-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KnpTEjF1FVoL531NnBLZ4KFiwVy0DyEocIc7qFvWq+ZWjQlXUxmWmTf8Dq76UPLM p/pH0nz9CKxLoa+yk5hgog== 0001099910-02-000290.txt : 20021104 0001099910-02-000290.hdr.sgml : 20021104 20021104150157 ACCESSION NUMBER: 0001099910-02-000290 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20021104 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STANFORD VENTURE CAPITAL HOLDINGS INC CENTRAL INDEX KEY: 0001160414 IRS NUMBER: 760619955 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 201 S BISCAYNE BLVD SUITE 1200 CITY: MIAMI STATE: FL ZIP: 33131 BUSINESS PHONE: 3053479102 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SILVER KEY MINING CO INC CENTRAL INDEX KEY: 0001093913 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 820513245 STATE OF INCORPORATION: ID FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-78530 FILM NUMBER: 02808148 BUSINESS ADDRESS: STREET 1: 802 PINE STREET CITY: CLARK FORK STATE: ID ZIP: 83811 BUSINESS PHONE: 2082661464 MAIL ADDRESS: STREET 1: 802 PINE STREET CITY: CLARK STATE: ID ZIP: 83811 SC 13D 1 silverkey_sc13d.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Silver Key Mining Company, Inc. ------------------------------- (Name of Issuer) Common Stock ------------ (Title of Class of Securities) 82773R 20 2 ----------- (CUSIP Number) Stanford Venture Capital Holdings, Inc. 5050 Westheimer Road Houston, Texas 77056 Attention: P. Mauricio Alvarado, Esq. Telephone No.: (713) 964-5100 ----------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 22, 2002 ------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Note: Schedules filed in paper formal shall included a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D - ----------------------------------------------------------------------------------------------------------------------------- CUSIP No. 82773R 20 2 Page 2 of 9 Pages - ----------------------------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON Stanford Venture Capital Holdings, Inc. - ----------------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - ----------------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - ----------------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ----------------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ----------------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 0 BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 3,454,302 shares of Common Stock* EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON 10 SHARED DISPOSITIVE POWER WITH 3,454,302 shares of Common Stock* - ----------------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,454,302 shares of Common Stock* - ----------------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* - ----------------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 66.7%* - ----------------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ----------------------------------------------------------------------------------------------------------------------------- * Includes the conversion of 512,820 shares of Series A Preferred Stock into Common Stock and the exercise of warrants to acquire 256,410 shares of Common Stock held directly by the Reporting Person and the conversion and exercise all securities that can be acquired within 60 days of the date hereof into Common Stock - 512,820 shares of Series A Preferred Stock and warrants to acquire 256,410 shares of Common Stock.
SCHEDULE 13D - ----------------------------------------------------------------------------------------------------------------------------- CUSIP No. 82773R 20 2 Page 3 of 9 Pages - ----------------------------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON R. Allen Stanford - ----------------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - ----------------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ----------------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware and Antigua - ----------------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 0 BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 3,454,302 shares of Common Stock* EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON 10 SHARED DISPOSITIVE POWER WITH 3,454,302 shares of Common Stock* - ----------------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,454,302 shares of Common Stock* - ----------------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* - ----------------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 66.7% of Common Stock* - ----------------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ----------------------------------------------------------------------------------------------------------------------------- *Includes the conversion of 512,820 shares of Series A Preferred Stock into Common Stock and the exercise of warrants to acquire 256,410 shares of Common Stock held directly by the Reporting Person and the conversion and exercise all securities that can be acquired within 60 days of the date hereof into Common Stock - 512,820 shares of Series A Preferred Stock and warrants to acquire 256,410 shares of Common Stock.
Explanatory Note - ---------------- Stanford Venture Capital Holdings, Inc., a Delaware corporation ("SVCH") and R. Allen Stanford ("Stanford") (SVCH and Stanford are sometimes collectively referred to herein as the "Reporting Persons"), hereby make this single joint filing statement on Schedule 13D to report the beneficial ownership of shares of common stock ("Common Stock") of Silver Key Mining Company, Inc., a Nevada corporation (the "Issuer"). This Schedule 13D also reports SVCH and Stanford's ownership of (i) Series A $1.17 convertible preferred stock ("Series A Preferred Stock" or "Preferred Stock"), which is convertible into shares of Common Stock and (ii) warrants (Warrants") to acquire shares of Common Stock. As described in this Schedule 13D, Stanford is joining SVCH in filing this Schedule 13D because, as the sole shareholder of SVCH, Stanford may be deemed to indirectly beneficially own the shares of Common Stock that are directly beneficially owned by SVCH. The filing of this Schedule 13D shall not be deemed to be an admission that any Reporting Person is, for the purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, the beneficial owner of any securities covered by this Schedule 13D. Item 1. Security and Issuer This statement relates to the Common Stock of the Issuer. The principal executive offices of the Issuer are located at 200 South Hoover Boulevard, Building 205, Tampa, Florida 33609. Item 2. Identity and Background (a) - (c) This statement is being filed jointly by Stanford Venture Capital Holdings, Inc., a Delaware corporation ("SVCH"), and R. Allen Stanford, a citizen of the United States and Antigua ("Stanford"). The business address of SVCH and Stanford is 5050 Westheimer Road, Houston, Texas 77056. Stanford is a director of SVCH and is the sole shareholder of SVCH. SVCH's principal business is to provide investment capital and other funding to companies in various industries. (d)-(e) During the last five (5) years, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") effective as of October 22, 2002 by and among the Issuer, the principal stockholders of the Issuer, Healthcare Quality Solutions, Inc., a subsidiary of the Issuer ("HQS") and Provider Acquisition, LLC ("PAL"), SVCH acquired 1,915,842 shares of the Issuer's common stock. SVCH acquired such shares in exchange for all of its membership interest in PAL. SVCH owned approximately 89% of the membership interests in PAL. 4 Pursuant to a Securities Purchase Agreement ("Securities Purchase Agreement") dated October 16, 2002, SVCH has agreed to make an aggregate investment of $2,200,000, in several tranches, subject to the conditions of that agreement (the "Investment"). The Investment will be in the form of Series A Preferred Stock and Warrants of the Company. For its aggregate investment, SVCH will receive 1,880,342 shares of Series A Preferred Stock, convertible (subject to antidilution) into 1,880,342 shares of common stock at an conversion price of $1.17 per share. Each share of Series A Preferred Stock will have ten votes, voting together with the Common Stock on all matters submitted for a vote. Each Warrant will give the holder the right to acquire one share of the Issuer's common stock at an exercise price of $1.17 per share. The Warrants are immediately exercisable and expire on October 21, 2007. On October 22, 2002, SVCH acquired 512,820 shares of Series A Preferred Stock and Warrants to acquire 256,410 shares of Common Stock pursuant to the Securities Purchase Agreement. SVCH use funds from its working capital account to advance $600,000 to the Issuer at the closing held on October 22, 2002. Furthermore, within sixty days of October 22, 2002, SVCH has the right to acquire an additional 512,820 shares of Series A Preferred Stock and Warrants to acquire 256,410 shares of Common Stock (which excludes warrants to acquire 256,410 shares of Common Stock that are being transferred to four individuals pursuant to certain Warrant Assignment Agreements as described herein), each of which can be immediately converted or exercised into shares of Common Stock. For more information on SVCH's right to acquire securities of the Issuer, please review the Securities Purchase Agreement which is attached as Exhibit 10.2 to this Schedule 13D. SVCH has also agreed to transfer an aggregate of 50% of any Warrants that it acquires pursuant to the Securities Purchase Agreement to four individuals pursuant to a form of Warrant Assignment Agreement dated October 22, 2002, which is attached hereto as part of Exhibit 10.3 Each individual will receive 12.5% of any Warrants that SVCH acquires pursuant to the Securities Purchase Agreement and the names of these individuals who will receive the assignment of Warrants are William Fusselmann, Daniel Bogar, Osvaldo Pi and Ronald Stein. In connection with the Securities Purchase Agreement, the Issuer granted to SVCH certain registration rights with respect to the Series A Preferred Stock and the Warrants, which are contained in a certain registration rights agreement attached hereto as Exhibit 10.4. No later than 180 days following the Closing of the Investment, the Company is required to file an SB-2 Registration Statement under the Securities Act covering all of the shares of Common Stock purchased by SVCH, including shares that may be received through the exercise of Warrants. In the event a filing is not made within 180 days of the Closing, the Company will issue SVCH, as a penalty, additional warrants equal to ten percent (10%) of the warrants originally issued for every quarter the filing is not made. SVCH will have unlimited "piggy back" registration rights. In addition, one of the conditions to SVCH's agreement to enter into the Securities Purchase Agreement was that the minority members of PAL agree to certain lock-up restrictions on the shares of common stock that they received 5 in the merger pursuant to a Lock-Up Agreement between the Issuer, SVCH and the minority members of PAL, which is attached hereto as Exhibit 10.5. The minority members of PAL are (a) Ronald Miller, as Trustee for Marcy Lewis, Gary I. Miller, Michael L. Miller and Ronald L. Miller & Sheila L. Miller, (b) the Estate of Lillian Krause and (c) Brian Milvain. SVCH also agreed to commit an additional $2.4 million to the Issuer, subject to the satisfaction of certain conditions, to finance acquisitions and to satisfy the Issuer' outstanding tax liability, as further set forth in the Equity Financing Commitment Letter, which is attached hereto as Exhibit 10.6. Item 4. Purpose of Transaction The Reporting Persons purpose in acquiring the shares of Common Stock reported in Item 5(a) hereof is for investment purposes. Except as set forth herein and in the attached exhibits, the Reporting Persons do not have any plans or proposals that relate to or would result in: (i) the acquisition by any person of additional securities of the Issuer or the disposition of securities of the Issuer; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer; (iii) a sale or transfer of a material amount of assets of the Issuer; (iv) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (v) any material change in the present capitalization or dividend policy of the Issuer; (vi) any other material change in the Issuer's business or corporate structure; (vii) changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (viii) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an interdealer quotation system of a registered national securities association; (ix) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (x) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer (a) As of October 22, 2002, the Reporting Persons directly own 1,915,842 shares of Common Stock, 512,820 shares of Series A Preferred Stock and warrants to purchase 256,410 shares of the Issuer's common stock. Pursuant to the Securities Purchase Agreement, the Reporting Persons have the right to acquire within sixty (60) days of the date hereof an additional 512,820 shares of Series A Preferred Stock and Warrants to purchase 256,410 shares of the Issuer's Common Stock. The Reporting Persons are deemed to beneficially own 66.7% of the Issuer's issued and outstanding Common Stock (which includes the conversion of 512,820 shares of Series A Preferred Stock into Common Stock, the exercise of Warrants to acquire 256,410 shares of the Issuer's Common Stock and the exercise or conversion of all securities that can be acquired by the Reporting Person within 60 days of the date hereof pursuant to the Securities Purchase Agreement - 512,820 shares of Series A Preferred Stock, which can be converted into 512,820 shares of Common Stock and the exercise of Warrants to acquire 256,410 shares of Common Stock). SVCH directly beneficially owns all the shares of Common Stock to which this Schedule 13D relates. Stanford, as the sole shareholder of SVCH, could be deemed to have indirect beneficial ownership of the shares of Common Stock directly beneficially owned by SVCH. 6 (b) SVCH, together with Stanford, has the shared power to vote or direct the vote and the shared power to dispose or to direct the disposition of the shares of Common Stock and Preferred Stock reported as beneficially owned by it in Item 5(a) hereof. (c) The Reporting Persons only transaction in shares of Common Stock and Preferred Stock, respectively, during the past 60 days was the consummation of the Merger Agreement and the Securities Purchase Agreement. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Except as described in Item 3 of this Schedule 13D and in the attached exhibits, there are no contracts, arrangements, understandings or relationships (legal or otherwise) with respect to any securities of the Issuer to which SVCH or Mr.Stanford is a party or is subject. Item 7. Materials to be filed as Exhibits 10.1 Agreement and Plan of Merger effective as of October 22, 2002 by and among the Issuer, certain principal stockholders of the Issuer (the "Principal Stockholders"), HQS and PAL 10.2 Securities Purchase Agreement dated as of October 16, 2002, by and among the Issuer, the Principal Stockholders and SVCH 10.3 Form of Warrant Agreement and Warrant Assignment Forms 10.4 Registration Rights Agreement dated as of October 22, 2002 between the Issuer, SVCH, Daniel Bogar, Ronald Stein, Osvaldo Pi, William Fusselmann and Deluxe Corporation, Inc. 10.5 Lock-Up Agreement dated as of October 22, 2002 by and among the Issuer, SVCH and the members of PAL 10.6 Equity Financing Commitment Letter dated October 22, 2002 from SVCH to the Issuer 10.7 Certificate of Designation of Series A $1.17 Convertible Preferred Stock 99.1 Joint Filing Agreement, dated as of October 22, 2002, by and between Stanford Venture Capital Holdings, Inc. and R. Allen Stanford 7 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: October 22, 2002 /s/ R. Allen Stanford ------------------------- R. Allen Stanford STANFORD VENTURE CAPITAL HOLDINGS, INC. Date: October 22, 2002 /s/ Jim Davis ------------------------- Name: Jim Davis Title: President 8 EXHIBIT INDEX 10.1 Agreement and Plan of Merger effective as of October 22, 2002 by and among the Issuer, certain principal stockholders of the Issuer (the "Principal Stockholders"), HQS and PAL 10.2 Securities Purchase Agreement dated as of October 16, 2002, by and among the Issuer, the Principal Stockholders and SVCH 10.3 Form of Warrant Agreement and Warrant Assignment Form 10.4 Registration Rights Agreement dated as of October 22, 2002 between the Issuer, SVCH, Daniel Bogar, Ronald Stein, Osvaldo Pi, William Fusselmann and Deluxe Corporation, Inc. 10.5 Lock-Up Agreement dated as of October 22, 2002 by and among the Issuer, SVCH and the members of PAL 10.6 Equity Financing Commitment Letter dated October 22, 2002 from SVCH to the Issuer 10.7 Certificate of Designation of Series A $1.17 Convertible Preferred Stock 99.1 Joint Filing Agreement, dated as of October 22, 2002, by and between Stanford Venture Capital Holdings, Inc. and R. Allen Stanford. 9 EX-10.1 3 ex10-1.txt AGREEMENT AND PLAN OF MERGER EXHIBIT 10.1 EXECUTION COPY AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, (hereinafter referred to as the "Agreement") is made and entered into as of this 16th day of October, 2002 by and between SILVER KEY MINING COMPANY, INC., a Nevada corporation (hereinafter referred to as "SKM"), the stockholders of SKM listed on the signature page (collectively, the "Principal Stockholders"), HEALTHCARE QUALITY SOLUTIONS, INC., a Florida corporation and wholly-owned subsidiary of SKM ("HQS"), and PROVIDER ACQUISITION, LLC, a Florida limited liability company (hereinafter referred to as "PAL"). RECITALS WHEREAS, SKM and PAL desire to merge PAL with and into HQS, whereby HQS shall be the surviving entity pursuant to the terms and conditions set forth herein and whereby the transaction shall qualify as a tax free exchange pursuant to Section 351 of the Internal Revenue Code (the "IRC"); WHEREAS, in furtherance of such combination, each of the Boards of Directors of SKM and HQS, and the Manager of PAL have each approved the merger of PAL with and into HQS (the "Merger"), upon the terms and subject to the conditions set forth herein, in accordance with Section 92A.100 of the Nevada Revised Statutes ("NRS") in the case of SKM, Section 607.1108 of the Florida Business Corporation Act (the "FBCA"), in the case of HQS, and Section 608.438 of the Florida Limited Liability Company Act (the "FLLCA") in the case of PAL. WHEREAS SKM presently has, issued and outstanding, a total of 1,500,000 shares of its common stock, par value $0.001 per share ("SKM Common Stock") and has no other Equity Securities (as defined herein) issued and outstanding; and WHEREAS, the members of PAL (individually a "Member" and collectively the "Members") desire to exchange all of their membership interests in PAL (the "Membership Interests") for Two Million One Hundred and Forty Two Thousand Eight Hundred and Fifty Seven (2,142,857) shares of SKM Common Stock representing approximately 58.8% of the total issued and outstanding SKM Common Stock on a fully diluted basis and in the respective amounts set forth in Schedule 1.2 hereto. WHEREAS, the parties hereto desire to reorganize, pursuant to Section 368(a)(1)(A) of the IRC, the operations of SKM and HQS. NOW, THEREFORE, in consideration of the premises and mutual representations, warranties and covenants herein contained, the parties hereby agree as follows: ARTICLE I SECTION 1.1 (a) Merger and Plan of Reorganization. At the Effective Time (as defined in Section 1.1(b) hereof), and subject to and upon the terms and conditions of this Agreement, the FBCA and the FLLCA , PAL shall be merged with and into HQS, the separate corporate existence of PAL shall cease, and HQS shall continue as the surviving corporation and shall remain a wholly-owned subsidiary of SKM. HQS after the Effective Time is sometimes referred to herein as the "Surviving Corporation". As consideration for their agreement to surrender their Membership Interests and to approve the Merger, the Members shall receive an aggregate of Two Million One Hundred and Forty Two Thousand Eight Hundred and Fifty Seven (2,142,857) shares of shares of authorized but previously unissued SKM Common Stock (the "Merger Shares"), on a pro rata basis determined by multiplying the Membership Interests held by each Member by 0.74606 (the "Conversion Ratio"). (b) The Effective Time. As promptly as practicable after the satisfaction or waiver of the conditions set forth in Articles VII, VIII and IX hereof, the parties hereto shall cause the merger to be consummated by filing the Articles of Merger as contemplated by Section 607.1109 of the FBCA ("the "Certificate of Merger") and the Articles of Merger as contemplated by Section 608.4382 of the FLLCA (the "Articles of Merger"), together with any required related documents, with the appropriate administrator, as indicated in the FBCA and the FLLCA, in such form as required by, and executed in accordance with the relevant provision of, the FBCA and the FLLCA. The Merger shall be effective at the time indicated in such Certificate of Merger and Articles of Merger (the "Effective Time"). SECTION 1.2 Issuance of Merger Shares. (a) At the Closing, SKM shall cause to be issued and delivered to the Members or their designees, stock certificates evidencing their ownership of the Merger Shares in the amounts set forth in Schedule 1.2 hereto. (b) The Merger Shares to be issued hereunder are deemed "restricted securities" as defined by Rule 144 promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), and the recipients shall represent, in writing to SKM prior to the issuance of share certificates representing the Merger Shares, that (i) they are acquiring the Merger Shares for investment purposes only and without the intent to make a further distribution of the Merger Shares, (ii) they are each an accredited investor within the meaning of Rule 501(a) under the Securities Act, or, if not such an accredited investor, has, alone or together with a purchaser representative within the meaning of Rule 501(h) under the Securities Act, such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in securities in general and of an investment in SKM in particular, (iii) they are aware of the limits on resale imposed by virtue of the nature of the transactions contemplated by this Agreement, and (iv) they have been given the 2 opportunity to ask questions of, and receive answers from, the officers of SKM regarding SKM, its current and proposed business operations and the SKM Common Stock, and the officers of SKM have made available to such stockholder all documents and information that such stockholder has requested relating to an investment in SKM. In addition, in the case of all of the Members, other than Stanford Venture Capital Holdings, Inc. ("SVCH"), as a condition of and prior to the issuance to such Members of certificates representing the Merger Shares, such Members shall execute and deliver to SKM a Lock-Up Agreement substantially in the form of Exhibit 1.2(b) attached hereto (the "Lock-Up Agreement"). (c) All Merger Shares to be issued under the terms of this Agreement shall be issued pursuant to exemptions from the registration requirements of the Securities Act and the rules and regulations promulgated thereunder. Certificates representing the restricted Merger Shares shall bear the following, or similar legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION PROVISIONS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. In addition, the certificates representing the Merger Shares to be issued to all recipients, other than SVCH, shall bear the following legend: The Shares represented by this certificate are subject to certain restrictions on transfer and certain restrictions on the sale of such Shares contained in that certain Lock Up Agreement dated as of October 22, 2002 entered into by and between the Company and the Holder hereof. A copy of such Agreement will be furnished without charge by the Company to the Holder hereof upon written request. SECTION 1.3 Effects of the Merger. (a) Certificate of Incorporation. The Articles of Incorporation of HQS, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation and thereafter may be amended or repealed in accordance with its terms and applicable law. (b) By-Laws. The By-laws of HQS, as in effect immediately prior to the Effective Time shall be the By-laws of the Surviving Corporation 3 and thereafter may be amended or repealed in accordance with their terms or the Articles of Incorporation of the Surviving Corporation and as provided by applicable law. (c) Directors of Surviving Corporation. The directors of the Surviving Corporation immediately after Closing shall be Mr. Steven Katz, Ms. Batsheva Schreiver and Mr. Brian M. Milvain, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. (d) Officers. The sole officer of the Surviving Corporation immediately after the Closing shall be Brian M. Milvain, who shall serve as President until the earlier of his resignation or removal or until his successor is duly appointed and qualified, as the case may be. (e) Tax-Free Reorganization. The parties intend that the Merger shall be treated as a tax-free exchange pursuant to Section 351 of the IRC. No party shall take any action or fail to take any action that would adversely affect the treatment of the Merger as a tax-free exchange. SECTION 1.4 Closing. Unless this Agreement shall have been terminated pursuant to Section X, and subject to the satisfaction or waiver, if permissible, of the conditions set forth in Articles VII, VIII and IX hereof, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place (i) at the offices of Adorno & Yoss, at 2601 S. Bayshore Drive, Miami, Florida 33133, on October 22, 2002, or (ii) at such other time, date or place as PAL and HQS may mutually agree. