party of
either a Claim Notice or an Indemnity Notice (as defined below) (the "DISPUTE
PERIOD") whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party under Section 9.2 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against
34
such Third Party Claim.(i)If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to this
Section 9.3(a), then the Indemnifying Party shall have the right to defend, with
counsel reasonably satisfactory to the Indemnified Party, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not be indemnified in
full pursuant to Section 9.2). The Indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
clause (i), and except as provided in the preceding sentence, the Indemnified
Party shall bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may takeover the control of
the defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under Section 9.2 with respect to such Third Party
Claim. (ii) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or settle the Third
Party Claim, or if the Indemnifying Party fails to give any notice whatsoever
within the Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted by
the Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party(with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
35
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause (ii), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause(iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause (ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party shall reimburse the Indemnifying Party in full for all reasonable costs
and expenses incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
clause (ii), and the Indemnifying Party shall bear its own costs and expenses
with respect to such participation. (iii) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability or the amount of its
liability to the Indemnified Party with respect to the Third Party Claim under
Section 9.2 or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim, the
amount of Damages specified in the Claim Notice shall be conclusively deemed a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim under
Section 9.2 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim for
indemnity under Section 9.2 specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an "INDEMNITY NOTICE") with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that the Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described
36
in such Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the claim or the amount
of the claim described in such Indemnity Notice, the amount of Damages specified
in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the
amount of such Damages to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability or the amount of its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute; provided,
however, that if the dispute is not resolved within thirty (30) days after the
Claim Notice, the Indemnifying Party shall be entitled to institute such legal
action as it deems appropriate. (c) The indemnity agreements contained herein
shall be in addition to (i) any cause of action or similar rights of the
Indemnified Party against the Indemnifying Party or others, and (ii)any
liabilities the Indemnifying Party may be subject to.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York without
regard to the principles of conflicts of law. Each of the Company and Investor
hereby submit to the exclusive jurisdiction of the United States Federal and
state courts located in New York with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 10.2 SPECIFIC ENFORCEMENT. The Company and the Investor
acknowledge and agree that irreparable damage would occur to the Investor in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Investor shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
Section 10.3 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the Company and Investor and their respective successors and
permitted assigns. Neither this Agreement nor any rights of Investor or the
Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any transferee of any of the Common
Stock purchased or acquired by Investor hereunder with respect to the Common
Stock held by such person, and (b) Investor's interest in this Agreement may be
assigned at any
37
time, in whole but not in part, to any affiliate of Investor.
Section 10.4 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the Company and Investor and their respective successors and
permitted assigns, and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
Section 10.5 TERMINATION. This Agreement shall terminate twenty-four(24)
months after the commencement of the Commitment Period (unless extended by the
agreement of the Company and Investor); provided, however, that the provisions
of Article VI, VIII, and Sections [10.1, 10.3, and 10.5] shall survive the
termination of this Agreement.
Section 10.6 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and
the instruments referenced herein contain the entire understanding of the
Company and Investor with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.
Section 10.7 FEES AND EXPENSES. Each of the Company and Investor agrees to
pay its own expenses in connection with the preparation of this Agreement and
performance of its obligations hereunder, except that the Company shall pay
Xxxxxxx & Xxxxxx, LLP the fee of $25,000 at the Initial Closing and $5,000 at
each subsequent Closing Date, to a maximum of $42,500. In addition, the Company
shall pay all reasonable fees and expenses incurred by the Investor in
connection with any amendments, modifications or waivers of this Agreement or
the Registration Rights Agreement or incurred in connection with the enforcement
of this Agreement and the Registration Rights Agreement, including, without
limitation, all reasonable attorneys fees and expenses. The Company shall pay
all stamp or other similar taxes and duties levied in connection with issuance
of the Shares pursuant hereto.
Section 10.8 NO BROKERS. Each of the Company and Investor represents that
it has had no dealings in connection with this transaction with any broker who
will demand payment of any commission from the other party, except Union
Atlantic LC and Union Atlantic Capital, L.C.("Finder") who shall be entitled to
receive a finder's fee equal to nine (9%) percent of the gross amount obligated
by the Investor to the Company on each Closing Date. Such fee shall be paid to
the Finder directly from escrow on each Closing Date. The Company on the one
hand, and Investor, on the other hand, agree to indemnify the other against and
hold the other harmless from any and all liabilities to any persons claiming
brokerage commissions or finder's fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with this
Agreement or the
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transactions contemplated hereby.
Section 10.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the Company and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 10.10 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the Company hereto shall survive each Closing
hereunder for a period of one (1) year thereafter. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.
Section 10.11 FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 10.12 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 10.13 EQUITABLE RELIEF. The Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to
Investor. The Company therefore agrees that Investor shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
Section 10.14 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.15 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price of the Common Stock on
any given Trading Day for the purposes of this Agreement shall be Bloomberg L.P.
or any successor thereto. The written mutual consent of Investor and the
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Company shall be required to employ any other reporting entity.
Section 10.16 PROPORTIONATE SHARE. Unless the context requires otherwise,
if more than one Investor executes this agreement, all sums set forth herein
shall mean such Investor's Proportionate Share. The failure or default of any
Investor to fulfill its Proportionate Share of its obligations under this
Agreement, shall not act as a waiver or release of the obligations of any other
Investor, nor shall any other Investor or Investors be obligated to assume the
obligations of the defaulting Investor or Investors.
Section 10.17 PUBLICITY. The Company and Investor shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Investor without the prior written consent of such Investor, except to the
extent required by law. Investor acknowledges that this Agreement and all or
part of the Transaction Documents may be deemed to be "material contracts" as
that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company
may therefore be required to file such documents as exhibits to reports or
registration statements filed under the Securities Act or the Exchange Act.
Investor further agrees that the status of such documents and materials as
material contracts shall be determined solely by the Company, in consultation
with its counsel.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
XXXXXX HEALTHCARE, INC.
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
XXXXXXX TRUST REG
Commitment Amount $ 750,000
By: /s/ XXXXXX XXXXX
Name: Xxxxxx Xxxxx
Title:
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
XXXXXX HEALTHCARE, INC.
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
ESQUIRE TRADE & FINANCE INC.
Commitment Amount $ 1,200,000
By: /s/ XXXXXXX KINDLE
Name: Xxxxxxx Kindle
Title: Director
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
XXXXXX HEALTHCARE, INC.
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
THE ENDEAVOUR CAPITAL INVESTMENT FUND S.A.
Commitment Amount $ 5,550,000
By: /s/ XXXXXX XXXXXXXXX
Name: Xxxxxx Xxxxxxxxx
Title: Director
43