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SKM, HQS AND THE PRINCIPAL STOCKHOLDERS As an inducement of PAL to enter into this Agreement, SKM, HQS and each Principal Stockholder hereby makes jointly and severally, as of the date hereof and as of the Closing Date, the following representations and warranties (in the case of the Principal Stockholders, the best of their Knowledge, as hereinafter defined) to PAL and the Members. SECTION 2.1 Organization of SKM. SKM is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, is duly qualified and in good standing as a foreign corporation in every jurisdiction in which such qualification is necessary, and has the corporate power and authority to own its properties and assets and to transact the business in which it is engaged. SKM is a shell company with no assets or business operations. Schedule 2.1 contains a complete and accurate list for SKM and HQS of their jurisdictions of incorporation and other jurisdictions in which they are qualified to do business. SKM, HQS and the Principal Stockholders have all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and thereby, and have taken all corporate or other action necessary to consummate the transactions contemplated hereby and thereby and to perform their respective obligations hereunder and thereunder. This Agreement upon its execution and 4 delivery, is the legal, valid and binding obligation of SKM, HQS and the Principal Stockholders enforceable against SKM, HQS and the Principal Stockholders in accordance with its respective terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. HQS is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, is duly qualified and in good standing as a foreign corporation in every jurisdiction in which such qualification is necessary, and has the corporate power and authority to own its properties and assets and to transact the business in which it is engaged. There are no corporations or other entities with respect to which (i) HQS owns any of the outstanding stock or other interests, or (ii) HQS may be deemed to be in control. SECTION 2.2 Capitalization of SKM. (a) The authorized capital stock of SKM consists of Twenty Million (20,000,000) shares of Common Stock, par value $0.001 per share, of which One Million Five Hundred Thousand (1,500,000) shares of SKM Common Stock are and will be issued and outstanding as of the Closing, and Five Million (5,000,000) shares of undesignated preferred stock, par value $0.001 per share, none of which are or at the Closing will be issued and outstanding. Schedule 2.2(a) contains a complete and accurate stockholder list of SKM showing all SKM capital stock issued and outstanding as of the date hereof. All shares of SKM Common Stock currently issued and outstanding have been duly authorized and validly issued and are fully paid and non-assessable, and have been issued in compliance with any and all applicable federal and state laws or pursuant to appropriate exemptions therefrom. There are no options, warrants, rights, calls, commitments or agreements of any character obligating SKM to issue any shares of its capital stock or other securities or any security representing the right to purchase or otherwise receive any such stock or other securities. The Merger Shares, when issued, will be duly authorized, validly issued, fully paid and non-assessable. (b) Other than the transactions contemplated by this Agreement, there is no outstanding vote, plan, pending proposal or right of any person to cause any redemption of SKM Common Stock or the merger or consolidation of SKM with or into any other entity. SKM is not under any obligation under any agreement to register any of its securities under federal or state securities laws, except as set forth in the Registration Rights Agreement contemplated hereby. (c) With the exception of HQS, there are no corporations or other entities with respect to which (i) SKM owns any of the outstanding stock or other interests, or (ii) SKM may be deemed to be in control. (d) There are no agreements among stockholders of SKM, or otherwise, voting trusts, proxies or other agreements or understanding of any character, whether written or oral, with respect to or concerning the purchase, sale, transfer or voting of the SKM Common Stock or any other security of SKM. (e) Except as set forth in Section 6.5 hereof, none of SKM, HQS or any Principal Stockholders have any legal obligations, absolute or 5 contingent, to any other person or entity to sell the assets or to sell any capital stock or any other security of SKM or HQS or to effect any merger, consolidation or other reorganization of SKM or HQS or to enter into any agreement with respect thereto, except pursuant to this Agreement. There are one thousand (1,000) shares of common stock, $0.01 par value per share, (the "HQS Stock") of HQS authorized, which are all outstanding and held by SKM. The HQS Stock was validly issued, fully paid and non-assessable and not subject to any preemptive rights created by statute, HQS's Articles of Incorporation or By-laws or any contract. There is no outstanding vote, plan, pending proposal or right of any person or entity to cover any redemption of the HQS Stock as to the merger or consolidation of HQS with or into any other entity, except as contemplated hereby. HQS holds no assets and conducts no business, except as contemplated hereby. SECTION 2.3 Charter Documents. Certified copies of the Articles of Incorporation and By-laws of SKM, as amended to date, the Articles of Incorporation of HQS and the By-laws of HQS have been delivered to PAL prior to the Closing and are true, correct and complete copies thereof. SECTION 2.4 Corporate Documents. The SKM shareholders' list as set forth on Schedule 2.4 and corporate minute books are complete and accurate as of the date hereof and the corporate minute books contain the recorded minutes of all corporate meetings or the written consents of shareholders and directors. SECTION 2.5 Financial Statements. (a) SKM's audited financial statements for the years ended December 31, 1999, 2000 and 2001, and unaudited financial statements for the quarters ended March 31, 2002 and June 30, 2002 (the audited and unaudited financial statements together, the "SKM Financial Statements"), copies of which have been delivered to PAL, are true and complete in all material respects, having been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis for the period covered by such statements, and fairly present, in accordance with generally accepted accounting principles, the consolidated financial condition of SKM, and results of its operations for the periods covered thereby. SKM maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed with management's authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's authorizations and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any difference. SKM has not engaged in any transaction, maintained any bank account or used any corporate funds except for transactions, bank accounts or funds which have been and are reflected in the normally maintained books and records. Except as otherwise disclosed to PAL in writing and as set forth herein, there has been no material adverse change in the business operations, assets, properties, prospects or condition (financial or otherwise) of SKM taken as a whole from that reflected in the financial statements referred to in this Section 2.5(a). 6 (b) SEC Documents. SKM has furnished PAL with a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by SKM with the SEC since August 31, 1999 and all correspondence from the Securities and Exchange Commission and any blue sky administrator with respect thereto (as such documents have since the time of their filing been amended, the "SKM SEC Documents") and since that date SKM has filed with the SEC all documents required to be filed pursuant to Section 15(d) of the Exchange Act, including but not limited to, a statement of beneficial ownership on the appropriate form, by each person known by SKM to beneficially own more than five percent (5%) of the issued and outstanding Common Stock of SKM and an Information Statement under Rule 14f-1 of the SEC describing the change of the Board of Directors of SKM contemplated hereby. As of their respective dates, the SKM SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such SKM SEC Documents, and none of the SKM SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of SKM included in the SKM SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, are accurate, complete and in accordance with the books and records of SKM and have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-QSB of the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, recurring audit adjustments) the consolidated financial position of SKM as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended. SECTION 2.6 Absence of Certain Changes or Events. Since the date of the latest SKM financial statement and except as disclosed on Schedule 2.6, neither SKM nor HQS have (i) issued or sold any promissory note, stock, bond, option or other security of which it was an issuer or other obligor, (ii) discharged or satisfied any lien or encumbrance or paid any obligation or liability, absolute or contingent, direct or indirect, (iii) incurred or suffered to be incurred any liability or obligation whatsoever, (iv) caused or permitted any lien, encumbrance or security interest to be created or arise on or in any of its properties or assets, (v) declared or made any dividend, payment or distribution to stockholders or purchased or redeemed or agreed to purchase or redeem any shares of its capital stock, (vi) reclassified its shares of capital stock, (vii) amended its Articles of Incorporation or By-Laws, (viii) acquired any equity interest in any other Person, or (ix) entered into any agreement or transaction except in connection with the execution and performance of this Agreement, and SKM nor HQS have not entered into any Agreement to do any of the foregoing actions described in this Section 2.6. SECTION 2.7 Assets and Liabilities. SKM and HQS have no assets. As of the date hereof, neither SKM nor HQS have any debts, liabilities or obligations of any nature, whether accrued, absolute, contingent, or otherwise, whether due or to become due, that are not fully reflected in the SKM Financial Statements. HQS has no assets and no liabilities. 7 SECTION 2.8 Tax Returns and Payments. All tax returns of SKM (Federal, state, city, county or foreign) which are required by law to be filed on or before the date of this Agreement, have been duly filed and are complete and accurate in all respects. SKM has paid all taxes due on said returns, any assessments made against SKM and all other taxes, fees and similar charges imposed on SKM by any governmental authority (other than those, the amount or validity of which is being contested in good faith by appropriate proceedings). No tax liens have been filed and no claims are being assessed with respect to any such taxes, fees or other similar charges. SKM does not know of (i) any other tax returns or reports which are required to be filed which have not been so filed and (ii) any unpaid assessment for additional taxes for any fiscal period or any basis thereof. HQS which was formed on October 15, 2002 has not filed, and has not yet been required to file any tax returns. SECTION 2.9 Required Authorizations. There have been or will be timely filed, given, obtained or taken, all applications, notices, consents, approvals, orders, registrations, qualifications, waivers or other actions of any kind required by virtue of execution and delivery of this Agreement by SKM and HQS or the consummation by them of the transactions contemplated hereby. SECTION 2.10 Compliance with Law and Government Regulations. SKM and HQS are in compliance with, and are not in violation of, applicable federal, state, local or foreign statutes, laws and regulations (including without limitation, any applicable building, zoning or other law, ordinance or regulation) affecting SKM, HQS or any of their properties or the operation of its businesses. SKM and HQS are not subject to any order, decree, judgment or other sanction of any court, administrative agency or other tribunal. SECTION 2.11 Litigation. There is no litigation, arbitration, proceeding or investigation pending, or to the Knowledge of SKM, HQS or the Principal Stockholders, threatened or anticipated to which SKM or HQS is a party or which may result in any material change in the business or condition, financial or otherwise, of SKM or HQS or in any of their properties or assets, or which might result in any liability on the part of SKM or HQS, or which questions the validity of this Agreement or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement, and to the Knowledge of SKM, HQS or the Principal Stockholders, there is no basis for any such litigation, arbitration, proceeding or investigation. There are presently no outstanding judgments, decrees or orders of any court or any governmental or administrative agency against or affecting SKM or HQS or any of their assets. All references to the "Knowledge" in this Agreement shall mean the actual knowledge of such party or the knowledge that such party could reasonably be expected to have, after reasonable investigation and due diligence. SECTION 2.12 Intellectual Property. (a) SKM and HQS do not use any patents, trade mark, service mark, trade name, or copyright in its business, nor does it own any patents, trade marks, trade mark registrations or applications, trade names, service marks, copyrights, copyright registrations or applications. No person owns any patents trademark, trade mark registration or application, service mark, trade 8 name, copyright or copyright registration or application, the use of which is necessary or contemplated in connection with the operation of the business of SKM or HQS. (b) Neither SKM nor HQS have knowledge of any facts and nothing has come to their attention that would lead it to believe that either has infringed or misappropriated or is infringing upon any trademark, copyright, patent or other similar right of any person. No claim relating thereto is pending or to the knowledge of SKM or HQS is threatened. SECTION 2.13 Governmental Consent. No consent, approval, authorization or order of, or registration, qualification, designation, declaration or filing with, any governmental authority on the part of SKM or HQS is required in connection with the execution and delivery of this Agreement or the carrying out of any transactions contemplated hereby with the exception of the necessary corporate filings with the States of Nevada and Florida relating to the proposed exchange of shares. SECTION 2.14 Authority. SKM, HQS and the Principal Stockholders have full power, authority and legal right to enter into this Agreement and to consummate the transactions contemplated hereby and thereby, and have taken all corporate or other action necessary to consummate the transactions contemplated hereby and thereby and to perform their respective obligations hereunder and thereunder. This Agreement upon its execution and delivery, is the legal, valid and binding obligation of SKM, HQS and the Principal Stockholders, enforceable against SKM, HQS and the Principal Stockholders, in accordance with its respective terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. SECTION 2.15 No Disqualifying Orders. None of SKM, HQS or the Principal Stockholders or any of their respective affiliates, directors, officers or principals is subject to any disqualifying order under the "Bad Boy" provisions of the federal or any state's securities law. As used herein, "Bad Boy" provisions include Rule 262 of Regulation A, Rule 507 of Regulation D and other similar disqualifying provisions of federal and state securities laws. SECTION 2.16 Real Property. Neither SKM nor HQS own or lease any real property. SECTION 2.17 Contracts. (b) Neither SKM or HQS is a party to: (i) any agreement (or group of related agreements) for the lease of personal property from or to third parties; (ii) any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services; (iii) any agreement concerning the establishment or operation of a partnership, joint venture or limited liability company; 9 (iv) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations); (v) any agreement for the disposition of any significant portion of the assets or business of SKM or any agreement for the purchase by SKM or HQS of the assets or business of any other entity; (vi) any agreement concerning confidentiality or noncompetition; (vii) any employment or consulting agreement; (viii) any agreement involving any current or former officer, director or stockholder of SKM or HQS or an affiliate thereof; (ix) any agreement under which the consequences of a default or termination would reasonably be expected to have a material adverse effect on SKM or HQS; (x) any agreement which contains any provisions requiring SKM or HQS to indemnify any other party; (xi) any other agreement. (c) SKM has delivered to PAL a complete and accurate copy of each agreement listed in Schedule 2.17. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither SKM or HQS, nor, to the knowledge of SKM or HQS, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of SKM or HQS, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by SKM or HQS or, to the knowledge of SKM or HQS, any other party under such agreement. SECTION 2.18 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of SKM or HQS. SECTION 2.19 Insurance. Schedule 2.19 lists each insurance policy (including fire, theft, casualty, comprehensive general liability, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which SKM or HQS is a party, all of which are in full force and effect. Such insurance policies are of the type and in amounts customarily carried by organizations conducting businesses or owning assets similar to those of SKM or HQS, respectively. There is no material claim pending under any such policy as to which coverage has been questioned, denied or disputed by the underwriter of such policy. All premiums due and payable under all such policies have been paid, SKM or HQS may not be liable for retroactive premiums or similar payments, and SKM and HQS is otherwise in compliance in all material respects with the terms of such policies. Neither SKM nor HQS has knowledge of any threatened 10 termination of, or premium increase with respect to, any such policy. Each such policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing. SECTION 2.20 Employee Benefits. Neither SKM nor HQS sponsors or otherwise maintain a "pension plan" within the meaning of Section 3(2) of ERISA or any other retirement plan, nor do any unfunded liabilities exist with respect to any employee benefit plan, past or present. No employee benefit plan, any trust created thereunder or any trustee or administrator thereof has engaged in a "prohibited transaction," as defined in Section 4975 of the IRC, which may have an adverse effect on the condition, financial or otherwise, of SKM or HQS. SECTION 2.21 Permits. SKM and HQS have all Permits that are or will be legally required to enable it to conduct its business in all material respects as now conducted. SECTION 2.22 No Conflict or Violation; Consent. None of the execution, delivery or performance of this Agreement, the consummation of the transactions contemplated hereby or thereby, nor compliance by SKM, HQS or any Principal Stockholder with any of the provisions hereof or thereof, will (a) violate or conflict with any provision of the governing documents of SKM, HQS or any Principal Stockholder, (b) violate, conflict with, or result in a breach of or constitute a default (with or without notice of passage of time) under, or result in the termination of, or accelerate the performance required by, or result in a right to terminate, accelerate, modify or cancel under, or require a notice under, or result in the creation of any encumbrance upon any of its respective assets under, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument of indebtedness, security interest or the arrangement to which SKM, HQS or any Principal Stockholder is a party or by which SKM, HQS or any Principal Stockholder is bound or to which any of its respective assets are subject, (c) violate any applicable regulation or court order or (d) impose any encumbrance on any assets. No notices to, declaration, filing or registration with, approvals or consents of, or assignments by, any Person (including any federal, state or local governmental or administrative authorities) are necessary to be made or obtained by SKM, HQS or any Principal Stockholder in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby or thereby. SECTION 2.23 Full Disclosure. None of the representations and warranties made by SKM, HQS or any Principal Stockholders herein, or in any exhibit, certificate or memorandum furnished or to be furnished by SKM, on its behalf pursuant hereto, contains or will contain any untrue statement of material fact, or omits any material fact, the omission of which would be misleading. The information with respect to SKM or HQS which is to be included in any information statement or proxy statement to be sent to the shareholders of SKM will not contain any untrue statement of material fact, or omit to state any material fact necessary to make the statement or fact contained herein not misleading. SECTION 2.24 Transactions with Affiliates. No director or officer of SKM, HQS or any Principal Stockholders or any member of his or her immediate family, is a party to any contract or other business arrangement or relationship of any kind with SKM, HQS or the Principal Stockholders, or has an ownership 11 interest in any business, corporate or otherwise, which is a party to, or in any property which is the subject of, business arrangements or relationships of any kind with SKM, HQS or any Principal Stockholders. SECTION 2.25 Environmental Matters. (d) SKM and HQS are in compliance with all Environmental Laws (as defined below); (e) Neither SKM nor HQS has knowledge of an existing or potential Environmental Claim (as defined below), nor has SKM, HQS or any Principal Stockholder received any notification or knowledge of alleged, actual or potential responsibility for, or any inquiry or investigation regarding, any disposal, release, or threatened release at any location of any Hazardous Substance (as defined below) stored, generated or transported by SKM or HQS; (f) (A) no underground tank or other underground storage receptacle for Hazardous Substance has leaked from any underground tank or related piping at any time; and (B) there have been no releases of Hazardous Substances by SKM or HQS on, upon or into any properties of SKM or any of its predecessors or HQS; (g) There has never been any PCBs or asbestos located at or on any owned or leased property by SKM or any of its predecessors or HQS; (h) No environmental lien has ever been attached to any real property owned or leased by SKM or any of its predecessors or HQS; (i) Definitions. (i) For purposes of this Agreement, "Environmental Laws" shall mean all federal, state, district, local and foreign laws, all rules or regulations promulgated thereunder, and all orders, consent orders, judgments, notices, permits, or demand letters issued, promulgated, or entered pursuant thereto, relating to pollution or protection of the environment (including without limitation ambient air, surface water, ground water, land surface, or subsurface strata), including without limitation (x) laws relating to emissions, discharges, releases or threatened releases, or threatened releases of pollutants, contaminants, chemicals, materials, wastes or other substances into the environment and (y) laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of pollutants, contaminants, chemicals, industrial materials, wastes or other substances. (ii) For purposes of this Agreement, "Environmental Claims" shall mean all accusations, allegations, notice of violations, liens, claims, demands, suits or causes of action or any damage, including without limitation, personal injury, property damage (including any depreciation of property values), lost use of property, or consequential damages, arising directly or indirectly out of Environmental Conditions or Environmental Laws. 12 (iii) For purposes of this Agreement, "Environmental Conditions" shall mean the state of environment, including natural resources (e.g. flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata, or ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injection, escaping, leaching, disposal, dumping, or threatened release of Hazardous Substances by any Consolidated Entity or its predecessors or such predecessors in interest, agents, representatives, employees, or independent contracts. (iv) For purposes of this Agreement, "Hazardous Substances" shall mean all pollutants, contaminants, chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic, or otherwise hazardous substances or materials (whether solids, liquids or gases), including but not limited to any substances, materials, or wastes subject to regulation, control, or remediation under Environmental Laws. ARTICLE III COVENANTS OF SKM, HQS AND THE PRINCIPAL STOCKHOLDERS SECTION 3.1 Conduct Prior to the Closing. Between the date hereof and the Closing, other than actions or transactions referred to herein: (a) SKM and HQS will not enter into any material agreement, contract or commitment, whether written or oral, or engage in any transaction, without the prior written consent of PAL; (b) SKM and HQS will not pay, incur or declare any dividends or distributions with respect to their capital stock or amend its Articles of Incorporation or By-Laws, without the prior written consent of PAL; (c) SKM and HQS will not authorize, issue, sell, purchase or redeem any shares of their capital stock or any options or other rights to acquire their capital stock, without the prior written consent of PAL; (d) SKM and HQS will comply with all requirements which federal or state law may impose on them with respect to this Agreement and the transactions contemplated hereby, and will promptly cooperate with and furnish written information to PAL in connection with any such requirements imposed upon the parties hereto in connection therewith; (e) SKM and HQS will not incur any indebtedness for money borrowed, or issue or sell any debt securities, incur or suffer to be incurred any liability or obligation of any nature whatsoever, or cause or permit any lien, encumbrance or security interest to be created or arise on or in any of their properties or assets, acquire or dispose of fixed assets change employment terms, enter into any material or long-term contract, guarantee obligations of any third party, settle or discharge any balance sheet receivable for less than 13 its stated amount or enter into any other transaction other than in the regular course of business, except to comply with the terms of this Agreement, without the prior written consent of PAL; (f) SKM and HQS will not make any investment of capital nature either buy purchased stock or securities, contribution to capital, property transfer or otherwise, or by the purchase of any property or assets of any other Person; (g) SKM and HQS will not enter into any contract whatsoever, including any employment contract or any other compensation arrangement; (h) SKM and HQS will not do any other act which would cause representation or warranty of SKM and HQS in this Agreement to be or become untrue in any material respect or that is not in the ordinary course of business consistent with past practice; (i) None of SKM, HQS or any Principal Stockholder shall directly or indirectly (a) solicit any inquiry or proposals or enter into or continue any discussions, negotiation or agreements relating to (i) the sale or exchange of SKM or HQS's capital stock, (ii) the merger of SKM or HQS with any Person other than PAL, or (b) provide any assistance or any information to other otherwise cooperate with any Person in connection with any such inquiry, proposal or transaction; (j) SKM and HQS shall grant to PAL and its counsel, accountants and other representatives, full access during normal business hours during the period to the Closing to all of its respective properties, books, contracts, commitments and records and, during such period, furnish promptly to PAL and such representatives all information relating to SKM or HQS as PAL may reasonably request, and shall extend to PAL the opportunity to meet with SKM's accountants and attorneys to discuss the financial condition of SKM or HQS; and (k) Except for the transactions contemplated by this Agreement, SKM and HQS will conduct their business in the normal course consistent with post practices, and shall not sell, pledge or assign any of their assets without the prior written consent of PAL. SECTION 3.2 Affirmative Covenants. Prior to Closing, SKM and HQS will do the following: (a) Use their best efforts to accomplish all actions necessary to consummate this Agreement, including satisfaction of all conditions contained in this Agreement; (b) Promptly notify PAL in writing of any material adverse change in the financial condition, business, operations or key personnel of SKM or HQS, any threatened material litigation or investigation, any breach of its representations or warranties contained herein, and any material contract, agreement, license or other agreement which, if in effect on the date of this Agreement, should have been included in this Agreement or in an exhibit annexed hereto and made a part hereof; 14 (c) Use their best efforts to satisfy all consents of or notices to its shareholders under federal and state securities laws and state corporate law; and (d) Obtain the written resignations of the existing officers and directors of SKM, and nominate a new Board of Directors, whose nominees are listed in Section 1.5(d), which nominations shall be effective 10 days after complying with the requirements of Rule 14f-1 of the Exchange Act, in accordance with Section 1.5(d). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PAL PAL hereby represents, warrants and agrees to the best of its knowledge that: SECTION 4.1 Organization of PAL. PAL is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Florida, is duly qualified or will become duly qualified and in good standing in every jurisdiction in which such qualification is necessary. Schedule 4.1 contains a complete and accurate list for PAL of its jurisdiction of incorporation and other jurisdictions in which it is qualified to do business. There are no corporations or other entities with respect to which (i) PAL owns any of the outstanding stock or other interests, or (ii) PAL may be deemed to be in control. SECTION 4.2 Capitalization of PAL. (a) As of the date hereof, PAL has issued and outstanding 2,872,221 Membership Units. All such PAL Membership Units of PAL currently issued and outstanding have been duly authorized and validly issued and are fully paid and non-assessable, and have been issued in compliance with any and all applicable federal and state laws or pursuant to appropriate exemptions therefrom. Other than the options listed in Schedule 4.2(a) hereto, there are no outstanding options, warrants, rights, calls, commitments or agreements of any character obligating PAL to issue any shares of its capital stock or other securities or any security representing the right to purchase or otherwise receive any such stock or other securities. Schedule 4.2(a) sets forth the name of each holder of Membership Units in PAL, as well as the number of Membership Units in PAL held by each such holder as of the Effective Date. (b) Other than the transactions contemplated by this Agreement, there is no outstanding vote, plan, pending proposal or right of any person to cause any redemption of PAL Membership Units or the merger or consolidation of PAL with or into any other entity. (c) There are no agreements among Members of PAL, or otherwise, voting trusts, proxies or other agreements or understanding of any character, whether written or oral, with respect to or concerning the purchase, sale, transfer or voting of the PAL Membership Units or any other security of PAL, except as set forth in Schedule 4.2(c). (d) PAL does not have any legal obligations, absolute or contingent, to any other person or entity to sell the assets or to sell any 15 capital stock or any other security of PAL or to effect any merger, consolidation or other reorganization of PAL or to enter into any agreement with respect thereto, except pursuant to this Agreement. SECTION 4.3 Charter Documents. Complete and correct copies of the Articles of Organization and First Amended and Restated Limited Liability Company Agreement of PAL have been delivered to SKM. SECTION 4.4 Required Authorizations. There have been or will be timely filed, given, obtained or taken, all applications, notices, consents, approvals, orders, registrations, qualifications waivers or other actions of any kind required by virtue of execution and delivery of this Agreement by PAL or the consummation by it of the transactions contemplated hereby and appropriate corporate filings shall have been made in the State of Florida, as required. SECTION 4.5 Compliance with Law and Government Regulations. PAL is, to the best of its knowledge, in compliance with all applicable statutes, regulations, decrees, orders, restrictions, guidelines and standard affecting its properties and operations, imposed by the United States of America or any state to which PAL is subject, the failure to comply with which would, either individually or in the aggregate, have a material adverse effect on the business, finances or prospects of PAL. SECTION 4.6 Litigation. There is no litigation, arbitration, proceeding or investigation pending or threatened to which PAL is a party or which may result in any material change in the business of condition, financial or otherwise, of PAL or in any of its properties or assets, or which might result in any liability on the part of PAL, or which questions the validity of this Agreement or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement, and to the best knowledge of PAL, there is no basis for any such litigation, arbitration, proceeding or investigation except as otherwise set forth in Schedule 4.6. SECTION 4.7 Governmental Consent. No consent, approval, authorization or order of, or registration, qualification, designation, declaration or filing with, any governmental authority on the part of PAL is required in connection with the execution and delivery of this Agreement or the carrying out of any transactions contemplated other than filing the Agreement together with Articles of Merger with the State of Florida. SECTION 4.8 Authority. PAL and its Manager have approved this Agreement and duly authorized the execution hereof. The Manager has full power, authority and legal right to enter into this Agreement on behalf of PAL and its Members and to consummate the transactions contemplated hereby, and all corporate action necessary to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and compliance by PAL with the provisions hereof will not (a) conflict with or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of PAL under, any of the terms, conditions or provisions of the Articles of Organization of PAL, or any note, bond, mortgage, indenture, license, agreement 16 or any instrument or obligation to which PAL is a party or by which it is bound; or (b) violate any order, writ, injunction, decree, statute, rule or regulation applicable to PAL or any of its properties or assets. SECTION 4.9 No Disqualifying Orders. Neither PAL nor any of its affiliates, directors or officers is subject to any disqualifying order under the "Bad Boy" provisions of the federal or any state's securities law which are defined in Section 2.16. SECTION 4.10 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of PAL. SECTION 4.11 Permits. PAL has all Permits that are or will be legally required to enable it to conduct its business in all material respects as now conducted. SECTION 4.12 No Conflict or Violation; Consent. None of the execution, delivery or performance of this Agreement, the consummation of the transactions contemplated hereby or thereby, nor compliance by PAL with any of the provisions hereof or thereof, will (a) violate or conflict with any provision of the governing documents of PAL, any of its subsidiaries, (b) violate, conflict with, or result in a breach of or constitute a default (with or without notice of passage of time) under, or result in the termination of , or accelerate the performance required by, or result in a right to terminate, accelerate, modify or cancel under, or require a notice under, or result in the creation of any encumbrance upon any of its respective assets under, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument of indebtedness, security interest or the arrangement to which PAL is a party or by which PAL is bound or to which any of its respective assets are subject, (c) violate any applicable regulation or court order or (d) impose any encumbrance on any assets. No notices to, declaration, filing or registration with, approvals or consents of, or assignments by, any Person (including any federal, state or local governmental or administrative authorities) are necessary to be made or obtained by PAL in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. SECTION 4.13 Full Disclosure. None of the representations and warranties made by PAL herein, or in any exhibit, certificate or memorandum furnished or to be furnished by, on its behalf pursuant hereto, contains or will contain any untrue statement of material fact, or omits any material fact, the omission of which would be misleading. ARTICLE V COVENANTS OF PAL SECTION 5.1 Conduct Prior to the Closing. Between the date hereof and the Closing: (a) PAL will not pay, incur or declare any dividends or distributions with respect to its Membership Interests or amend its Articles of Organization, without the prior written consent of SKM; 17 (b) PAL will not authorize, issue, sell, purchase, or redeem any units of ownership or any options or other rights to acquire ownership interests without the prior written consent of SKM; (c) PAL will not do any other act which would cause representation or warranty of PAL in this Agreement to be or become untrue in any material respect or that is not in the ordinary course of business consistent with past practice; (d) PAL shall not directly or indirectly (a) solicit any inquiry or proposals or enter into or continue any discussions, negotiation or agreements relating to (i) the sale or exchange of PAL's Membership Interests (ii) the merger of PAL with any Person other than SKM or (b) provide any assistance or any information to other otherwise cooperate with any Person in connection with any such inquiry, proposal or transaction; (e) PAL will comply with all requirements which federal or state law may impose on it with respect to this Agreement and the transactions contemplated hereby, and will promptly cooperate with and furnish written information to SKM in connection with any such requirements imposed upon the parties hereto in connection therewith; and (f) PAL shall grant to SKM and its counsel, accountants and other representatives, full access during normal business hours during the period to the Closing to all its respective properties, books, contracts, commitments and records and, during such period, furnish promptly to SKM and such representatives all information relating to PAL as SKM may reasonably request, and shall extend to SKM the opportunity to meet with PAL's accountants and attorneys to discuss the financial condition of PAL. SECTION 5.2 Affirmative Covenants. Prior to Closing, PAL will do the following: (a) Use its best efforts to accomplish all actions necessary to consummate this Agreement, including satisfaction of all conditions contained in this Agreement; and (b) Promptly notify SKM in writing of any material adverse change in the financial condition, business, operations or key personnel of PAL, any threatened material litigation or investigation, any breach of its representations or warranties contained herein, and any material contract, agreement, license or other agreement which, if in effect on the date of this Agreement, should have been included in this Agreement. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.1 Expenses. If the Merger is not consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense. If the Merger is consummated, the reasonable costs and expenses of Adorno & Yoss, P.A. shall be payable by SKM at the Closing or immediately following the Closing upon receipt by SKM of wire instructions and proper documentation. 18 SECTION 6.2 Brokers and Finders. Except as set forth in Schedule 6.2, each of the parties hereto represents, as to itself, that no agent, broker, investment banker or firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. SECTION 6.3 Necessary Actions. Subject to the terms and conditions herein provided, each of the parties hereto agree to use all reasonable efforts to take, or cause to be taken, all action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. In the event at any time after the Closing, any further action is necessary or desirable to carry out the purpose of this Agreement, the proper managers, officers and/or directors of SKM, HQS or PAL, as the case may be, shall take all such necessary action. SECTION 6.4 Indemnification. (a) General. (i) Subsequent to the Closing, SKM and the Principal Stockholders shall, jointly and severally, indemnify PAL, and each of the PAL Members ("PAL Indemnified Parties") against, and hold each of the PAL Indemnified Parties harmless from any damage, claim, loss, cost, liability or expense of SKM, HQS or the PAL Indemnified Parties, including without limitation, interest, penalties, reasonable attorneys' fees and expenses of investigation, diminution of value of SKM or HQS, response action, removal action or remedial action (collectively "Damages") incurred by SKM, HQS or any such PAL Indemnified Party, that are incident to, arise out of, in connection with, or related to, whether directly or indirectly, the breach of any warranty, representation, covenant or agreement of SKM, HQS or the Principal Stockholders contained in this Agreement or any schedule hereto or in any certificate or instrument of conveyance delivered by or on behalf of SKM, HQS or the Principal Stockholders pursuant to this Agreement or in connection with the transaction contemplated hereby. (ii) Subsequent to the Closing, PAL shall indemnify SKM and its officers and directors, in their capacity as such ("SKM Indemnified Parties"), against, and hold each of the SKM Indemnified Parties harmless from, any Damages incurred by such SKM Indemnified Party, that are incident to, arise out of, in connection with, or related to, whether directly or indirectly, the breach of any warranty, representation, covenant or agreement of PAL contained in this Agreement, any schedule or in any certificate or instrument of conveyance delivered by or on behalf of PAL pursuant to this Agreement or in connection with the transactions contemplated hereby. The term "Damages" as used in this Section 6.4 is not limited to matters asserted by third parties against PAL Indemnified Parties or SKM Indemnified Parties, but includes Damages incurred or sustained by such persons in the absence of third party claims. (b) Procedure for Claims. (c) If a claim for Damages (a "Claim") is to be made by a person entitled to indemnification hereunder, the person claiming such indemnification (the "Indemnified Party"), subject to clause (ii) below, shall 19 give written notice (a "Claim Notice") to the indemnifying person (the "Indemnifying Party") as soon as practicable after the Indemnified Party becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 6.4. The failure of any Indemnified Party to give timely notice hereunder shall not affect rights to indemnification hereunder, except and only to the extent that, the Indemnifying Party demonstrates actual material damage caused by such failure. In the case of a Claim involving the assertion of a claim by a third party (whether pursuant to a lawsuit or other legal action or otherwise, a "Third-Party Claim"), if the Indemnifying Party shall acknowledge in writing to the Indemnified Party under the terms of its indemnity hereunder in connection with such Third-Party Claim, then (A) the Indemnifying party shall be entitled and, if it so elects, shall be obligated at its own cost, risk and expense, (1) to take control of the defense and investigation such Third-Party Claim and (2) to pursue the defense thereof in good faith by appropriate actions or proceedings promptly taken or instituted and diligently pursued, including, without limitation, to employ and engage attorneys of its own choice reasonably acceptable to the Indemnified Party to handle and defend the same, and (B) the Indemnifying Party shall be entitled (but not obligated), if it so elects, to compromise or settle such claim, which compromise or settlement shall be made only with the written consent of the Indemnified Party, such consent not to be unreasonably withheld. In the event the Indemnifying Party elects to assume control of the defense and investigation of such lawsuit or other legal action in accordance with this Section 6.4, the Indemnified Party may, at its own cost and expense, participate in the investigation, trial and defense of such Third-Party Claim; provided that, if the named persons to a lawsuit or other legal action include both the Indemnifying Party and the Indemnified Party and the Indemnified Party has been advised in writing by counsel that there may be one ore more legal defenses available such Indemnified Party that are different from or additional to those available to the Indemnifying Party, the Indemnified Party shall be entitled, at the Indemnifying Party's cost, risk and expense, to separate counsel of its own choosing. If the Indemnifying Party fails to assume the defense of such Third-Party Claim in accordance with this Section 6.4 within 10 calendar days after receipt of the Claim Notice, the Indemnified Party against which such Third-Party Claim has been asserted shall upon delivering notice to such effect to the Indemnifying Party have the right to undertake, at the Indemnifying Party's cost, risk and expense, the defense, compromise and settlement of such Third- Party Claim on behalf of and for the account of the Indemnifying Party; provided that such Third-Party Claim shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. In the event the Indemnifying Party assumes the defense of the claim, the Indemnifying Party shall keep the Indemnified Party reasonably informed of the progress of any such defense, compromise or settlement, and in the event the Indemnified Party assumes the defense of the claim, the Indemnified Party shall keep the Indemnifying Party reasonably informed of the progress of any such defense, compromise or settlement. The Indemnifying Party shall be liable for any settlement of any Third-Party Claim effected pursuant to and in accordance with this Section 6.4 and for any final judgment (subject to any right of appeal), and the Indemnifying party agrees to indemnify and hold harmless each Indemnified Party from and against any and all Damages by reason of such settlement or judgment. 20 (i) Notwithstanding clause (i) above, in the event that the Indemnified Party is an SKM Indemnified Party, any Claim Notice election or other notification or correspondence required pursuant to such clause (i) shall be valid if it is delivered to Russell Smith_ (the "Stockholder Representative"). Each Principal Stockholder hereby irrevocably appoints the Stockholder Representative as its agent and attorney-in-fact with respect to the matters set forth in this Section 6.4, and hereby irrevocably grants to the Stockholder Representative the authority to administer Claims on behalf of such Stockholder, to exercise such other rights and powers as are set forth in this Agreement and to enter into, and to bind such Stockholder with respect to, the settlement of any such Claim. Each PAL Indemnified Party shall be entitled to rely on the agreements and representations of, and notices and other correspondence from, the Stockholder Representative as such agent and attorney-in-fact in connection with any Claim by or against any Stockholder pursuant to this Section 6.4. (d) No Right of Contribution. After the Closing, the Principal Stockholders shall not have any right of contribution against the Surviving Corporation for any breach of any representation, warranty, covenant or agreement of SKM or HQS. PAL and SKM shall be entitled to specific performance and injunctive relief, without posting bond or other security, for the purpose of asserting their respective rights under this Section 6.4. The remedies described in this Section 6.4 shall be in addition to, and not in lieu of, and any other remedies at law or in equity that the parties may elect to pursue. (e) Escrow of SKM Common Stock held by Principal Stockholders. Immediately prior to the Closing, the Principal Stockholders shall deposit into escrow with Boylan, Brown, Code, Vigdor & Wilson, LLP, as escrow agent (the "Escrow Agent"), 500,000 shares of SKM Common Stock (the "Escrow Shares"), in accordance with the Escrow Agreement substantially in the form attached hereto as Exhibit 6.5. The Escrow Shares shall be released from escrow only in accordance with the Escrow Agreement. ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES The obligations of the parties under this Agreement are subject to the fulfillment and satisfaction of each of the following conditions: SECTION 7.1 Legal Action. No preliminary or permanent injunction or other order by any federal or state court which prevents the consummation of this Agreement or any of the transactions contemplated by this Agreement shall have been issued and remain in effect. SECTION 7.2 Absence of Termination. The obligations to consummate the transactions contemplated hereby shall not have been terminated pursuant to Article X hereof. SECTION 7.3 Required Approvals. SKM, HQS and PAL shall have received all such approvals, consents, authorizations or modifications as may be required to permit the performance by SKM, HQS and PAL of the respective obligations under this Agreement, and the consummation of the transactions herein contemplated, whether from governmental authorities or other persons, and SKM, HQS and PAL shall each have received any and all permits and approvals from any 21 regulatory authority having jurisdiction required for the lawful consummation of this Agreement. SECTION 7.4 "Blue Sky" Compliance. There shall have been obtained any and all permits, approvals and consents of the appropriate state securities commissions of any jurisdictions, and of any other governmental body or agency, which counsel for SKM or PAL may reasonably deem necessary or appropriate so that consummation of the transactions contemplated by this Agreement may be in compliance with all applicable laws. ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SKM, HQS AND THE PRINCIPAL STOCKHOLDERS All obligations of SKM, HQS and the Principal Stockholders under this Agreement are subject to the fulfillment and satisfaction by PAL prior to or at the time of Closing, of each of the following conditions, any one or more of which may be waived by SKM. SECTION 8.1 Representations and Warranties True at Closing. All representations and warranties of PAL contained in this Agreement will be true and correct at and as of the time of the Closing, and PAL shall have delivered to SKM a Manager's Certificate, dated the Closing Date, to such effect and in the form and substance satisfactory to SKM. SECTION 8.2 Performance. The obligations of PAL to be performed on or before the Closing pursuant to the terms of this Agreement shall be duly performed at such time, and PAL shall have delivered to SKM a Manager's Certificate, dated the Closing Date, to such effect and in form and substance satisfactory to SKM. SECTION 8.3 Authority. All action required to be taken by, or on the part of PAL to authorize the execution, delivery and performance of this Agreement by PAL and the consummation of the transactions contemplated hereby, shall have been duly and validly taken. SECTION 8.4 Absence of Certain Changes or Events. There shall not have occurred, since the date hereof, any adverse change in the business, condition (financial or otherwise), assets or liabilities of PAL or any event or condition of any character adversely affecting PAL, and PAL shall have delivered to SKM, a Manager's Certificate, dated the Closing Date, to such effect and in form and substance satisfactory to SKM. 22 SECTION 8.5 Closing Documents. PAL shall have delivered to SKM the documents and other items described in Section 10.2 and such other documents and items as SKM shall reasonably request. ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PAL All obligations of PAL under this Agreement are subject to the fulfillment and satisfaction by SKM, HQS and the Principal Stockholders prior to or at the time of Closing, of each of the following conditions, any one or more of which may be waived by PAL. SECTION 9.1 Representations and Warranties True at Closing. All representations and warranties of SKM, HQS and the Principal Stockholders contained in this Agreement will be true and correct at and as of the time of the Closing, and SKM, HQS and the Principal Stockholders shall have delivered to PAL an Officer's Certificate (with respect to SKM and HQS) and a Principal Stockholders' Certificate (with respect to the Principal Stockholders), each dated the Closing Date, to such effect and in the form and substance satisfactory to PAL. SECTION 9.2 Performance. The obligations of SKM, HQS and the Principal Stockholders to be performed on or before the Closing pursuant to the terms of this Agreement shall have been duly performed at such time, and SKM, HQS and the Principal Stockholders shall have delivered to PAL an Officer's Certificate (with respect to SKM and HQS) and a Principal Stockholders' Certificate (with respect to the Principal Stockholders), each dated as of the Closing Date, to such effect and in form and substance satisfactory to PAL. SECTION 9.3 Authority. All action required to be taken by, or on the part of SKM and HQS to authorize the execution, delivery and performance of this Agreement by SKM and the consummation of the transactions contemplated hereby, shall have been duly and validly taken. SECTION 9.4 Absence of Certain Changes or Events. There shall not have occurred, since the date hereof, any adverse change in the business, condition (financial or otherwise), assets or liabilities of SKM or HQS or any event or condition of any character adversely affecting SKM or HQS, and each of SKM and HQS shall have delivered to PAL, Officer's Certificates, dated the Closing Date, to such effect and in form and substance satisfactory to PAL. SECTION 9.5 Resignations. The current directors and officers of SKM shall have submitted their resignations as directors and officers of SKM effective as of the Closing of this Agreement. SECTION 9.6 No Claims. No stockholder of SKM or its predecessor shall have notified SKM or its predecessor of their intent to seek or demand for dissenter's appraisal rights in respect of any transaction nor shall any such stockholder have instituted any action therefor. SECTION 9.6 Opinion of Counsel. SKM shall deliver to PAL and the Members opinions of Boylan, Brown, Code, Vigdor & Wilson, LLP and Mont E. Banner, Esq., legal counsel to SKM, in form and content acceptable to PAL. 23 SECTION 9.7 Closing Documents. SKM and the Principal Stockholders, as the case may be, shall have delivered to PAL the documents and other items described in Section 10.1 and such other documents and items as PAL may reasonably require. SECTION 9.8 Exemption Under Federal and State Securities Laws. The issuance of shares of SKM in the Merger shall not violate any federal or state securities laws. SECTION 9.9 Completion of PAL Diligence. PAL shall have completed its business and legal due diligence to its satisfaction, in its sole judgment. SECTION 9.10 Required Approval. SKM and HQS shall have taken all actions related to the due authorization of the Merger as may be required under the federal and state law, including the DGCL and federal securities laws. SECTION 9.11 Board of Directors Approvals. The Merger shall have been approved by appropriate action of the Board of Directors of SKM and HQS. SECTION 9.12 Closing of SVCH Transaction. The SVCH Transaction (as hereinafter defined) shall have closed. ARTICLE X CLOSING On the Closing Date: SECTION 10.1 Deliveries by SKM. SKM shall deliver (or cause to be delivered) to PAL: (a) any consents required to be obtained by SKM, HQS and the Principal Stockholders; (b) SKM and HQS shall deliver an Officer's Certificate as described in Sections 9.1, 9.2 and 9.4 hereof, dated the Closing Date, that all representations, warranties, covenants and conditions set forth herein by SKM and HQS are true and correct as of, or have been fully performed and complied with by the Closing Date and that there have been no adverse changes in each respective entity's business; (c) all SKM and HQS company books and records; (d) an opinion of Boylan, Brown, Code, Vigdor & Wilson, LLP, legal counsel to SKM dated as of the Closing Date, in a form reasonably satisfactory to PAL, addressed to PAL and the Members; 24 (e) certificates for the Merger Shares to be issued to the PAL stockholders in accordance with Section 1.2; (f) evidence that this Agreement and the transactions contemplated hereby have been approved by the board of SKM and HQS; (g) certificates of good standing from: (i) in respect of SKM, Nevada and any other state in which SKM is required to be qualified to do business; and (ii) in respect of HQS, Florida and any other state in which HQS is required to be qualified to do business; (h) a Secretary's Certificate of SKM, in form and substance satisfactory to PAL, attaching thereto the current Articles of Incorporation of SKM, By-Laws of SKM and meeting minutes from all Board and shareholder meetings since inception, and verifying that no other director or stockholder minutes exist and no other director or stockholder meetings took place; (i) a Secretary's Certificate of HQS, in form and substance satisfactory to PAL, attaching thereto the current Articles of Incorporation of HQS, By-Laws of HQS and meeting minutes from all Board and shareholder meetings since inception, and verifying that no other director or stockholder minutes exist and no other director or stockholder meetings took place; (j) certificates representing 500,000 shares of SKM Common Stock to be placed in escrow pursuant to Section 6.5, and pursuant to the terms of the Escrow Agreement; and (k) the Registration Rights Agreement dated as of the date of Closing, duly executed by SKM; (l) the Escrow Agreement, dated as of the date of Closing, duly executed and delivered by all parties thereto other than SVCH; and (m) such other documents and certificates duly executed as may reasonably be requested by PAL prior to the Closing Date. SECTION 10.2 Delivered by PAL. PAL shall deliver to SKM: (a) any consents required to be obtained by PAL; (b) a Manager's Certificate as described in Section 8.1, 8.2 and .4 hereof, dated the Closing Date, that all representations, warranties, covenants and conditions set forth herein by PAL are true and correct as of, or have been, fully performed and complied with by the Closing Date; (c) certificates representing the Membership Interests to be surrendered by the PAL Members; 25 (d) the Lock Up Agreements dated as of the date hereof, duly executed by each of the Members, other than SVCH; and (e) such other documents and certificates duly executed as may reasonably be requested by SKM prior to the Closing Date. SECTION 10.3 Termination. Notwithstanding anything herein or elsewhere to the contrary, this Agreement may be terminated: (a) By mutual agreement of the parties hereto at any time prior to the Closing; (b) By the Board of Directors of HQS at any time prior to the Closing, if: (i) a condition to performance by HQS under this Agreement or a covenant of PAL contained herein shall not be fulfilled on or before the date of the Closing or at such other time and date specified in this Agreement for the fulfillment for such covenant or condition; or (ii) a material default or breach of this Agreement shall be made by PAL; (c) By PAL at any time prior to the Closing, if: (i) a condition to PAL's performance under this Agreement or a covenant of SKM, HQS or the Principal Stockholders contained herein shall not be fulfilled on or before the date of the Closing or at such other time and date specified in this Agreement for the fulfillment for such covenant or condition; or (ii) a material default or breach of this Agreement shall be made by SKM, HQS or a Principal Stockholder; or (d) By either party if it notifies the other that it is not satisfied with its due diligence review. SECTION 10.4 Effect of Termination. If this Agreement is terminated, this Agreement, except as to Section 11.1 and Section 11.2, shall no longer be of any force or effect and there shall be no liability on the part of any party or its respective directors, officers or stockholders; provided however, that in the case of a termination pursuant to Section 10.3(b)(ii) or 10.3(c)(ii) hereof because of a prior material default under or a material breach of this Agreement by another party, the damages which the aggrieved party or parties may recover from the defaulting party or parties shall in no event exceed the amount of out-of-pocket costs and expenses incurred by such aggravated party or parties in connection with this Agreement, and no party to this Agreement shall be entitled to any injunctive relief. 26 ARTICLE XI MISCELLANEOUS SECTION 11.1 Cost and Expenses. In the event of any termination of this Agreement pursuant to Section 10.3, SKM and PAL will each bear their own respective expenses. SECTION 11.2 Extension of time; Waivers. At any time prior to the Closing: (a) SKM may in its sole discretion (i) extend the time for the performance of any of the obligations or other acts of PAL, (ii) waive any inaccuracies in the representations and warranties of PAL contained herein or in any documents delivered pursuant hereto by PAL, and (iii) waive compliance with any of the agreements or conditions contained herein to be performed by PAL. Any agreement on the part of SKM to any such extension or waiver shall be valid only if set forth in an instrument, in writing, signed on behalf of SKM and shall only be effective in the specific instance. No waiver or any condition or provision shall be deemed to be a subsequent waiver of such condition or provision or a waiver of any condition or provision other than the one specifically waived. (b) PAL may in its sole discretion (i) extend the time for the performance of any of the obligations or other acts of SKM, HQS or the Principal Stockholders, (ii) waive any inaccuracies in the representations and warranties of SKM, HQS or any Principal Stockholder contained herein or in any documents delivered pursuant hereto by same and (iii) waive compliance with any of the agreements or conditions contained herein to be performed by SKM, HQS or the Principal Stockholders. Any agreement on the part of PAL to any such extension or waiver shall be valid only if set forth in an instrument, in writing, signed on behalf of PAL and shall only be effective in the specific instance. No waiver or any condition or provision shall be deemed to be a subsequent waiver of such condition or provision or a waiver of any condition or provision other than the one specifically waived. SECTION 11.3 Notices. Any notice to any party hereto pursuant to this Agreement shall be in writing and given by Certified or Registered Mail, Fedex or by facsimile, addressed as follows: PROVIDER ACQUISITION, LLC 201 South Biscayne Boulevard, Suite 1200 Miami, Florida 33133 Attention: Danny Bogar, Manager Telephone: 305-579-0909 Facsimile: 305-960-8535 27 With a Copy To: ADORNO & YOSS, P.A. 2601 S. Bayshore Drive, Suite 1600 Miami, Florida 33133 Attention: Seth P. Joseph, Esq. Telephone: 305-860-7363 Facsimile: 305-858-4777 SILVER KEY MINING COMPANY, INC. AND HEALTHCARE QUALITY SOLUTIONS, INC. 56 West 400 South, Suite 220 Salt Lake City, Utah 84101 Atttn: President Phone: 801-322-3401 Fax: 801-595-0967 With a Copy To: Boylan, Brown, Code, Vigdor & WILSON, LLP 2400 Chase Square Rochester, New York 14604 Attn: Melissa Mahler, Esq. Phone: 585-232-5300 Fax: 585-232-3528 If to the Principal Stockholders, to the addresses provided on the signature pages hereof. Additional notices are to be given as to each party, at such other address as should be designated in writing complying as to delivery with the terms of this Section 11.3. All such notices shall be effective when sent, addressed as aforesaid. SECTION 11.4 Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto and the respective successors and assigns. Nothing in this Agreement is intended to confer, expressly or by implication, upon any other person any rights or remedies under or by reason of this Agreement. SECTION 11.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and together shall constitute one document. The delivery by facsimile of an executed counterpart of this Agreement shall be deemed to be an original and shall have the full force and effect of an original executed copy. SECTION 11.6 Severability. The parties hereto agree and affirm that none of the provisions herein is dependent upon the validity of any other provision, and if any part of this Agreement is deemed to be unenforceable, the remainder of the Agreement shall remain in full force and effect. 28 SECTION 11.7 Headings. The "Article" and "Section" headings are provided herein for convenience of reference only and do not constitute a part of this Agreement. SECTION 11.8 Survival of Representations and Warranties. All terms, conditions, representations and warranties set forth in this Agreement or in any instrument, certificate, opinion, or other writing providing for in it, shall survive the Closing and the delivery of the Merger Shares issued hereunder at the Closing, for a period of two years from the Closing regardless of any investigation made by or on behalf of any of the parties hereto. SECTION 11.9 Assignability. This Agreement shall not be assigned by any of the parties hereto without the prior written consent of the other parties. SECTION 11.10 Amendment. This Agreement may be amended with the approval of the Boards of Directors of SKM and the Manager of PAL at any time prior to the Effective Time, but no amendment shall be made which substantially and adversely changes the terms hereof after the PAL Members have approved this Agreement. This Agreement may not be amended except by an instrument, in writing, signed on behalf of each of the parties hereto. SECTION 11.11 Choice of Law. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Florida except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. SECTION 11.12 Submission to Jurisdiction. Each party hereto (a) submits to the jurisdiction of any state or federal court sitting in the State of Florida, County of Miami-Dade, in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 12.3, provided that nothing in this Section 12.12 shall affect the right of any party to serve such summons, complaint or other initial pleading in any other manner permitted by law. SECTION 11.13 Publicity. Except as required by law or on advice of counsel, neither party shall issue any press release or make any public statement regarding the transactions contemplated hereby without the prior approval of the other parties, and the parties hereto shall issue a mutually acceptable press release as soon as practicable after the date hereof and after the Closing Date. SECTION 11.14 Definitions. "Legal Requirement" means any federal, state, local, municipal, foreign, international, multinational or other administrative law, ordinance, principle of common law, regulation, statute or treaty. 29 "Permits" means all licenses, permits, franchises, approvals, authorizations, consents or order of, or filing with, any governmental authority, whether foreign, federal, state or local, necessary or desirable for the past, present or anticipated conduct or operation of the business or ownership of the assets of such person. "Person" means any person or entity, whether an individual, trustee, corporation, limited liability company, general partnership, limited partnership, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority or any similar entity. "Proceeding" means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any governmental body or arbitrator. "SVCH Transaction" means that certain private equity financing pursuant to which, simultaneously with the Closing, Stanford Venture Capital Holdings, Inc. ("SVCH") shall purchase the Series A Preferred Stock and Warrants of SKM upon terms and conditions as set forth in that certain Securities Purchase Agreement by and between SKM and SVCH of even date herewith. 30 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement in a manner legally binding upon them as of the date first above written. PROVIDER ACQUISITION, LLC By: /s/ Daniel T. Bogar ---------------------------- Manager SILVER KEY MINING COMPANY, INC. Attest: By: /s/ J. Rockwell Smith ---------------------------- _____________________________ President Secretary HEALTHCARE QUALITY SOLUTIONS, INC. Attest: By:/s/ B.M. Milvain ---------------------------- _____________________________ President Secretary PRINCIPAL STOCKHOLDERS /s/ Edward F. Cowle - ------------------------------- Edward F. Cowle 99 Park Avenue, Suite 2230 New York, NY 10016 Phone: 212-557-4005 Fax: 212-867-6908 /s/ H. Deworth Williams - ------------------------------- H. Deworth Williams 56 West 400 South Suite 220 Salt Lake City, Utah 84101 Phone: 801-322-3401 Fax: 801-595-0967 /s/ Ronald Rasmussen - ------------------------------- Name: Ronald Rasmussen 4740 East Warner Road #2 Phoenix, Arizona 85044 Phone: 480-598-3221 Fax: 801-595-0967 /s/ J. Rockwell Smith - ------------------------------- Name: J. Rockwell Smith 56 West 400 South, Suite 220 Salt Lake City, Utah 84101 Phone: 435-649-5060 Fax: 801-595-096 31 EXHIBITS Exhibit 1.2(b) Lock-Up Agreement Exhibit 6.5 Escrow Agreement SCHEDULES Schedule 1.2 Issuance of Merger Shares Schedule 2.1 SKM and HQS Jurisdictions Schedule 2.2(a) SKM Capitalization Schedule 2.4 SKM Shareholders'List Schedule 2.6 SKM Certain Changes or Events Schedule 2.17 SKM Agreements Schedule 2.19 SKM Insurance Policies Schedule 4.1 PAL Jurisdictions Schedule 4.2(a) PAL Capitalization Table Schedule 4.2(c) Certain PAL Agreements Schedule 4.6 PAL Litigation Schedule 6.2 Brokerage or Commission Arrangements 32 EX-10.2 4 ex10-2.txt SECURITIES PURCHASE AGREEMENT EXHIBIT 10.2 EXECUTION COPY SILVER KEY MINING COMPANY, INC. A Nevada Corporation SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT, dated as of October 16, 2002 (the "Agreement"), is entered into by and among Silver Key Mining Company, Inc. a Nevada corporation (the "Company"), the Stockholders of the Company listed on the signature page attached hereto (collectively the "Principal Stockholders") and Stanford Venture Capital Holdings, Inc., a Delaware corporation (the "Purchaser"). W I T N E S S E T H: WHEREAS, the Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemptions from registration provided by Regulation D ("Regulation D") promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), and/or Section 4(2) of the Securities Act; and WHEREAS, upon the terms and conditions of this Agreement, the Purchaser has agreed to purchase, and the Company wishes to issue and sell, for an aggregate purchase price of $2,200,000 (i) 1,880,342 shares of the Company's Series A $1.17 Convertible Preferred Stock, $0.001 par value per share (the "Series A Preferred Stock"), the terms of which are as set forth in the Certificate of Designation of Series A $1.17 Convertible Preferred Stock attached hereto as Exhibit A (the "Series A Certificate of Designation") and (ii) warrants (the "Warrants") to purchase an aggregate of 1,880,342 shares of the Company's common stock, $.001 par value per share (the "Common Stock"), which Warrants will be in the form attached hereto as Exhibit B; and WHEREAS, the Series A Preferred Stock shall be convertible into shares of Common Stock pursuant to the terms set forth in the Series A Certificate of Designation, and the Warrants may be exercised for the purchase of Common Stock, pursuant to the terms set forth therein; and NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. AGREEMENT TO PURCHASE; PURCHASE PRICE (a) Purchase of Preferred Stock and the Warrants. Subject to the terms and conditions in this Agreement, the Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to issue and sell to the Purchaser (i) 1,880,342 shares of Series A Preferred Stock; and (ii) 1,880,342 Warrants, for an aggregate purchase price of $2,200,000, which shall be payable in immediately available funds on the closing dates set forth in the Table of Closing Dates (as shown below). (b) Closings. The Series A Preferred Stock and the Warrants to be purchased by the Purchaser hereunder, in the number set forth opposite each of the Closing Dates (as defined below) in the Table of Closing Dates shown below and in definitive form, and in such denominations and such names (provided any name other than the Purchaser shall be an affiliate of Purchaser or an employee of an affiliate of Purchaser) as the Purchaser or its representative, if any, may request the Company upon at least three business days' prior notice of any closing, shall be delivered by or on behalf of the Company for the account of the Purchaser, against payment by the Purchaser of the aggregate purchase price by wire transfer to an account of the Company, by 5:00 PM, Eastern Standard Time on each of the six Closing Dates as set forth below in the Table of Closing Dates, the first of such Closing Dates being referred to herein as the "First Closing Date" and any such closing date being referred to herein as a "Closing Date." (c) Table of Closing Dates.
- ------------------------------- -------------------------- ---------------------------- ------------------------------ Number of Shares of Series Warrants to Purchase the A Preferred Stock Number of Shares of Common Closing Date Purchase Price Transferred Stock Transferred - ------------------------------- -------------------------- ---------------------------- ------------------------------ October 22, 2002 Six Hundred Thousand 512,820 512,820 (the "First Closing Date") United States Dollars ($600,000) - ------------------------------- -------------------------- ---------------------------- ------------------------------ November 13, 2002 (the Three Hundred Thousand 256,410 256,410 "Second Closing Date") United States Dollars ($300,000) - ------------------------------- -------------------------- ---------------------------- ------------------------------ December 12, 2002 (the "Third Three Hundred Thousand 256,410 256,410 Closing Date") United States Dollars ($300,000) - ------------------------------- -------------------------- ---------------------------- ------------------------------ January 13, 2003 (the "Fourth Four Hundred Thousand 341,881 341,881 Closing Date") United States Dollars ($400,000) - ------------------------------- -------------------------- ---------------------------- ------------------------------ February 13, 2003 (the "Fifth Three Hundred Thousand 256,410 256,410 Closing Date") United States Dollars ($300,000) - ------------------------------- -------------------------- ---------------------------- ------------------------------ March 13, 2003 (the "Final Three Hundred Thousand 256,410 256,410 Closing Date") United States Dollars ($300,000) - ------------------------------- -------------------------- ---------------------------- ------------------------------
2 2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION The Purchaser represents and warrants to, and covenants and agrees with, the Company as follows: (a) Qualified Investor. The Purchaser is (i) experienced in making investments of the kind described in this Agreement and the related documents, (ii) able to afford the entire loss of its investment in the Series A Preferred Stock and the Warrants, and (iv) an "Accredited Investor" as defined in Rule 501(a) of Regulation D and knows of no reason to anticipate any material change in its financial condition for the foreseeable future. (b) Restricted Securities. The securities are "restricted securities" as defined in Rule 144 promulgated under the Securities Act. All subsequent offers and sales by the Purchaser of the Note, the Series A Preferred Stock and the Warrants and the Common Stock issuable upon conversion of the Series A Preferred Stock or exercise of the Warrants shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from such registration. (c) Reliance on Representations. The Purchaser understands that the Series A Preferred Stock and the Warrants are being offered and sold to it in reliance upon exemptions from the registration requirements of the United States federal securities laws, and that the Company is relying upon the truthfulness and accuracy of the Purchaser's representations and warranties, and the Purchaser's compliance with its covenants and agreements, each as set forth herein, in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Series A Preferred Stock and the Warrants. (d) Access to Information. The Purchaser (i) has been provided with sufficient information with respect to the business of the Company for the Purchaser to determine the suitability of making an investment in the Company and such documents relating to the Company as the Purchaser has requested and the Purchaser has carefully reviewed the same, (ii) has been provided with such additional information with respect to the Company and its business and financial condition as the Purchaser, or the Purchaser's agent or attorney, has requested, and (iii) has had access to management of the Company and the opportunity to discuss the information provided by management of the Company and any questions that the Purchaser had with respect thereto have been answered to the full satisfaction of the Purchaser. (e) Legality. The Purchaser has the requisite corporate power and authority to enter into this Agreement. (f) Authorization. This Agreement and any related agreements, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Purchaser, and such agreements, when executed and delivered by each of the Purchaser and the Company will each be a valid and binding agreement of the Purchaser, enforceable in accordance with their respective terms, except to the extent that enforcement of each such agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or 3 other similar laws now or hereafter in effect relating to creditors rights generally and to general principles of equity. (g) Adequate Resources. The Purchaser, or an affiliate of the Purchaser, has sufficient liquid assets to deliver the aggregate purchase price on each of the Closing Dates as specified in the Table of Closing Dates. (h) Investment. The Purchaser is acquiring the Series A Preferred Stock and the Warrants for investment for the Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof, nor with any present intention of distributing or selling such Series A Preferred Stock or Warrants. The Purchaser is aware of the limits on resale imposed by virtue of the transaction contemplated by this Agreement and is aware that the Series A Preferred Stock and the Warrants will bear restrictive legends. (i) Litigation. There is no action, suit, proceeding or investigation pending or, to the Knowledge of the Purchaser (as defined herein), currently threatened against the Purchaser that questions the validity of the Primary Documents (as defined below) or the right of Purchaser to enter into any such agreements or to consummate the transactions contemplated hereby and thereby, nor, to the Knowledge of Purchaser, is there any basis for the foregoing. All references to the "Knowledge" means the actual knowledge of the person in question or the knowledge such person could reasonably be expected to have each after reasonable investigation and due diligence. (j) Broker's Fees and Commissions. Neither the Purchaser nor any of its officers, partners, employees or agents has employed any investment banker, broker, or finder in connection with the transactions contemplated by the Primary Documents. 3. REPRESENTATIONS OF THE COMPANY The Principal Stockholders, to the best of their Knowledge, and the Company represent and warrant to, and covenant and agree with, the Purchaser that: (a) Organization. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted after the Merger (as defined below). The Company has no other interest in any other entities except for Healthcare Quality Systems, Inc ("HQS"). The representations and warranties apply only to the Company and no representations or warranties are made with respect to HQS for any period subsequent to the Merger. The Company is duly qualified as a foreign corporation and in good standing in all jurisdictions in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. The minute books and stock record books and other similar records of the Company have been provided or made available to the Purchaser or its counsel prior to the execution of this Agreement, are complete and correct in all material respects and have been maintained in accordance with sound business practices. Such minute books 4 contain true and complete records of all actions taken at all meetings and by all written consents in lieu of meetings of the directors, stockholders and committees of the board of directors of the Company from the date of organization through the date hereof. The Company has, prior to the execution of this Agreement, delivered to the Purchaser true and complete copies of the Company's Articles of Incorporation, and Bylaws, each as amended through the date hereof. The Company is not in violation of any provisions of its Articles of Incorporation or Bylaws. (b) Capitalization. On the date hereof, the authorized capital of the Company consists of: (i) 20,000,000 shares of Common Stock, par value $0.001 per share, of which 1,500,000 shares are issued and outstanding (including 500,000 shares held in escrow pursuant to that certain Escrow Agreement of even date herewith entered into by and between the Company, the Principal Stockholders, and Boylan, Brown, Code, Vigdor & Wilson, LLP, as escrow agent); and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share, none of which are issued and outstanding. Schedule 3(b) attached hereto sets forth a complete list of all holders of capital stock of the Company and a complete list of all options, warrants, notes, or any other rights or instruments which would entitle the holder thereof to acquire shares of the Common Stock or other equity interests in the Company upon conversion or exercise, setting forth for each such holder the type of security, number of equity shares covered thereunder, the exercise or conversion price thereof, the vesting schedule thereof (if any), and the issuance date and expiration date thereof. Other than as disclosed in Schedule 3(b) attached hereto, there are no outstanding rights, agreements, arrangements or understandings to which the Company is a party (written or oral) which would obligate the Company to issue any equity interest, option, warrant, convertible note, or other types of securities or to register any shares in a registration statement filed with the Commission. Other than disclosed in Schedule 3(b) attached hereto, there is no agreement, arrangement or understanding between or among any entities or individuals which affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to any voting shares of the Company, including without limitation any voting trust agreement or proxy. Schedule 3(b) attached hereto contains a complete and accurate schedule of all the shares subject to "lock-up" or similar agreement or arrangement by which any equity shares are subject to resale restrictions and the Company has provided the Purchaser complete and accurate copies of all such agreements, which agreements are in full force and effect. Except as set forth in Schedule 3(b) attached hereto, there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire for value any outstanding shares of capital stock or other ownership interests of the Company or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity. There are no anti-dilution or price adjustment provisions regarding any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities (as defined below). (c) Concerning the Common Stock, the Preferred Stock and the Warrants. The Series A Preferred Stock, the Warrants and the Common Stock issuable upon conversion of the Series A Preferred Stock and upon exercise of the Warrants when issued, shall be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such a holder. (d) Authorized Shares. The Company shall have available a sufficient number of authorized and unissued shares of Common Stock as may be necessary to effect conversion of the Series A Preferred Stock and the exercise of the 5 Warrants. The Company understands and acknowledges the potentially dilutive effect to the Common Stock of the issuance of shares of Common Stock upon the conversion of the Series A Preferred Stock and the exercise of the Warrants. The Company further acknowledges that its obligation to issue shares of Common Stock upon conversion of the Series A Preferred Stock and upon exercise of the Warrants is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. (e) Legality. The Company has the requisite corporate power and authority to enter into this Agreement, and to issue and deliver the Series A Preferred Stock, the Warrants and the Common Stock issuable upon conversion of the Series A Preferred Stock and the exercise of the Warrants. (f) Transaction Agreements. This Agreement, the Merger Agreement, the Warrants, the Registration Rights Agreement (as defined below), the Lock-Up Agreements (as defined below) the Escrow Agreement, and the Series A Certificate of Designation (collectively, the "Primary Documents"), and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company; this Agreement has been duly executed and delivered by the Company and this Agreement is, and the other Primary Documents, when executed and delivered by the Company, will each be, a valid and binding agreement of the Company, enforceable in accordance with their respective terms, except to the extent that enforcement of each of the Primary Documents may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and to general principles of equity. (g) Financial Statements. The financial statements and related notes thereto contained in the Company's filings with the Commission (the "Company Financials") are correct and complete in all material respects, comply in all material respects with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission promulgated thereunder and have been prepared in accordance with United States generally accepted accounting principles applied on a basis consistent throughout the periods indicated and consistent with each other. The Company Financials present fairly and accurately the financial condition and operating results of the Company in all material respects as of the dates and during the periods indicated therein and are consistent with the books and records of the Company. Except as set forth in the Company Financials, the Company has no material liabilities, contingent or otherwise, other than liabilities disclosed on the balance sheet as of June 30, 2002. Except as disclosed in Schedule 3(g) attached hereto, since January 1, 2001, there has been no change in any accounting policies, principles, methods or practices, including any change with respect to reserves (whether for bad debts, contingent liabilities or otherwise), of the Company. (h) Commission Filings. The Company has made all filings with the Commission that it has been required to make under the Securities Act and the Exchange Act and has furnished or made available to the Purchaser true and complete copies of all the documents it has filed with the Commission since its inception, all in the forms so filed. As of their respective filing dates, such filings already filed by the Company or to be filed by the Company after the date hereof but before the First Closing Date complied or, if filed after the date hereof, will comply in all material respects with the requirements of the Securities Act and the Exchange Act, and the rules and regulations of the 6 Commission promulgated thereunder, as the case may be, and none of the filings with the Commission contained or will contain any untrue statement of a material fact or omitted or will omit any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent such filings have been all prior to the date of this Agreement corrected, updated or superseded by a document subsequently filed with Commission. (i) Non-Contravention. The execution and delivery of this Agreement and each of the other Primary Documents, and the consummation by the Company of the transactions contemplated by this Agreement and each of the other Primary Documents, do not and will not conflict with, or result in a breach by the Company of, or give any third party any right of termination, cancellation, acceleration or modification in or with respect to, any of the terms or provisions of, or constitute a default under, (A) its Articles of Incorporation or Bylaws, as amended through the date hereof, (B) any material indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, or (C) any existing applicable law, rule, or regulation or any applicable decree, judgment or order of any court or federal, state, securities industry or foreign regulatory body, administrative agency, or any other governmental body having jurisdiction over the Company or any of their properties or assets (collectively, "Legal Requirements"), other than those which have been waived or satisfied on or prior to the First Closing Date. (j) Approvals and Filings. Other than the completion of the filing of the Series A Certificate of Designation, no authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the entry into or the performance of this Agreement and the other Primary Documents. (k) Compliance With Legal Requirements. Except as disclosed in Schedule 3(k) attached hereto, the Company has not violated in any material respect, and is not currently in material default under, any Legal Requirement applicable to the Company, or any of the assets or properties of the Company, where such violation could reasonably be expected to have material adverse effect on the business or financial condition of the Company. (l) Absence of Certain Changes. Since August 31, 1999, except as previously disclosed to the Purchaser and listed on Schedule 3(l), there has been no material adverse change nor any material adverse development in the business, properties, operations, financial condition, prospects, outstanding securities or results of operations of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change. (m) Indebtedness to Officers, Directors and Stockholders. The Company is not indebted to any of the Company's stockholders, officers or directors or their Affiliates in any amount whatsoever (including, without limitation, any deferred compensation, salaries or rent payable). (n) Relationships With Related Persons. Except as set forth in Schedule 3(n) attached hereto, no officer, director, or principal stockholder of 7 the Company nor any Related Person (as defined below) of any of the foregoing has, or since December 31, 1998 has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible) used in or pertaining to the business of the Company. Except as set forth in Schedule 3(n) attached hereto, no officer, director, or principal stockholder of the Company nor any Related Person of the any of the foregoing is, or since December 31, 1998 has owned an equity interest or any other financial or profit interest in, a Person (as defined below) that has (i) had business dealings or a material financial interest in any transaction with the Company, or (ii) engaged in competition with the Company with respect to any line of the merchandise or services of such company (a "Competing Business") in any market presently served by such company except for ownership of less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market. Except as set forth in Schedule 3(n) attached hereto, no director, officer, or principal stockholder of the Company nor any Related Person of any of the foregoing is a party to any Contract with, or has claim or right against, the Company. As used in this Agreement, "Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or any governmental body; "Related Person" means, (X) with respect to a particular individual, (a) each other member of such individual's Family (as defined below); (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (c) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest (as defined below); and (d) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity); (Y) with respect to a specified Person other than an individual, (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of the foregoing definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse and former spouses, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least 1% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 1% of the outstanding equity securities or equity securities in a Person. (o) Title to Properties; Liens and Encumbrances. The Company has good and marketable title to all of its material properties and assets, both real and personal, and has good title to all its leasehold interests. Except as disclosed in Schedule 3(o) attached hereto, all material properties and assets reflected in the Company Financials are free and clear of all Encumbrances (as defined below) except liens for current Taxes not yet due. As used in this Agreement, "Encumbrance" means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first 8 refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. (p) Permits. The Company has all permits, licenses and any similar authority necessary for the conduct of its business as now conducted, the lack of which would materially and adversely affect the business or financial condition of such company. The Company is not in default in any respect under any of such permits, licenses or similar authority. (q) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body, or arbitration tribunal pending or, to the Knowledge of the Company, threatened, against or affecting the Company, in which an unfavorable decision, ruling or finding would have a material adverse effect on the properties, business, condition (financial or other) or results of operations of the Company, taken as a whole, or the transactions contemplated by the Primary Documents, or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, the Primary Documents. All references to the "Knowledge of the Company" in this Agreement shall mean the actual knowledge of the Company or the knowledge that the Company could reasonably be expected to have, after reasonable investigation and due diligence. (r) No Default. The Company is not in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust or other instrument or agreement to which it is a party or by which it or its property may be bound. (s) Taxes. (i) All Tax Returns (as defined below) required to have been filed by or with respect to the Company (including any extensions) have been filed. All such Tax Returns are true, complete and correct in all material respects. All Taxes (as defined below) due and payable by the Company, whether or not shown on any Tax Return, or claimed to be due by any Taxing Authority (as defined below), have been paid or accrued on the balance sheet included in the Company's latest filing with the Commission. (ii) The Company does not have any material liability for Taxes outstanding other than as reflected in the balance sheet included in the Company's latest filing with the Commission or incurred subsequent to the date of such filing in the ordinary course of business. The unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end, exceed by any material amount the reserve for liability for income tax (other than the reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the face of the balance sheet included in the Company's latest filing with the Commission, and (ii) will not exceed by any material amount that reserve as adjusted for operations and transactions through the First Closing Date. (iii) The Company is not a party to any agreement extending the time within which to file any Tax Return. No claim has ever been made by a Taxing Authority of any jurisdiction in which the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. 9 (iv) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor or independent contractor. (v) There has been no action by any Taxing Authority in connection with assessing additional Taxes against, or in respect of, the Company for any past period. There is no dispute or claim concerning any Tax liability of the Company either (i) claimed, raised or, to the Knowledge of the Company, threatened by any Taxing Authority or (ii) of which the Company is otherwise aware. There are no liens for Taxes upon the assets and properties of the Company other than liens for Taxes not yet due. Schedule 3(s) attached hereto indicates those Tax Returns, if any, of the Company, that have been audited or examined by Taxing Authorities, and indicates those Tax returns of the Company that currently are the subject of audit or examination. The Company has made available to the Purchaser complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company since the fiscal year ended December 31, 1998. (vi) There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Tax Returns required to be filed by, or which include or are treated as including, the Company or with respect to any Tax assessment or deficiency affecting the Company. (vii) The Company has not received any written ruling related to Taxes or entered into any agreement with a Taxing Authority relating to Taxes. (viii) Except for the liabilities, if any, of HQS, the Company does not have any liability for the Taxes of any person or entity other than the Company (i) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign Legal Requirements), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise. (ix) The Company (i) has not agreed to make nor is required to make any adjustment under Section 481 of the Internal Revenue Code by reason of a change in accounting method and (ii) is not a "consenting corporation" within the meaning of Section 341(f)(1) of the Internal Revenue Code. (x) The Company is not a party to or bound by any obligations under any tax sharing, tax allocation, tax indemnity or similar agreement or arrangement. (xi) The Company is not involved in, subject to, or a party to any joint venture, partnership, contract or other arrangement that is treated as a partnership for federal, state, local or foreign Tax purposes. (xii) The Company was not included nor is includible, in the Tax Return of any other entity. As used in this Agreement, a "Tax Return" means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with, or, where 10 none is required to be filed with a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax; "Tax" means any and all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross, receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, service, service use, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by Taxing Authority, whether computed on a separate, consolidated, unitary, combined or any other basis; and such term includes any interest whether paid or received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments; and "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. (t) Certain Prohibited Activities. Neither the Company nor any of its directors, officers or other employees has (i) used any Company funds for any unlawful contribution, endorsement, gift, entertainment or other unlawful expense relating to any political activity, (ii) made any direct or indirect unlawful payment of Company funds to any foreign or domestic government official or employee, (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any bribe, rebate, payoff, influence payment, kickback or other similar payment to any person. (u) Contracts; No Defaults. Schedule (u) attached hereto contains a complete and accurate list, and the Company has made available to the Purchaser true and complete copies, of any Contract of the Company. As used in this Agreement, "Contract" means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding; or any Contract (a) under which the Company has or may acquire any rights, (b) under which the Company has or may become subject to any obligation or liability, or (c) by which the Company or any of the assets owned or used by it is or may become bound. With respect to each Contract (i) the Company is, and has been, in material compliance with all applicable terms and requirements of each Contract under which the Company has or had any obligation or liability or by which the Company or any of the assets owned or used by it is or was bound; (ii) each other person or entity that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and has been, in material compliance with all applicable terms and requirements of such Contract; (iii) no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a material violation or breach of, or give the Company or other person or entity the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract; and (iv) the Company has not given to or received from any other person or entity any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. Each Contract is valid, in full force, and binding on and enforceable against the other party or parties to such contract in accordance with its terms and provisions. 11 Except as disclosed on Schedule (u) attached hereto, there are no renegotiation of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company under current or completed Contracts with any person or entity and no such person or entity has made written demand for such renegotiation. (v) Agent Fees. The Company has not incurred any liability for any finder's or brokerage fees or agent's commissions in connection with the transactions contemplated by this Agreement. (w) Insurance. Schedule (w) attached hereto sets forth a true and correct list of all the insurance policies covering the business, properties and assets of the Company presently in force (including as to each (i) risk insured against, (ii) name of carrier, (iii) policy number, (iv) amount of coverage, (v) amount of premium, (vi) expiration date and (vii) the property, if any, insured). All of the insurance policies set forth on Schedule (w) attached hereto are in full force and effect and all premiums, retention amounts and other related expenses due have been paid, and the Company has not received any written notice of cancellation with respect to any of the policies. Such policies, taken together, provide adequate insurance coverage for the assets and the operations of the Company for all risks normally insured against by companies carrying on the same business or businesses as the Company. (x) Employees. The Company has no employees and there is no accrued vacation or sick pay due. (y) Employee Benefits. (i) The Company does not have, and has not at any time since December 31, 1998 had, Plans (as defined below). As used in this Agreement, "Plan" means (i) each of the "employee benefit plans" (as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")), of which any of the Company or any member of the same controlled group of businesses as the Company within the meaning of Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is or ever was a sponsor or participating employer or as to which the Company or any of its ERISA Affiliates makes contributions or is required to make contributions, and (ii) any similar employment, severance or other arrangement or policy of any of the Company or any of its ERISA Affiliates (whether written or oral) providing for health, life, vision or dental insurance coverage (including self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, fringe benefits, or for profit sharing, deferred compensation, bonuses, stock options, stock appreciation or other forms of incentive compensation or post-retirement insurance, compensation or benefits. (z) Private Offering. Subject to the accuracy of the Purchaser's representations and warranties set forth in Section 2 hereof, (i) the offer, sale and issuance of the Series A Preferred Stock and the Warrants, (ii) the issuance of Common Stock pursuant to the conversion and/or exercise of such securities into shares of Common Stock, each as contemplated by the Primary Documents, are exempt from the registration requirements of the Securities Act. The Company agrees that neither the Company nor anyone acting on its behalf will 12 offer any of the Series A Preferred Stock, the Warrants or any similar securities for issuance or sale, or solicit any offer to acquire any of the same from anyone so as to render the issuance and sale of such securities subject to the registration requirements of the Securities Act. The Company has not offered or sold the Series A Preferred Stock or the Warrants by any form of general solicitation or general advertising, as such terms are used in Rule 502(c) under the Securities Act. (aa) Mergers, Acquisitions and Divestitures. Except as set forth on Schedule (aa) attached hereto, the Company has never acquired any equity interest in or any major assets of any other Person, or sold the equity interest or any major asset owned by it, in a deal the terms of which were not based on arms' length negotiations. Except as set forth on Schedule (aa) attached hereto, to the Knowledge of the Company, none of the officers and directors of the Company has received any benefit in connection with any of the foregoing transactions or is under any agreement or understanding with any Person (including agreements or understandings among themselves) with respect to the receipt of or entitlement to any such benefit. (bb) Full Disclosure. There is no fact known to the Company (other than general economic conditions known to the public generally) that has not been disclosed to the Purchaser that could (i) reasonably be expected to have a material adverse effect upon the condition (financial or otherwise) or the earnings, business affairs, properties or assets of the Company or (ii) reasonably be expected to materially and adversely affect the ability of the Company to perform the obligations set forth in the Primary Documents. The representations and warranties of the Company set forth in this Agreement do not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading. 4. CERTAIN COVENANTS, ACKNOWLEDGMENTS AND RESTRICTIONS (a) Transfer Restrictions. The Purchaser acknowledges that (i) neither the Series A Preferred Stock, the Warrants nor the Common Stock issuable upon conversion of the Series A Preferred Stock or upon exercise of the Warrants have been registered under the Securities Act, and such securities may not be transferred unless (A) subsequently registered thereunder or (B) they are transferred pursuant to an exemption from such registration, and (ii) any sale of the Series A Preferred Stock, the Warrants or the Common Stock issuable upon conversion, exercise or exchange thereof (collectively, the "Securities") made in reliance upon Rule 144 under the Securities Act ("Rule 144") may be made only in accordance with the terms of said Rule 144. The provisions of Section 4(a) and 4(b) hereof, together with the rights of the Purchaser under this Agreement and the other Primary Documents, shall be binding upon any subsequent transferee of the Series A Preferred Stock and the Warrants. (b) Restrictive Legend. The Purchaser acknowledges and agrees that, until such time as the Securities shall have been registered under the Securities Act or the Purchaser demonstrates to the reasonable satisfaction of the Company and its counsel that such registration shall no longer be required, such Securities may be subject to a stop-transfer order placed against the transfer of such Securities, and such Securities shall bear a restrictive legend in substantially the following form: 13 THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED. (c) Filings. The Company undertakes and agrees that it will make all required filings in connection with the sale of the Securities to the Purchaser as required by federal and state laws and regulations, or by any domestic securities exchange or trading market, and if applicable, the filing of a notice on Form D (at such time and in such manner as required by the rules and regulations of the Commission), and to provide copies thereof to the Purchaser promptly after such filing or filings. With a view to making available to the holders of the Securities the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit such holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 or Form SB-2, the Company shall (a) at all times make and keep public information available, as those terms are understood and defined in Rule 144, (b) file on a timely basis with the Commission all information that the Commission may require under either of Section 13 or Section 15(d) of the Exchange Act and, so long as it is required to file such information, take all actions that may be required as a condition to the availability of Rule 144 (or any successor exemptive rule hereafter in effect) with respect to the Common Stock; and (d) furnish to any holder of the Securities forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company as filed with the Commission, and (iii) any other reports and documents that a holder of the Securities may reasonably request in order to avail itself of any rule or regulation of the Commission allowing such holder to sell any such Securities without registration. (d) Reservation of Common Stock. The Company will at all times have authorized and reserved for the purpose of issuance a sufficient number of shares of Common Stock to provide for the conversion of the Series A Preferred Stock and the exercise of the Warrants. (e) Registration Requirement. At the time of the First Closing Date, holders of the Securities and the Company shall execute a registration rights agreement in the form attached hereto as Exhibit C (the "Registration Rights Agreement"). (f) Lock-Up Agreements. The members (other than the Purchaser) of Provider Acquisition, LLC, a Florida limited liability company, and the Company have executed lock-up agreements (the "Lock-Up Agreements"), substantially in the form of Exhibit D attached hereto. The Company shall not waive any restriction under any of the Lock-Up Agreements or otherwise consent to any such waiver without the express written approval in advance by the Purchaser, which approval can be withheld by the Purchaser in its sole and absolute discretion. (g) Return of Certificates on Conversion and Warrants on Exercise. 14 (i) Upon any conversion by the Purchaser of less than all of the Series A Preferred Stock pursuant to the terms of the Series A Certificate of Designation, the Company shall issue and deliver to the Purchaser, within seven business days of the date of conversion, a new certificate or certificates for, as applicable, the total number of shares of the Series A Preferred Stock, which the Purchaser has not yet elected to convert (with the number of and denomination of such new certificate(s) designated by the Purchaser). (ii) Upon any partial exercise by the Purchaser of the Warrants, the Company shall issue and deliver to the Purchaser, within seven business days of the date on which the Warrants is exercised, new Warrants representing the number of adjusted shares of Common Stock covered thereby, in accordance with the terms thereof. (h) Replacement Certificates and Warrants. (i) The certificate(s) representing the shares of the Series A Preferred Stock held by the Purchaser shall be exchangeable, at the option of the Purchaser at any time and from time to time at the office of Company, for certificates with different denominations representing, as applicable, an equal aggregate number of shares of the Series A Preferred Stock as requested by the Purchaser upon surrendering the same. No service charge will be made for such registration or transfer or exchange. (ii) The Warrants will be exchangeable, at the option of the Purchaser, at any time and from time to time at the office of the Company, for other Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock as are purchasable under such Warrants. No service charge will be made for such transfer or exchange. (i) Approval Rights. From the date hereof and until the Final Closing Date as described in Section 1(c), the Company shall not take any of the following actions without the prior written consent of the Purchaser, in its sole discretion: (i) sell a material portion of the assets of the Company or merge the Company into or with another unaffiliated company, except as contemplated hereby; (ii) change the certificate of incorporation, bylaws or other charter documents of the Company, except as contemplated hereby; (iii) change substantially or materially the nature of the business of the Company; (iv) issue any equity securities or securities convertible into equity securities of the Company other than the Series A Preferred Stock and the Warrants pursuant to this Agreement; (v) make any acquisition or any capital expenditure or agree to a schedule of spending or payments for assets which, in the aggregate, exceeds or would exceed $200,000 over a consecutive 12-month period, except for the acquisition of inventory or other related assets in the ordinary course of business; 15 (vi) enter into any credit facility or incur any material amount of debt, other than incurring obligations for purchases of inventory or other related assets in the ordinary course of business; (vii) offer or sell any securities of the Company; (viii) expand the number of members of the board of directors of the Company; (ix) declare or pay dividends or make any other distribution or redeem securities; or (x) enter into or modify a related-party transaction. (j) Resignation and Replacement of Board Members. On or before the First Closing Date, the Company's Board of Directors shall resign. The remaining members of the Board of Directors (the "Remaining Board Members") shall fill the newly created Board vacancies with three new members to be selected by the Purchaser (the "New Board Members"). The members of Board of Directors as set forth pursuant to this Section 4(j) shall serve until the next annual meeting of the Company's stockholders. (k) Right to Maintain Participation. (i) For so long as any shares of the Series A Preferred Stock shall remain outstanding and are held by Purchaser, the Company agrees that prior to any sale and/or issuance by the Company of any shares of Common Stock or any security exercisable for or, convertible into such Common Stock or any security with voting rights (the "Common Equivalents") (other than a sale or issuance excluded from the provisions of this Section 4(k)(i) by the provisions of Section 4(k)(iii)), the Company shall give the Purchaser written notice (the "Notice of Issuance") of the Company's intention to sell and/or issue such Common Stock or Common Equivalents, setting forth the proposed price, quantity and other material terms and conditions under which the Company proposes to make such sale and/or issuance. If and when the Company consummates the sale or issuance of Common Stock or Common Equivalents described in the Notice of Issuance, the Purchaser shall have the right to purchase or otherwise acquire (the "Right to Maintain Participation") a number of shares of Common Stock or Common Equivalents on terms which, subject to this Section 4(k), are at least as favorable to the Purchaser as the terms on which the Company sold or otherwise issued such Common Stock or Common Equivalents to the persons who purchased or otherwise acquired the Common Stock or Common Equivalents referred to in the Notice of Issuance, such that, immediately after the purchase or other acquisition by the Purchaser, Purchaser's ownership of the total number of outstanding shares of Common Stock (assuming the exercise for or conversion of all Common Equivalents into Common Stock) equals the same percentage of the total shares of Common Stock (assuming the exercise for or conversion of all Common Equivalents into Common Stock) as the Purchaser held immediately prior to the sale or issuance described in the Notice of Issuance. The Purchaser shall have 20 days from the giving of the Notice of Issuance (the "Election Date") to notify the Company in writing that Purchaser elects to exercise its Right to 16 Maintain Participation (the date such notice is received by the Company is hereinafter referred to as the "Notice Date"). (ii) If the Purchaser elects to exercise its Right to Maintain Participation, the Purchaser and the Company shall use their reasonable best efforts to consummate the purchase or acquisition and sale or issuance of such Common Stock or Common Equivalents within 30 days after the Election Date and, subject to this Section 4(k), the terms of such purchase or acquisition and sale or issuance shall be at least as favorable to the Purchaser as those set forth in the Notice of Issuance. The closing of such transaction shall take place as promptly as practicable after all regulatory approvals required for the consummation of such purchase have been obtained, at such time, on such date, and at such location as the parties shall mutually agree. Payment for such Common Stock or Common Equivalents shall be by wire transfer of immediately available funds to an account designated by the Company by written notice delivered to the Purchaser not less than two business days prior to the scheduled closing of such purchase against delivery of the Common Stock or Common Equivalents at the executive offices of the Company at the time of the scheduled closing therefor. The Company shall take all such action as may reasonably be required by any regulatory authority in connection with the exercise by the Purchaser of the right to purchase Common Stock or Common Equivalents as set forth in this Section 4(k). (iii) The right contained in this Section 4(k) shall not apply to the following sales and/or issuances by the Company on or after the date hereof of Common Stock or Common Equivalents: a. Common Stock or Common Equivalents issued to employees, officers, directors and consultants pursuant to any stock option plan, stock incentive or purchase plan or agreement approved by the Company's Board of Directors or Common Stock issued upon exercise of Common Equivalents so issued; b. Common Stock or Common Equivalents issued in connection with or upon exercise or conversion of securities issued in connection with a merger, consolidation, share exchange, or other reorganization or business combination, involving the Company, in which the Company is the acquiring corporation or stockholders of the Company immediately prior to such merger, consolidation or other reorganization or business combination and own securities with a majority of the voting power of the resulting entity; c. Common Stock or Common Equivalents issued pursuant to rights distributed to all holders of Common Stock generally or Common Stock issued upon exercise of such Common Equivalents; d. Common Stock or Common Equivalents issued in connection with any stock split, stock dividend or recapitalization of the Company; e. Common Stock issued pursuant to the exercise of any currently outstanding stock options, warrants or any other securities exchangeable for or convertible into or any other right to acquire shares of Common Stock; and 17 f. Common Stock or Common Equivalents issued in connection with a firmly underwritten public offering, which generates aggregate net proceeds to the Company (after deduction for underwriters' discounts and expenses relating to the issuance, including without limitation fees to the Company's counsel) equal to or exceeding $15,000,000. (iv) In the event a Purchaser exercises its Right to Maintain Participation and a dispute arises as to the value of the Common Stock or Common Equivalents that the Purchaser is acquiring to maintain such participation, an independent third party ("Arbitrator") acceptable to both parties shall be selected. The Arbitrator shall determine the consideration the Purchaser will pay for the Common Stock or Common Equivalent and such determination shall be binding, conclusive and final. The Purchaser and the Company shall pay equal shares of all the fees and expenses of the Arbitrator. 5. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SHARES AND THE WARRANT The Purchaser understands that the Company's obligation to issue the Series A Preferred Stock and the Warrants on each Closing Date to the Purchaser pursuant to this Agreement is conditioned upon the following, unless waived in writing by the Company: (a) The accuracy on each Closing Date of the representations and warranties of the Purchaser contained in this Agreement as if made on each Closing Date and the performance by the Purchaser on or before each Closing Date of all covenants and agreements of the Purchaser required to be performed on or before each Closing Date. (b) The absence or inapplicability on each Closing Date of any and all laws, rules or regulations prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval, except for any stockholder or Board of Director approval or consent contemplated herein, which shall not have been obtained. (c) All regulatory approvals or filings, if any, on each Closing Date necessary to consummate the transactions contemplated by this Agreement shall have been made as of each Closing Date. (d) The receipt of good funds (or, in the case of the First Closing Date, the original Note, marked "cancelled") as of each Closing Date as scheduled in the Table of Closings in Section 1(c). 6. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SHARES AND THE WARRANT The Company understands that the Purchaser's obligation to purchase the Series A Preferred Stock and the Warrants on each Closing Date is conditioned upon each of the following, unless waived in writing by the Purchaser: (a) The Purchaser shall have completed to its satisfaction its due diligence review of the Company, the Company's business, assets and liabilities, and the Company shall have furnished to the Purchaser and its representatives, such information as may be reasonably requested by them. 18 (b) The accuracy on each Closing Date of the representations and warranties of the Company contained in this Agreement as if made on such Closing Date, and the performance by the Company on or before such Closing Date of all covenants and agreements of the Company required to be performed on or before the First Closing Date or such other Closing Date. (c) The Company shall have executed and delivered to the Purchaser (i) the Series A Preferred Stock and (ii) the Warrants as scheduled in the Table of Closings in Section 1(c) with respect to each Closing Date. (d) On each Closing Date, the Purchaser shall have received from the Company such other certificates and documents as it or its representatives, if applicable, shall reasonably request, and all proceedings taken by the Company or the Board of Directors of the Company, as applicable, in connection with the Primary Documents contemplated by this Agreement and the other Primary Documents and all documents and papers relating to such Primary Documents shall be satisfactory to the Purchaser. (e) All regulatory approvals or filings, if any, necessary to consummate the transactions contemplated by this Agreement shall have been made as of each Closing Date. (f) All the parties to the Lock-Up Agreements shall have executed and delivered such agreements. (g) The Purchaser shall have received a legal opinion from Boylan, Brown, Code, Vigdor & Wilson, LLP, dated the First Closing Date, in form and content acceptable to the Purchaser. (h) The Company shall have received a Closing Certificate substantially in the form attached hereto as Exhibit E. (i) On or prior to the First Closing Date, Healthcare Quality Solutions, Inc., a Florida corporation wholly owned by the Company ("HQS"), the Company and Provider Acquisition, LLC, a Florida limited liability company ("PAL") shall have executed a merger agreement acceptable to the Purchaser (the "Merger Agreement") and consummated a merger (the "Merger") pursuant to which PAL shall merge with and into HQS. (j) With respect to the Second Closing Date only, the Company shall have reimbursed the Purchaser the expenses incurred in connection with the negotiation or performance of this Agreement pursuant to Section 7 hereof. 19 7. FEES AND EXPENSES The Company shall bear its own costs, including attorney's fees, incurred in the negotiation of this Agreement and consummating of the transactions contemplated herein and in the Merger Agreement, the Escrow Agreement and the corporate proceedings of the Company in contemplation hereof and thereof, not to exceed $20,000. At the First Closing Date, the Company shall reimburse the Purchaser for all of the Purchaser's reasonable out-of-pocket expenses incurred in connection with the negotiation or performance of this Agreement, including without limitation reasonable fees and disbursements of counsel to the Purchaser. 8. SURVIVAL The agreements, covenants, representations and warranties of the Company, the Purchaser and PAL shall survive the execution and delivery of this Agreement and the delivery of the Securities hereunder for a period of two years from the date of the Final Closing Date, except that: (a) the Company's representations and warranties regarding Taxes contained in Section 3(s) of this Agreement shall survive as long as the Company remains statutorily liable for any obligation referenced in Section 3(s), and (b) the Company's representations and warranties contained in Section 3(b) shall survive until the Purchaser and any of its affiliates are no longer holders of any of the Securities purchased hereunder. 9. INDEMNIFICATION (a) Each of the Company and the Principal Stockholders, jointly and severally, on the one side, and the Purchaser (each in such capacity under this section, the "Indemnifying Party") agrees to indemnify the other party and each officer, director, employee, agent, partner, stockholder, member and affiliate of such other party (collectively, the "Indemnified Parties") for, and hold each Indemnified Party harmless from and against: (i) any and all damages, losses, claims, diminution in value and other liabilities of any and every kind, including, without limitation, judgments and costs of settlement, and (ii) any and all reasonable out-of-pocket costs and expenses of any and every kind, including, without limitation, reasonable fees and disbursements of counsel for such Indemnified Parties (all of which expenses periodically shall be reimbursed as incurred), in each case, arising out of or suffered or incurred in connection with any of the following, whether or not involving a third party claim: (a) any misrepresentation or any breach of any warranty made by the Indemnifying Party herein or in any of the other Primary Documents, (b) any breach or non-fulfillment of any covenant or agreement made by the Indemnifying Party herein or in any of the other Primary Documents, or (c) any claim relating to or arising out of a violation of applicable federal or state securities laws by the Indemnifying Party in connection with the sale or issuance of the Series A Preferred Stock or Warrants by the Indemnifying Party to the Indemnified Party (collectively, the "Indemnified Liabilities"). To the extent that the foregoing 20 undertaking by the Indemnifying Party may be unenforceable for any reason, the Indemnifying Party shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. No indemnification shall be payable in respect of any Indemnified Liability (i) where the claiming Indemnified Party had actual knowledge of or notice from information set forth in the schedules hereto of the facts giving rise to such Indemnified Liability prior to the First Closing Date or (ii) where such Indemnified Party entered into a settlement of an Indemnified Liability without the prior written consent of the applicable Indemnifying Party. 10. NOTICES Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by five days advance written notice to each of the other parties hereto.
Company: Silver Key Mining Company, Inc. 200 South Hoover Boulevard Building 205 Tampa, Florida 33609 Attention: President Telephone: 813-282-3303 Facsimile: 813-282-8907 with a copy to: Adorno & Yoss, P.A. 2601 S. Bayshore Drive, Suite 1600 Miami, Florida 33133 Attention: Seth P. Joseph Telephone: 305-860-7363 Facsimile: 305-858-4777 Principal Stockholders: At the address and facsimile set forth on the signature page. Purchaser: Stanford Venture Capital Holdings, Inc. 6075 Poplar Avenue Memphis, TN 38119 Attention: James M. Davis, President Telephone: (901) 680-5260 Facsimile: (901) 680-5265 with a copy to: Stanford Financial Group 5050 Westheimer Houston, TX 77056 Attention: Mauricio Alvarado, Esq. Telephone: (713) 964-5145 Facsimile: (713) 964-5245
21 11. GOVERNING LAW; JURISDICTION This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any party in the federal courts of Florida or the state courts of the State of Florida, Miami-Dade County and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. 12. MISCELLANEOUS (a) Entire Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement, together with the other Primary Documents, including any certificate, schedule, exhibit or other document delivered pursuant to their terms, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters. (b) Amendments. This Agreement may not be amended except by an instrument in writing signed by the party to be charged with enforcement. (c) Waiver. No waiver of any provision of this Agreement shall be deemed a waiver of any other provisions or shall a waiver of the performance of a provision in one or more instances be deemed a waiver of future performance thereof. (d) Construction. This Agreement and each of the Primary Documents have been entered into freely by each of the parties, following consultation with their respective counsel, and shall be interpreted fairly in accordance with its respective terms, without any construction in favor of or against either party. (e) Binding Effect of Agreement. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Series A Preferred Stock and the Warrants. (f) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. 22 (g) Attorneys' Fees. If any action should arise between the parties hereto to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be reimbursed for all reasonable expenses incurred in connection with such action, including reasonable attorneys' fees. (h) Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. (i) Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by each of the undersigned as of the 16th day of October, 2002. SILVER KEY MINING COMPANY, INC. By: /s/ J. Rockwell Smith -------------------------------------------- Name: J. Rockwell Smith ----------------------------------------- Title: President ---------------------------------------- PRINCIPAL STOCKHOLDERS: /s/ Edward F. Cowle ----------------------------------------- Edward F. Cowle, an Individual 99 Park Avenue, Suite 2230 New York, NY 10016 Phone: 212-557-4005 Fax: 212-867-6908 /s/ H. Deworth Williams ----------------------------------------- H. Deworth Williams, an Individual 56 West 400 South Suite 220 Salt Lake City, Utah 84101 Phone: 801-322-3401 Fax: 801-595-0967 23 /s/ Ronald Rasmussen ----------------------------------------- Ronald Rasmussen, an Individual 4740 East Warner Road #2 Phoeniz, AZ 85044 Phone: 480-598-3221 Fax: 801-595-0967 /s/ J. Rockwell Smith ----------------------------------------- J. Rockwell Smith, an Individual P.O. Box 3303 Park City, UT 84060 Phone: 435-649-5060 Fax: 801-595-0967 STANFORD VENTURE CAPITAL HOLDINGS, INC. By: /s/ Jim Davis -------------------------------------- Name: Jim Davis ------------------------------------ Title: President ----------------------------------- 24 EXHIBIT INDEX EXHIBIT A CERTIFICATE OF DESIGNATION OF SERIES A $1.17 CONVERTIBLE PREFERRED STOCK EXHIBIT B FORM OF WARRANT EXHIBIT C REGISTRATION RIGHTS AGREEMENT EXHIBIT D FORM OF LOCK-UP AGREEMENT EXHIBIT E CLOSING CERTIFICATE 25 SCHEDULE INDEX Schedule Description - -------- ----------- 3(a) Organization 3(b) Capitalization 3(g) Financial Statements 3(k) Compliance With Legal Requirements 3(l) Absence of Certain Changes 3(n) Relationships With Related Persons 3(o) Title to Properties; Liens and Encumbrances 3(r) No Default 3(s) Taxes 3(u) Contracts; No Defaults (w) Insurance (aa) Mergers, Acquisitions and Divestitures 26 EX-10.3 5 ex10-3.txt FORM OF WARRANT AGREEMENT EXHIBIT 10.3 NEITHER THIS WARRANT NOR THE WARRANT STOCK (AS HEREINAFTER DEFINED) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE WARRANT STOCK MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND SUCH LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT. THIS WARRANT IS SUBJECT TO THE TERMS OF THE SECURITIES PURCHASE AGREEMENT, DATED AS OF OCTOBER 22, 2002 BETWEEN THE COMPANY AND THE HOLDER HEREOF, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY, AND ANY TRANSFERS AND TRANSFEREES OF THIS WARRANT AND THE WARRANT STOCK ARE SUBJECT TO THE TERMS AND CONDITIONS OF SUCH AGREEMENT. Warrant No.___________ WARRANT For the Purchase of Common Stock of SILVER KEY MINING COMPANY, INC. A Nevada Corporation VOID AFTER 5:00 P.M., EASTERN STANDARD TIME, ON OCTOBER 22, 2007. ______ Shares October 22, 2002 FOR VALUE RECEIVED, SILVER KEY MINING COMPANY, INC., a Nevada corporation (the "Company"), hereby certifies that ___________________________ (the "Holder") is entitled, subject to the provisions of this Warrant, to purchase from the Company up to ____________________ (____________) shares of common stock (the "Common Shares"), par value $.0001 per share ("Common Stock"), of the Company at an exercise price per Common Share equal to $1.17 per Common Share (the "Exercise Price"), during the period commencing October 22, 2002 and expiring at 5:00 P.M., Eastern Standard time, on October 22, 2007 (5 years from the date of issuance). The number of Common Shares to be received upon the exercise of this Warrant may be adjusted from time to time as hereinafter set forth. The Common Shares deliverable upon such exercise, or the entitlement thereto upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock." The Warrants issued on the same date hereof bearing the same terms and conditions as this Warrant shall be collectively referred to as the "Warrants". The Holder agrees with the Company that this Warrant is issued, and all the rights hereunder shall be held subject to, all of the conditions, limitations and provisions set forth herein. 1. EXERCISE OF WARRANT (a) By Payment of Cash. This Warrant may be exercised by its presentation and surrender to the Company at its principal office (or such office or agency of the Company as it may designate in writing to the Holder hereof), commencing on October 22, 2002 ("Date of Issuance") and expiring at 5:00 P.M., Eastern Standard time, on October 22, 2007 (5 years from the Date of Issuance), with the Warrant Exercise Form attached hereto duly executed and accompanied by payment (either in cash or by certified or official bank check or by wire transfer, payable to the order of the Company) of the Exercise Price for the number of shares specified in such Form. The Company agrees that the Holder hereof shall be deemed the record owner of such Common Shares as of the close of business on the date on which this Warrant shall have been presented and payment made for such Common Shares as aforesaid whether or not the Company or its transfer agent is open for business. Certificates for the Common Shares so purchased shall be delivered to the Holder hereof within a reasonable time, not exceeding 15 days, after the rights represented by this Warrant shall have been so exercised. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder hereof to purchase the balance of the shares purchasable hereunder as soon as reasonably possible. (b) Cashless Exercise. In lieu of the payment method set forth in Section 1(a) above, the Holder may elect to exchange all or some of this Warrant for the Common Shares equal to the value of the amount of this Warrant being exchanged on the date of exchange. If the Holder elects to exchange this Warrant as provided in this Section 1(b), the Holder shall tender to the Company this Warrant for the amount being exchanged, along with written notice of the Holder's election to exchange some or all of this Warrant, and the Company shall issue to the Holder the number of Common Shares computed using the following formula: X = Y (A-B) ------- A Where: X = The number of Common Shares to be issued to the Holder. Y = The number of Common Shares purchasable under the amount of this Warrant being exchanged (as adjusted to the date of such calculation). A = The Market Price of one Common Share. B = The Exercise Price (as adjusted to the date of such calculation). The Warrant exchange shall take place on the date specified in the notice or if the date the notice is received by the Company is later than the date specified in the notice, on the date the notice is received by the Company. As used herein in the phrase "Market Price" at any date shall be deemed to be the last reported sale price or the closing price of the Common Stock on any exchange (including the National Association of Securities Dealers Automated Quotation System ("Nasdaq")) on which the Common Stock is listed or the closing price as quoted on the OTC Bulletin Board, or BBX, whichever is applicable, or, in the case no such reported sale takes place on such day, the average of the last reported sales prices or quotations for the last five trading days, in either case as officially reported or quoted by the principal securities exchange or the OTC Bulletin Board, or BBX, and if the Common Stock is not listed or quoted as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it. (c) "Easy Sale" Exercise. In lieu of the payment method set forth in Section 1(a) above, when permitted by law and applicable regulations (including rules of Nasdaq and National Association of Securities Dealers ("NASD")), the Holder may pay the aggregate Exercise Price (the "Exercise Amount") through a 2 "same day sale" commitment from the Holder (and if applicable a broker-dealer that is a member of the NASD (an "NASD Dealer")), whereby the Holder irrevocably elects to exercise this Warrant and to sell a portion of the shares so purchased to pay the Exercise Amount and the Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case of the NASD Dealer, upon receipt) of such shares to forward the Exercise Amount directly to the Company. 2. COVENANTS BY THE COMPANY The Company covenants and agrees as follows: (a) Reservation of Shares. During the period within which the rights represented by this Warrant may be exercised, the Company shall, at all times, reserve and keep available out of its authorized capital stock, solely for the purposes of issuance upon exercise of this Warrant, such number of its Common Shares as shall be issuable upon the exercise of this Warrant. If at any time the number of authorized Common Shares shall not be sufficient to effect the exercise of this Warrant, the Company will take such corporate action as may be necessary to increase its authorized but unissued Common Shares to such number of shares as shall be sufficient for such purpose. The Company shall have analogous obligations with respect to any other securities or property issuable upon exercise of this Warrant. (b) Valid Issuance, etc. All Common Shares which may be issued upon exercise of the rights represented by this Warrant included herein will be, upon payment thereof, validly issued, fully paid, non-assessable and free from all taxes, liens and charges with respect to the issuance thereof. (c) Taxes. All original issue taxes payable in respect of the issuance of Common Shares upon the exercise of the rights represented by this Warrant shall be borne by the Company, but in no event shall the Company be responsible or liable for income taxes or transfer taxes upon the issuance or transfer of this Warrant or the Warrant Stock. (d) Fractional Shares. The Company shall not be required to issue certificates representing fractions of Common Shares. In lieu of any fractional interests, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction. 3. EXCHANGE OR ASSIGNMENT OF WARRANT This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company for other Warrants of different denominations, entitling the Holder to purchase in the aggregate the same number of Common Shares purchasable hereunder. Subject to the provisions of this Warrant and the receipt by the Company of any required representations and agreements, upon surrender of this Warrant to the Company with the Warrant Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without additional charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. In 3 the event of a partial assignment of this Warrant, the new Warrants issued to the assignee and the Holder shall make reference to the aggregate number of shares of Warrant Stock issuable upon exercise of this Warrant. 4. RIGHTS OF THE HOLDER The Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant. 5. ADJUSTMENT OF EXERCISE PRICE (a) Common Stock Dividends; Common Stock Splits; Reclassification. If the Company, at any time while this Warrant is outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares (or combine the outstanding shares of Common Stock into a smaller number of shares) or (c) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, then (i) the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event and (ii) the number of shares of the Warrant Stock shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such event. Any adjustment made pursuant to this Section 5.1 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution or, in the case of a subdivision or re-classification, shall become effective immediately after the effective date thereof. (b) Rights; Options; Warrants or Other Securities. If the Company, at any time while this Warrant is outstanding, shall fix a record date for the issuance of rights, options, warrants or other securities to all the holders of its Common Stock entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire shares of Common Stock for no consideration or at a price per share less than the Exercise Price, the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance or sale plus the number of shares of Common Stock which the aggregate consideration received by the Company would purchase at the Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance date plus the number of additional shares of Common Stock offered for subscription, purchase, conversion, exchange or acquisition, as the case may be. Such adjustment shall be made whenever such rights, options, warrants or other securities are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or other securities. 4 (c) Subscription Rights. If the Company, at any time while this Warrant is outstanding, shall fix a record date for the distribution to holders of its Common Stock, evidence of its indebtedness or assets or rights, options, warrants or other security entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire any security (excluding those referred to in Sections 5(a) and 5(b) above), then in each such case the Exercise Price at which this Warrant shall thereafter be exercisable shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the per-share Market Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith, and the denominator of which shall be the Exercise Price as of such record date; provided, however, that in the event of a distribution exceeding 10% of the net assets of the Company, such fair market value shall be determined by an appraiser selected in good faith by the registered owners of a majority of the Warrant Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such appraiser shall have the right to select in good faith an additional appraiser meeting the same qualifications, in which case the fair market value shall be equal to the average of the determinations by each such appraiser. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (d) Rounding. All calculations under this Section 5 shall be made to the nearest cent or the nearest l/l00th of a share, as the case may be. (e) Notice of Adjustment. Whenever the Exercise Price is adjusted pursuant to this Section 5, the Company shall promptly deliver to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such notice shall be signed by the chairman, president or chief financial officer of the Company. (f) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock by the Company. (g) Change of Control; Compulsory Share Exchange. In case of (A) any Change of Control Transaction (as defined below) or (B) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (each, an "Event"), lawful provision shall be made so that the Holder shall have the right thereafter to exercise this Warrant for shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Event, and the Holder shall be entitled upon such Event to receive such amount of shares of stock and other securities, cash or property as the shares of the Common Stock of the Company into which this Warrant could have been exercised immediately prior to such Event (without taking into account any limitations or restrictions on the 5 exercisability of this Warrant) would have been entitled; provided, however, that in the case of a transaction specified in (A), above, in which holders of the Company's Common Stock receive cash, the Holder shall have the right to exercise the Warrant for such number of shares of the surviving company equal to the amount of cash into which this Warrant is then exercisable, divided by the fair market value of the shares of the surviving company on the effective date of such Event. The terms of any such Event shall include such terms so as to continue to give to the Holder the right to receive the securities, cash or property set forth in this Section 5(g) upon any exercise or redemption following such Event, and, in the case of an Event specified in (A), above, the successor corporation or other entity (if other than the Company) resulting from such reorganization, merger or consolidation, or the person acquiring the properties and assets, or such other controlling corporation or entity as may be appropriate, shall expressly assume the obligation to deliver the securities or other assets which the Holder is entitled to receive hereunder. The provisions of this Section 5(g) shall similarly apply to successive Events. "Change of Control Transaction" means the occurrence of any (i) merger or consolidation of the Company with or into another entity, unless the holders of the Company's securities immediately prior to such transaction or series of transactions continue to hold at least 50% of such securities following such transaction or series of transactions, (ii) a sale, conveyance, lease, transfer or disposition of all or substantially all of the assets of the Company in one or a series of related transactions or (iii) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i) or (ii). (h) Issuances Below Exercise Price. If the Company, at any time while this Warrant is outstanding: (i) issues or sells, or is deemed to have issued or sold, any Common Stock; (ii) in any manner grants, issues or sells any rights, options, warrants, options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than any Excluded Securities (as defined below)) (such rights, options or warrants being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"); or (iii) in any manner issues or sells any Convertible Securities; for (a) with respect to paragraph (i) above, a price per share, or (b) with respect to paragraphs (ii) or (iii) above, a price per share for which Common Stock issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities is, less than the Exercise Price in effect immediately prior to such issuance or sale, then, immediately after such issuance, sale or grant, the Exercise Price shall be reduced to a price equal to the price per share of the Common Stock sold or the exercise price or conversion price of the Options and Convertible Securities, as applicable. No modification of the issuance terms shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Options or Convertible Securities. The number of Common Shares issuable upon exercise of this Warrant shall be increased to an amount equal to the quotient of (A) the product of (x) the Exercise Price in effect immediately prior to the adjustment multiplied by (y) the number of Common Shares issuable upon exercise of this Warrant immediately prior to the adjustment, divided by (B) the adjusted Exercise Price. If there is 6 a change at any time in (i) the exercise price provided for in any Options, (ii) the additional consideration, if any, payable upon the issuance, conversion or exchange of any Convertible Securities or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock, then immediately after such change the Exercise Price shall be adjusted to Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed exercise price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold; provided that no adjustment shall be made if such adjustment would result in an increase of the Exercise Price then in effect. "Excluded Securities" means (i) options to be granted pursuant to a stock option plan approved by Stanford Venture Capital Holdings, Inc. ("Stanford"); (ii) shares of Common Stock issued upon conversion or exercise of warrants, options or other securities convertible into Common Stock which have been specifically disclosed to Stanford in the Securities Purchase Agreement dated as of even date herewith between the Company and Stanford, or (iii) shares of Common Stock or securities convertible into or exercisable for shares of Common Stock issued or deemed to be issued by the Company in connection with a strategic acquisition by the Company of the assets or business, or division thereof, of another entity which acquisition has been approved by Stanford in writing. (i) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 5(h), the following shall be applicable: (i) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor, without deducting any expenses paid or incurred by the Company or any commissions or compensations paid or concessions or discounts allowed to underwriters, dealers or others performing similar services in connection with such issue or sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities listed or quoted on a national securities exchange or national quotation system, in which case the amount of consideration received by the Company will be the arithmetic average of the closing sale price of such security for the five (5) consecutive trading days immediately preceding the date of receipt thereof. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the registered owners of a majority of the Warrant Stock then outstanding. If such parties are unable to reach agreement within 10 days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within 48 hours of the 10th day following the Valuation Event by an appraiser selected in good faith by the Company and agreed upon in good faith by the registered owners of a majority of the Warrant Stock then outstanding. The determination of such appraiser shall be binding upon all parties absent manifest error. 7 (ii) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for an aggregate consideration of $.001. (iii) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (iv) Other Events. If any event occurs that would adversely affect the rights of the Holder of this Warrant but is not expressly provided for by this Section 5 (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Exercise Price so as to protect the rights of the Holder; provided, however, that no such adjustment will increase the Exercise Price. (j) Notice of Certain Events. If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the Company shall authorize the granting to the holders of all of its Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (iv) the approval of any stockholders of the Company shall be required in connection with any capital reorganization, reclassification of the Company's capital stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be delivered to the Holder, at least 30 calendar days prior to the applicable 8 record or effective date hereinafter specified, a notice (provided such notice shall not include any material non-public information) stating (a) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (b) the date on which such reorganization, reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Nothing herein shall prohibit the Holder from exercising this Warrant during the 30-day period commencing on the date of such notice. (k) Increase in Exercise Price. In no event shall any provision in this Section 5 cause the Exercise Price to be greater than the Exercise Price on the date of issuance of this Warrant, except for a combination of the outstanding shares of Common Stock into a smaller number of shares as referenced in Section 5(a) above. 6. RESTRICTIONS ON EXERCISE (a) Investment Intent. Unless, prior to the exercise of the Warrant, the issuance of the Warrant Stock has been registered with the Securities and Exchange Commission pursuant to the Act, the Warrant Exercise Form shall be accompanied by a representation of the Holder to the Company to the effect that such shares are being acquired for investment and not with a view to the distribution thereof, and such other representations and documentation as may be required by the Company, unless in the opinion of counsel to the Company such representations or other documentation are not necessary to comply with the Act. 7. RESTRICTIONS ON TRANSFER (a) Transfer to Comply with the Securities Act of 1933. Neither this Warrant nor any Warrant Stock may be sold, assigned, transferred or otherwise disposed of except as follows: (1) to a person who, in the opinion of counsel satisfactory to the Company, is a person to whom this Warrant or the Warrant Stock may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 7 with respect to any resale, assignment, transfer or other disposition of such securities; (2) to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale, assignment, transfer or disposition; or (3) to any "affiliate" (as such term is used in Rule 144 promulgated pursuant to the Act) of the Holder. (b) Legend. Subject to the terms hereof, upon exercise of this Warrant and the issuance of the Warrant Stock, all certificates representing such Warrant Stock shall bear on the face or reverse thereof substantially the following legend: "The securities which are represented by this certificate have not been registered under the Securities Act of 1933, and may not be sold, transferred, hypothecated or otherwise disposed of until a registration 9 statement with respect thereto is declared effective under such act, or the Company receives an opinion of counsel for the Company that an exemption from the registration requirements of such act is available." 8. LOST, STOLEN OR DESTROYED WARRANTS In the event that the Holder notifies the Company that this Warrant has been lost, stolen or destroyed and provides (a) a letter, in form reasonably satisfactory to the Company, to the effect that it will indemnify the Company from any loss incurred by it in connection therewith, and/or (b) an indemnity bond in such amount as is reasonably required by the Company, the Company having the option of electing either (a) or (b) or both, the Company may, in its sole discretion, accept such letter and/or indemnity bond in lieu of the surrender of this Warrant as required by Section 1 hereof. 9. SUBSEQUENT HOLDERS Every Holder hereof, by accepting the same, agrees with any subsequent Holder hereof and with the Company that this Warrant and all rights hereunder are issued and shall be held subject to all of the terms, conditions, limitations and provisions set forth in this Warrant, and further agrees that the Company and its transfer agent, if any, may deem and treat the registered holder of this Warrant as the absolute owner hereof for all purposes and shall not be affected by any notice to the contrary. 10. NOTICES Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed the other party at the following address, or at such other addresses as a party may designate by five days advance written notice to the other party hereto. Company: Silver Key Mining Company, Inc. 200 South Hoover Boulevard Building 205 Tampa, Florida 33609 Attn: President Telephone: 813-282-3303 Facsimile: 813-282-8907 with a copy to: Adorno & Yoss, 2601 S. Bayshore Drive, Suite 1600 Miami, Florida 33133 Attention: Seth P. Joseph, Esq. Telephone: 305-860-7363 Facsimile: 305-858-4777 Holder: Stanford Venture Capital Holdings 6075 Poplar Avenue Memphis, TN 38119 Attention: James Davis Telephone: 901-680-5260 Facsimile: 901-680-5265 10 11. GOVERNING LAW; JURISDICTION This Warrant shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Warrant may be brought against any party in the federal courts of Florida or the state courts of the State of Florida, and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. (Signature on the following page) 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf, in its corporate name, by its duly authorized officer, all as of the day and year first above written. SILVER KEY MINING COMPANY, INC. By: ______________________________ Name: ---------------------------- Title: --------------------------- 12 SILVER KEY MINING COMPANY, INC. WARRANT EXERCISE FORM --------------------- The undersigned hereby irrevocably elects (A) to exercise the Warrant dated __________ _____, 200___ (the "Warrant"), pursuant to the provisions of Section 1(a) of the Warrant, to the extent of purchasing _____________ shares of the common stock, par value $.001 per share (the "Common Stock"), of Silver Key Mining Company, Inc. and hereby makes a payment of $________ in payment therefor, or (B) to exercise the Warrant to the extent of purchasing _________ shares of the Common Stock, pursuant to the provisions of Section 1(b) of the Warrant. In exercising the Warrant, the undersigned hereby confirms that the Common Stock to be issued hereunder is being acquired for investment and not with a view to the distribution thereof. Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below. __________________________________ Name of Holder __________________________________ Signature of Holder or Authorized Representative __________________________________ Signature, if jointly held __________________________________ Name and Title of Authorized Representative __________________________________ Address of Holder __________________________________ Date 13 EXECUTION COPY WARRANT ASSIGNMENT AND JOINDER Reference is made to those certain Warrants (the "Warrants"), to purchase an aggregate of 1,880,342 shares of the common stock, $.001 par value per share ("Common Stock"), of Silver Key Mining Company, Inc., a Nevada corporation (the "Company"). Capitalized terms not defined herein shall have the meaning given to them in the Securities Purchase Agreement the "Securities Purchase Agreement"), dated as of October 16, 2002, by and among the Company, the stockholders of the Company listed on the signature page attached thereto and Stanford Venture Capital Holdings, Inc., a Delaware corporation ("Stanford"). Now therefore, for value received, Stanford, hereby sells, assigns and transfers unto ____________ ("Assignee") an aggregate of ____________ percent (_____%) of the total Warrants purchased by Stanford in accordance with the terms of the Securities Purchase Agreement with each share of Common Stock represented by the Warrants ("Warrant Shares") exercisable at an exercise price per Warrant Share of $1.17 in accordance with the Table of Closing Dates as outlined in Section 1(c) of the Securities Purchase Agreement. By execution and delivery of this Warrant Assignment and Joinder, Assignee, as successor to Stanford with respect of the Warrant Shares (i) will be deemed to be a party to the Warrants and the Registration Rights Agreement, incorporated by this reference as though fully set forth herein, (ii) authorizes this Warrant Assignment and Joinder to be attached to each Warrant, and (iii) represents and warrants that Assignee is an Accredited Investor. Assignee, as successor to Stanford with respect to the Warrant Shares, will have all rights, and shall observe all the obligations, applicable to a "Holder" as set forth in the Warrants and an "Investor" as set forth in the Registration Rights Agreement, as though such Assignee had executed the Warrants and the Registration Rights Agreement as an initial Holder or Investor thereunder, and confirms his obligations under the Warrants and the Registration Rights Agreement. Date: October ___, 2002 "Company" "Holder" Silver Key Mining Company, Inc. Stanford Venture Capital Holdings, Inc. By:_________________________ ____________________________ Name: ___________________ By: Title: Title: President "Assignee" _____________________________ _____________________________ _____________________________ _____________________________ 14 EX-10.4 6 ex10-4.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.4 EXECUTION COPY SILVER KEY MINING COMPANY, INC. A Nevada Corporation REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 22, 2002 (the "Agreement"), is entered into by and among Silver Key Mining Company, Inc., a Nevada corporation (the "Company"), and the holders (the "Investors") of the Company's capital stock and Warrants set forth on the signature page hereof. Capitalized terms not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement (as hereinafter defined). WHEREAS, heretofore, Healthcare Quality Systems, Inc., a Florida corporation wholly owned by Company entered into and consummated Merger Agreement with Provider Acquisition, LLC ("PAL") pursuant to which the Investors exchanged all their membership interests in PAL for 1,915,842 shares of the Company's Common Stock (the "Merger"); and WHEREAS, simultaneously with the execution and delivery of this Agreement, the Investors are agreeing to purchase from the Company, pursuant to the Securities Purchase Agreement dated as of October 16, 2002 among the Company, certain of its stockholders and Stanford Venture Capital Holdings, Inc., a Delaware corporation (the "Securities Purchase Agreement") 1,880,342 shares of the Series A Preferred Stock and the Warrants; and WHEREAS, the Company desires to grant to the Investors the registration rights set forth herein with respect to the shares of Common Stock issuable upon conversion of the Series A Preferred Stock (the "Conversion Shares"), the shares of Common Stock issuable as a result of the Merger (the "Merger Shares"), the shares of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares"), the shares of Common Stock issuable upon the exercise of the warrants issuable in the event of a registration default pursuant to Section 4(e) (the "Default Warrant Shares"), the 500,000 shares of Common Stock registered in the name of Deluxe Investment Company. and held in escrow under an Escrow Agreement of even date herewith among the Company, Stanford Venture Capital Holdings, Inc. and Boylan, Brown, Vigdor & Wilson LLP, as escrow agent (the "Escrow Shares") and the shares of Common Stock issued as a dividend or other distribution with respect to the Conversion Shares, Merger Shares, Warrant Shares, Escrow Shares or Default Warrant Shares (the "Distribution Shares") (all the shares of the Series A Preferred Stock, the Conversion Shares, the Merger Shares, the Warrant Shares, the Default Warrant Shares, the Escrow Shares and the Distribution Shares, collectively and interchangeably, are referred to herein as the "Securities"). NOW, THEREFORE, the parties hereto mutually agree as follows: 1. CERTAIN DEFINITIONS As used herein the term "Registrable Security" means the Conversion Shares, Warrant Shares, Merger Shares, Default Warrant Shares and the Distribution Shares, until (i) the Registration Statement (as defined below) has been declared effective by the Securities and Exchange Commission (the "Commission"), and all Securities have been disposed of pursuant to the Registration Statement, (ii) all Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 ("Rule 144") (or any similar provision then in force) under the Securities Act of 1933, as amended (the "Securities Act") are met, or (iii) such time as, in the opinion of counsel to the Company reasonably satisfactory to the Investors and upon delivery to the Investors of such executed opinion, all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144 (or any similar provision then in effect). In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be deemed to be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement. As used herein the term "Holder" means any Person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 10 hereof. As used herein "Trading Day" shall mean any business day on which the market on which the Common Stock trades is open for business. 2. RESTRICTIONS ON TRANSFER Each of the Investors acknowledges and understands that prior to the registration of the Securities as provided herein, the Securities are "restricted securities" as defined in Rule 144. Each of the Investors understands that no disposition or transfer of the Securities may be made by any of the Investors in the absence of (i) an opinion of counsel to such Investor, in form and substance reasonably satisfactory to the Company, that such transfer may be made without registration under the Securities Act or (ii) such registration. 3. COMPLIANCE WITH REPORTING REQUIREMENTS With a view to making available to the Investors the benefits of Rule 144 or any other similar rule or regulation of the Commission that may at any time permit the holders of the Securities to sell securities of the Company to the public pursuant to Rule 144, the Company agrees to: (a) comply with the provisions of paragraph (c)(1) of Rule 144; (b) file with the Commission in a timely manner all reports and other documents required to be filed with the Commission pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934 (the "Exchange Act") by companies subject to either of such sections, irrespective of whether the Company is then subject to such reporting requirements; and (c) Upon request by any Holder or the Company's transfer agent, the Company shall provide an opinion of counsel, which opinion shall be reasonably acceptable to the Holder and/or the Company's transfer agent, that the such Holder has complied with the applicable conditions of Rule 144 (or any similar provision then in force). 2 4. REGISTRATION RIGHTS WITH RESPECT TO THE REGISTRABLE SECURITIES (a) The Company agrees that it will prepare and file with the Commission, (i) within 180 calendar days from the Last Closing Date, a registration statement (on Form S-1 or SB-2, or other appropriate registration statement form) under the Securities Act (the "Registration Statement"), and (ii) if at least 20% of the Registrable Securities covered under the Registration Statement filed under (i) remain unsold during the effective period of such Registration Statement, then within 20 days following receipt of a written notice from the holders representing a majority of such unsold Registrable Securities, another Registration Statement so as to permit a resale of the Securities under the Securities Act by the Holders as selling stockholders and not as underwriters. The Company shall use diligent best efforts to cause the Registration Statement to become effective as soon as practical following the filing of the Registration Statement. The number of shares designated in the Registration Statement to be registered shall include 150% of the Warrant Shares, 150% of the Merger Shares, 150% of the Default Warrant Shares, if any, and 150% of the Conversion Shares and shall include appropriate language regarding reliance upon Rule 416 to the extent permitted by the Commission. The Company will notify the Holders and its transfer agent of the effectiveness of the Registration Statement within one Trading Day of such event. (b) The Company will maintain the Registration Statement or post-effective amendment filed under this Section 4 effective under the Securities Act until the earlier of (i) the date that none of the Registrable Securities covered by such Registration Statement are or may become issued and outstanding, (ii) the date that all of the Registrable Securities have been sold pursuant to such Registration Statement, (iii) the date all the Holders receive an opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Holders, that the Registrable Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iv) all Registrable Securities have been otherwise transferred to persons 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 (v) two years from the Effective Date. (c) All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under this Section 4 and in complying with applicable securities and blue sky laws (including, without limitation, all attorneys' fees of the Company) shall be borne by the Company. The Company shall also reimburse the fees and expenses of counsel to the Holders incurred in connection with such counsel's review of the Registration Statement and advice concerning the Registration Statement and its filing subject to a cap of $15,000. The Holders shall bear the cost of underwriting and/or brokerage discounts, fees and commissions, if any, applicable to the Registrable Securities being registered. The Holders and their counsel shall have a reasonable period, not to exceed 15 Trading Days, to review the proposed Registration Statement or any amendment thereto, prior to filing with the Commission, and the Company shall provide the Holders with copies of any comment letters received from the Commission with respect thereto within two Trading Days of receipt thereof. The Company shall qualify any of the Registrable Securities for sale in such states as the Holders 3 reasonably designate and shall furnish indemnification in the manner provided in Section 7 hereof. However, the Company shall not be required to qualify in any state which will require an escrow or other restriction relating to the Company and/or the Holders, or which will require the Company to qualify to do business in such state or require the Company to file therein any general consent to service of process. The Company at its expense will supply each of the Investors with copies of the applicable Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by any of the Investors. (d) The Company shall not be required by this Section 4 to include the Registrable Securities in any Registration Statement which is to be filed if, in the opinion of counsel for both the Holders and the Company (or, should they not agree, in the opinion of another counsel experienced in securities law matters acceptable to counsel for the Holders and the Company) the proposed offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities laws and would result in all purchasers or transferees obtaining securities which are not "restricted securities," as defined in Rule 144. (e) In the event that (i) the Registration Statement is not filed by the Company in a timely manner as set forth in Section 4(a); or (ii) such Registration Statement is not maintained as effective by the Company for the period set forth in Section 4(b) above (each a "Registration Default"), then the Company will issue to each of the Holders as of the first day of such Registration Default and for every consecutive month in which such Registration Default is occurring, as liquidated damages, and not as a penalty, warrants to purchase one (1) share of the Common Stock ("Default Warrants") for each share of Series A Preferred Stock issued to the Holders pursuant to the Securities Purchase Agreement until such corresponding Registration Default no longer exists ("Liquidated Damages"); provided, however, that the issuance of such Default Warrants shall not relieve the Company from its obligations to register the Registrable Securities pursuant to this Section. If the Company does not issue the Default Warrants to the Holders as set forth above, the Company will pay any Holder's reasonable costs of any action in a court of law to cause compliance with this Section 4(e), including reasonable attorneys' fees, in addition to the Default Warrants. The registration of the Registrable Securities pursuant to this Section shall not affect or limit a Holder's other rights or remedies as set forth in this Agreement. (f) The Company shall be precluded from including in any Registration Statement which it is required to file pursuant to this Section 4 any other securities apart from the Registrable Securities, without the prior written consent of the Holders. (g) If, at any time any Registrable Securities are not at the time covered by any effective Registration Statement, the Company shall determine to register under the Securities Act (including pursuant to a demand of any stockholder of the Company exercising registration rights) any of its shares of the Common Stock (other than in connection with a merger or other business combination transaction that has been consented to in writing by holders of the Series A Preferred Stock, or pursuant to Form S-8 when such filing has been consented to in writing by holders of the Series A Preferred Stock), it shall send to each Holder written notice of such determination and, if within 20 days after receipt of such notice, such Holder shall so request in writing, the 4 Company shall its best efforts to include in such registration statement all or any part of the Registrable Securities that such Holder requests to be registered. Notwithstanding the foregoing, if, in connection with any offering involving an underwriting of the Common Stock to by issued by the Company, the managing underwriter shall impose a limitation on the number of shares of the Common Stock included in any such registration statement because, in such underwriter's judgment, such limitation is necessary based on market conditions: (a) if the registration statement is for a public offering of common stock on a "firm commitment" basis with gross proceeds to the Company of at least $15,000,000 (a "Qualified Public Offering"), the Company may exclude, to the extent so advised by the underwriters, the Registrable Securities from the underwriting; provided, however, that if the underwriters do not entirely exclude the Registrable Securities from such Qualified Public Offering, the Company shall be obligated to include in such registration statement, with respect to the requesting Holder, only an amount of Registrable Securities equal to the product of (i) the number of Registrable Securities that remain available for registration after the underwriter's cutback and (ii) such Holder's percentage of ownership of all the Registrable Securities then outstanding (on an as-converted basis) (the "Registrable Percentage"); and (b) if the registration statement is not for a Qualified Public Offering, the Company shall be obligated to include in such registration statement, with respect to the requesting Holder, only an amount of Registrable Securities equal to the product of (i) the number of Registrable Securities that remain available for registration after the underwriter's cutback and (ii) such Holder's Registrable Percentage; provided, however, that the aggregate value of the Registrable Securities to be included in such registration may not be so reduced to less than 30% of the total value of all securities included in such registration. If any Holder disapproves of the terms of any underwriting referred to in this paragraph, it may elect to withdraw therefrom by written notice to the Company and the underwriter. No incidental right under this paragraph shall be construed to limit any registration required under the other provisions of this Agreement. 5. COOPERATION WITH COMPANY Each Holder will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information reasonably requested by the Company (which shall include all information regarding such Holder and proposed manner of sale of the Registrable Securities required to be disclosed in any Registration Statement) and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities and entering into and performing its obligations under any underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering. Nothing in this Agreement shall obligate any Holder to consent to be named as an underwriter in any Registration Statement. The obligation of the Company to register the Registrable Securities shall be absolute and unconditional as to those Registrable Securities which the Commission will permit to be registered without naming any Holder as underwriters. Any delay or delays caused by a Holder by failure to cooperate as required hereunder shall not constitute a Registration Default as to such Holder. 5 6. REGISTRATION PROCEDURES If and whenever the Company is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible, subject to the Holders' assistance and cooperation as reasonably required with respect to each Registration Statement: (a) (i) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such Registration Statement whenever any of the Holder shall desire to sell or otherwise dispose of the same (including prospectus supplements with respect to the sales of Registrable Securities from time to time in connection with a registration statement pursuant to Rule 415 promulgated under the Securities Act) and (ii) take all lawful action such that each of (A) the Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (B) the prospectus forming part of the Registration Statement, and any amendment or supplement thereto, does not at any time during the Registration Period include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (b) (i) prior to the filing with the Commission of any Registration Statement (including any amendments thereto) and the distribution or delivery of any prospectus (including any supplements thereto), provide draft copies thereof to the Holders as required by Section 4(c) and reflect in such documents all such comments as the Holders (and their counsel) reasonably may propose; (ii) furnish to each of the Holders such numbers of copies of a prospectus including a preliminary prospectus or any amendment or supplement to any prospectus, as applicable, in conformity with the requirements of the Securities Act, and such other documents, as any of the Holders may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such Holder; and (iii) provide to the Holders copies of any comments and communications from the Commission relating to the Registration Statement, if lawful to do so; (c) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as any of the Holders shall reasonably request (subject to the limitations set forth in Section 4(c) above), and do any and all other acts and things which may be necessary or advisable to enable such Holder to consummate the public sale or other disposition in such jurisdiction of the Registrable Securities owned by such Holder; 6 (d) list such Registrable Securities on the markets where the Common Stock of the Company is listed as of the effective date of the Registration Statement, if the listing of such Registrable Securities is then permitted under the rules of such markets; (e) notify the Holders at any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the Securities Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company shall prepare and file a curative amendment under Section 6(a) as quickly as reasonably possible and during such period, the Holders shall not make any sales of Registrable Securities pursuant to the Registration Statement; (f) after becoming aware of such event, notify each of the Holders who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission of any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time and take all lawful action to effect the withdrawal, rescission or removal of such stop order or other suspension; (g) cooperate with the Holders to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts, as the case may be, as any of the Holders reasonably may request and registered in such names as any of the Holders may request; and, within three Trading Days after a Registration Statement which includes Registrable Securities is declared effective by the Commission, deliver and cause legal counsel selected by the Company to deliver to the transfer agent for the Registrable Securities (with copies to the Holders) an appropriate instruction and, to the extent necessary, an opinion of such counsel; (h) take all such other lawful actions reasonably necessary to expedite and facilitate the disposition by the Holders of their Registrable Securities in accordance with the intended methods therefor provided in the prospectus which are customary for issuers to perform under the circumstances; (i) in the event of an underwritten offering, promptly include or incorporate in a prospectus supplement or post-effective amendment to the Registration Statement such information as the managers reasonably agree should be included therein and to which the Company does not reasonably object and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such prospectus supplement or post-effective amendment; and (j) maintain a transfer agent and registrar for the Common Stock. 7. INDEMNIFICATION (a) To the maximum extent permitted by law, the Company agrees to indemnify and hold harmless each of the Holders, each person, if any, who 7 controls any of the Holders within the meaning of the Securities Act, and each director, officer, shareholder, employee, agent, representative, accountant or attorney of the foregoing (each of such indemnified parties, a "Distributing Investor") against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses), to which the Distributing Investor may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent, and only to the extent, that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Distributing Investor, its counsel, or affiliates, specifically for use in the preparation thereof or (ii) by such Distributing Investor's failure to deliver to the purchaser a copy of the most recent prospectus (including any amendments or supplements thereto). This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) To the maximum extent permitted by law, each Distributing Investor agrees that it will indemnify and hold harmless the Company, and each officer and director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Distributing Investor, its counsel or affiliates, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Distributing Investor may otherwise have under this Agreement. Notwithstanding anything to the contrary herein, the Distributing Investor shall be liable under this Section 7(b) for only that amount as does not exceed the net proceeds to such Distributing Investor as a result of the sale of Registrable Securities pursuant to the Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action against such indemnified party, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying 8 party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent the failure of the indemnified party to provide such written notification actually prejudices the ability of the indemnifying party to defend such action. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified parties shall have the right to employ one or more separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party unless (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any interpleaded parties) include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party or any other indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnified party). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld so long as such settlement includes a full release of claims against the indemnified party. All fees and expenses of the indemnified party (including reasonable costs of defense and investigation in a manner not inconsistent with this Section and all reasonable attorneys' fees and expenses) shall be paid to the indemnified party, as incurred, within 10 Trading Days of written notice thereof to the indemnifying party; provided, that the indemnifying party may require such indemnified party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such indemnified party is not entitled to indemnification hereunder. 8. CONTRIBUTION In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the indemnified party makes a claim for indemnification pursuant to Section 7 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 7 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the 9 part of any indemnified party, then the Company and the applicable Distributing Investor shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the applicable Distributing Investor on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Distributing Investor agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any other provision of this Section 8, in no event shall (i) any of the Distributing Investors be required to undertake liability to any person under this Section 8 for any amounts in excess of the dollar amount of the proceeds received by such Distributing Investor from the sale of such Distributing Investor's Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Registration Statement under which such Registrable Securities are registered under the Securities Act and (ii) any underwriter be required to undertake liability to any person hereunder for any amounts in excess of the aggregate discount, commission or other compensation payable to such underwriter with respect to the Registrable Securities underwritten by it and distributed pursuant to such Registration Statement. 9. NOTICES Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by five days advance written notice to each of the other parties hereto. 10 Company: Silver Key Mining Company, Inc. 200 South Hoover Boulevard Building 205 Tampa, Florida 33609 Attention: President Tel: 813-282-3303 Facsimile: 813-282-8907 with a copy to: Adorno & Yoss, P.A. 2601 S. Bayshore Drive, Suite 1600 Miami, Florida 33133 Attention: Seth P. Joseph, Esq. Tel: 305-860-7363 Facsimile: 305-858-4777 Investors: At the address and facsimile set forth on the signature page hereof 10. ASSIGNMENT The registration rights granted to any Holder under this Agreement may be transferred or assigned provided the transferee is bound by the terms of this Agreement and the Company is given written notice of such transfer or assignment. 11. ADDITIONAL COVENANTS OF THE COMPANY For so long as it shall be required to maintain the effectiveness of the Registration Statement, it shall file all reports and information required to be filed by it with the Commission in a timely manner and take all such other action so as to maintain such eligibility for the use of the applicable form. 12. CONFLICTING AGREEMENTS The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise prevents the Company from complying with all of its obligations hereunder. 13. GOVERNING LAW; JURISDICTION This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any party in the federal courts of Florida or the state courts of the State of Florida, and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. 11 14. MISCELLANEOUS (a) Entire Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement, together with the other Primary Documents, including any certificate, schedule, exhibit or other document delivered pursuant to their terms, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters. (b) Amendments. This Agreement may not be amended except by an instrument in writing signed by the party to be charged with enforcement. (c) Waiver. No waiver of any provision of this Agreement shall be deemed a waiver of any other provisions or shall a waiver of the performance of a provision in one or more instances be deemed a waiver of future performance thereof. (d) Construction. This Agreement and each of the Primary Documents have been entered into freely by each of the parties, following consultation with their respective counsel, and shall be interpreted fairly in accordance with its respective terms, without any construction in favor of or against either party. (e) Binding Effect of Agreement. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Securities. (f) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. (g) Attorneys' Fees. If any action should arise between the parties hereto to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be reimbursed for all reasonable expenses incurred in connection with such action, including reasonable attorneys' fees. (h) Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. (i) Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. [SIGNATURES ON FOLLOWING PAGE] 12 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed, on this 22nd day of October, 2002. SILVER KEY MINING COMPANY, INC. By: /s/ J. Rockwell Smith ------------------------------------ Name: J. Rockwell Smith ------------------------------------ Title: President INVESTORS: STANFORD VENTURE CAPITAL HOLDINGS, INC. By: /s/ Jim Davis ------------------------------------ Name: Jim Davis ------------------------------------ Title: President /s/ DANIEL BOGAR ---------------------------------- DANIEL BOGAR 1016 Sanibel Drive Hollywood, Florida 33019 Telephone: 305-960-8530 Facsimile: 305-960-8535 /s/ RONALD STEIN ----------------------------------- RONALD STEIN 6520 Allison Road Miami Beach, Florida 33141 Telephone: 305-960-8530 Facsimile: 305-960-8535 /s/ OSVALDO PI ----------------------------------- OSVALDO PI 6405 SW 104 Street Pinecrest, Florida 33156 Telephone: 305-960-8530 Facsimile: 305-960-8535 /s/ WILLIAM FUSSELMANN ----------------------------------- WILLIAM FUSSELMANN 141 Crandon Boulevard, #437 Key Biscayne, Florida 33149 Telephone: 305-960-8530 Facsimile: 305-960-8535 DELUXE INVESTMENT COMPANY By: /s/ Ian Markofsky -------------------------------- Ian Markofsky 630 Third Avenue 5th Floor New York, NY 10017 Phone: 212-983-6900 Fax: 212-983-9210 13 EX-10.5 7 ex10-5.txt LOCK-UP AGREEMENT EXHIBIT 10.5 EXECUTION COPY SILVER KEY MINING COMPANY, INC. A Nevada Corporation LOCK-UP AGREEMENT THIS LOCK-UP AGREEMENT dated as of October 22, 2002 (the "Agreement"), is entered into by and among Silver Key Mining Company, Inc., a Nevada corporation (the "Company"), Stanford Venture Capital Holdings, Inc., a Delaware corporation ("Stanford"), and the undersigned members of Provider Acquisition, LLC, a Florida limited liability company ("PAL") (the "Minority Members"). Capitalized terms not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement. W I T N E S S E T H: WHEREAS, the Minority Members have entered into the First Amended and Restated Limited Liability Company Agreement of PAL (the "LLC Agreement"); and WHEREAS, the Minority Members have agreed to a lock-up of their membership units in PAL ("Units") for a five year period ending September 19, 2007; and WHEREAS, the Minority Members have agreed that such lock-up terms shall extend to any securities received as merger consideration in respect of such Units; and WHEREAS, PAL, Health Quality Systems, Inc., a Florida corporation ("HQS") and the Company have entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of October 16, 2002, pursuant to which each Unit will be exchangeable for 0.74606 shares of Common Stock, par value of $0.001 per share, of the Company; and WHEREAS, an aggregate of 227,105 shares of Common Stock of the Company will be issued to the Minority Members upon the Effective Date of the Merger, in the amounts set forth on Schedule A attached hereto (such shares of capital stock and all securities for which Shares of capital stock are exchangeable or convertible, referred to collectively as the "Shares"); and WHEREAS, it is condition to the consummation of such Merger Agreement that this Agreement by executed and delivered by each of the Minority Members; and WHEREAS, pursuant to the Securities Purchase Agreement dated as of October 16, 2002 (the "Securities Purchase Agreement") entered into by and among the Company and Stanford, Stanford has agreed to acquire such securities of the Company set forth in the Securities Purchase Agreement; and WHEREAS, it is a condition to the Securities Purchase Agreement that the Minority Members execute this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. PROHIBITED TRANSFERS (a) The Minority Members shall not sell, assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise dispose (a "Transfer") of all or any of their Shares prior to June 30, 2007 and provided further that following June 30, 2007 the Minority Members shall Transfer their Shares only in compliance with the volume limitations set forth in Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), whether or not such Stockholder is subject to such volume limitation. The term "dispose" includes, but is not limited to, the act of selling, assigning, transferring, pledging, hypothecating, encumbering, mortgaging, giving and any other form of disposing or conveying, whether voluntary or by operation of law, except for, a private sale where the purchaser agrees to be bound by each and all the restrictions in this Agreement as if such purchaser was an original Stockholder. (b) The Shares are deemed "restricted securities" as defined by Rule 144 promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), and the Minority Members shall represent, in writing to the Company prior to the issuance of share certificates representing the Shares, that (i) they are acquiring the Shares for investment purposes only and without the intent to make a further distribution of the Shares, (ii) they are each an accredited investor within the meaning of Rule 501(a) under the Securities Act, and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in securities in general and of an investment in the Company in particular, (iii) they are aware of the limits on resale imposed by virtue of the nature of the transactions contemplated by this Agreement, and (iv) they have been given the opportunity to ask questions of, and receive answers from, the officers of the Company regarding the Company, its current and proposed business operations and the Company's Common Stock, and the officers of the Company have made available to such Stockholder all documents and information that such stockholder has requested relating to an investment in the Company. (c) Notwithstanding the foregoing, the Minority Members may transfer all or any of their Shares (i) by way of gift to any member of their family or to any trust for the benefit of any such family member of the Minority Members, provided that any such transferee shall agree in writing with the Company, as a condition to such transfer, to be bound by all of the provisions of this Agreement to the same extent as if such transferee were one of Minority Members, or (ii) by will or the laws of descent and distribution, in which event each 2 such transferee shall be bound by all of the provisions of this Agreement to the same extent as if such transferee were one of the Minority Members. As used herein, the word "family" shall include any spouse, lineal ancestor or descendant, brother or sister. (d) No transfer of Shares otherwise permitted by this Agreement may be made unless (i) the Shares shall have first been registered under the Securities Act; (ii) the Company shall have first been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such transfer is exempt from the registration requirements of the Securities Act; or (iii) such transfer is within the limitations of and in compliance with Rule 144 under the Securities Act. (e) Any transfer or other disposition of Shares in violation of the restrictions on transfer contained herein shall be null and void and shall not entitle the Minority Members or any proposed transferee or other person to have any Shares transferred upon the books of the Company. 2. RELEASE OF SHARES FROM TRANSFER RESTRICTIONS UPON REQUEST Stanford may be petitioned (the "Petition") in writing by any of the Minority Members hereto (the "Requesting Party") to waive some or all of the restrictions of this Agreement with respect to Shares. If Stanford releases any of the restrictions on the Requesting Party's Shares in accordance with the Petition ("Waived Restrictions"), then Stanford shall notify the Requesting Party of such consent and release. 3. VOTING AND DIVIDEND Rights It is understood that the Minority Members have the right to vote all of the Shares held by them and that they shall be entitled to all dividends or distributions made by the Company arising in respect of the Shares, in cash, stock or other property, including warrants, options or other rights. 4. SPECIFIC ENFORCEMENT The parties hereby acknowledge and agree that they may be irreparably damaged in the event that this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants and/or conditions of this Agreement by any party, any other party shall, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, and/or a decree for specific performance, in accordance with the provisions hereof. 5. LEGEND All certificates evidencing any of the Shares subject to this Agreement shall also bear a legend substantially as follows during the term of this Agreement: "The shares represented by this certificate are subject to restrictions on transfer and may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with and subject to all the terms and conditions of a certain Lock-Up Agreement dated as of October 22, 2002 as it may be amended from time to time, a copy of which may be obtain from the Company upon request and without charge." 3 6. NOTICES Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by five days advance written notice to each of the other parties hereto. Company: Silver Key Mining Company, Inc. 200 South Hoover Boulevard Building 205 Tampa, Florida 33609 Tel: (813) 282-3303 Fax: (813) 282-8907 Attention: President with a copy to: Adorno & Yoss, P.A. 2601 South Bayshore Drive Suite 1600 Miami, Florida 33133 Tel: (305) 860-7363 Fax: (305) 858-4777 Attn: Seth P. Joseph, Esq. Stanford: Stanford Venture Capital Holdings, Inc. 6075 Poplar Avenue Memphis, TN 38119 Attention: James M. Davis, President Tel: (901) 680-5260 Fax: (901) 680-5265 with a copy to: Stanford Financial Group 5050 Westheimer Houston, TX 77056 Attention: Mauricio Alvarado, Esq. Telephone: (713) 964-5145 Facsimile: (713) 964-5245 Minority Members: At the address set forth on the signature page 7. GOVERNING LAW; JURISDICTION This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict 4 of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any party in the federal courts of Florida or the state courts of the State of Florida, Miami Dade County, and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. 8. MISCELLANEOUS (a) Entire Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement, including any certificate, schedule, exhibit or other document delivered pursuant to its terms, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters. (b) Amendments. This Agreement may not be amended except by an instrument in writing signed by the party to be charged with enforcement. (c) Waiver. No waiver of any provision of this Agreement shall be deemed a waiver of any other provisions or shall a waiver of the performance of a provision in one or more instances be deemed a waiver of future performance thereof. (d) Construction. This Agreement has been entered into freely by each of the parties, following consultation with their respective counsel, and shall be interpreted fairly in accordance with its respective terms, without any construction in favor of or against either party. (e) Binding Effect of Agreement. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto. (f) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. (g) Attorneys' Fees. If any action should arise between the parties hereto to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be reimbursed for all reasonable expenses incurred in connection with such action, including reasonable attorneys' fees. (h) Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. (i) Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. 5 IN WITNESS WHEREOF, this Agreement has been duly executed by each of the undersigned. SILVER KEY MINING COMPANY, INC. STANFORD VENTURE CAPITAL HOLDINGS, INC. By: J. Rockwell Smith By: Jim Davis ----------------- --------- Name: J. Rockwell Smith Name: Jim Davis ----------------- --------- Title: President Title: President MINORITY MEMBERS: Ronald L. Miller, Trustee for Marcy Lewis, Gary I. Miller, Michael L. Miller and Ronald L. Miller & Sheila L. Miller Ronald L. Miller - ---------------- (Signature) Address: 2601 Heron Lane North Clearwater, Florida 33762 Phone: (727) 573-9666 Fax: (727) 572-5044 The Estate of Lillian Krause By: Steven H. Smith --------------- Name: Steven H. Smith Title: Personal Representative Address: 2138 Hollywood Blvd. Hollywood, Florida 33020 Phone: (727) 573-9666 Fax: (727) 572-5044 Brian M. Milvain Brian M. Milvain - ---------------- Address: 4340 45th Street South St. Petersburg, Florida 33711 Phone: (813) 282-3303 Fax: (813) 282-8907 6 EX-10.6 8 ex10-6.txt EQUITY FINANCING COMMITMENT LETTER EXHIBIT 10.6 Stanford Venture Capital Holdings, Inc. 6075 Poplar Avenue Memphis, TN 38119 October 22, 2002 Board of Directors Silver Key Mining Company, Inc. 56 West 400 South, Suite 220 Salt Lake City, Utah 84101 Re: Equity Financing Commitment Ladies and Gentlemen: This letter will serve to confirm the conditions under which Stanford Venture Capital Holdings, Inc. ("SVCH") is committed to provide equity capital to Silver Key Mining Company, Inc., a Nevada corporation (the "Company") in connection with the transactions described herein in the amount, on the terms and subject to the conditions set forth in this letter (together, the "Commitment Letter"). Prior to the date hereof, the Company, SVCH, and certain stockholders of the Company have entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") pursuant to which SVCH has agreed to purchase, for an aggregate purchase price of $2,200,000, an aggregate of 1,880,342 shares of the Company's Series A $1.17 Convertible Preferred Stock, $0.001 par value per share (the "Series A Preferred Stock") and warrants to purchase an aggregate of 1,880,342 of the Company's common stock, $0.001 par value per share (the "Common Stock"). All capitalized terms used herein not otherwise defined herein shall have the same meanings ascribed to such terms as in the Securities Purchase Agreement. We understand that the Company desires, in the future, to identify and acquire certain corporations engaged in the development, marketing and sale of software products for the health care industry (the "Acquisitions"), and that Healthcare Quality Solutions, Inc. ("HQS"), a subsidiary of the Company, has an outstanding tax liability payable to the IRS in the amount of $400,000 (the "Tax Liability"). In light thereof, in order to enable the Company to fund the Acquisitions and HQS to satisfy the Tax Liability, SVCH is pleased to announce its commitment to make an additional equity capital investment in the Company upon the terms and conditions herein stated. 1. Commitment. SVCH hereby confirms its commitment (the "Commitment") to invest up to $2,400,000 in the equity capital of the Company, on the terms and subject to the conditions contained in this Commitment Letter and in the Securities Purchase Agreement, which agreement is incorporated herein by this reference. SVCH's Commitment is subject, in its discretion, to the conditions set forth in this Commitment Letter and in the Securities Purchase Agreement and to the negotiation, execution and delivery of definitive documentation satisfactory to SVCH evidencing the Acquisitions (along with any other agreements or documents entered into in connection therewith or delivered pursuant thereto, the ("Transaction Agreements"), satisfactory to SVCH and its counsel and the satisfaction of the terms, conditions and covenants contained therein. 2. Fees and Expenses. The fees for these services shall be governed by Section 7 of the Securities Purchase Agreement. 3. Conditions Precedent. SVCH's obligations hereunder are conditioned on the following: (a) The transactions contemplated by the Transaction Agreements shall have been consummated concurrently with, or shall be ready for consummation immediately after, SVCH's equity financing hereunder on the terms and conditions set forth in such agreements without modification, amendment or waiver, except as previously consented to in writing by SVCH. (b) SVCH shall have received fully executed conformed copies of the Transaction Agreements and each of the other material documents related to the Acquisitions and the Tax Liability, certified as true and correct copies thereof by a duly authorized officer of the Company, each of which shall be in full force and effect and in form and substance satisfactory to SVCH. (c) the Company and SVCH shall have completed a due diligence investigation of the Acquisition target that is satisfactory to SVCH, in its sole discretion, as to the target, its management and its assets, liabilities, financial position, operations and prospects. In this regard, the Company will furnish to SVCH such information as SVCH may reasonably request in order to enable SVCH to complete the required due diligence. (d) The Company and SVCH shall have entered into a second Securities Purchase Agreement governing the funding of SVCH's equity obligations hereunder, containing comparable terms and provisions as contained in the Securities Purchase Agreement. For the avoidance of doubt, SVCH shall pay $1.17 for each share of Series A Preferred Stock and Warrant issued thereunder to SVCH. (e) The representations and warranties of the Company set forth in Section 3 of the Securities Purchase Agreement shall be true and correct on and as of the closing date of an Acquisition. (f) The Company and HQS shall promptly keep SVCH informed of, consult and confer with SVCH on all matters relating to any Acquisition, any Transaction Agreements and the Tax Liability and any discussions, communications or negotiations by and between the Company, HQS and any other party in respect thereof. Such obligation shall include provision of copies of material correspondence, documents and other information and adequate notice and opportunity to attend conferences and meetings in respect thereof. (g) SVCH shall have received such other documents, instruments and information as SVCH may reasonably request. 4. Assignment. Neither the Company nor HQS may assign any of their respective rights or be relieved of any of their respective obligations hereunder without the prior written consent of SVCH. 2 5. Use Of Proceeds. To finance a maximum of two Acquisitions by the Company, the working capital of such Acquisitions and the satisfaction of the Tax Liability. 6. Investment Terms. Upon the funding of any of its equity obligations hereunder, SVCH shall receive shares of the Company's Series A Preferred Stock and warrants to purchase shares of the Company's Common Stock upon terms and conditions comparable to those stated in the Securities Purchase Agreement. 7. Termination. The Commitment will terminate upon the first to occur of (i) the closing of the Acquisitions and the satisfaction of the Tax Liability, (ii) a breach by the Company under this Commitment Letter or under any other agreement between the Company and SVCH. 8. Right to Participate. SVCH's other rights in this Commitment Letter, in the event that an alternate offer for investment in the Company emerges or for some other reason an altered or improved bid is offered to the Company, SVCH will be given the opportunity, but will not be obligated, to participate in any transactions contemplated upon the terms and conditions herein stated. Please confirm that the foregoing is in accordance with your understanding by signing and returning to SVCH the enclosed copy of this Commitment Letter on or before the close of business on the date hereof, whereupon this Commitment Letter shall become a binding agreement among us. Very truly yours, STANFORD VENTURE CAPITAL HOLDINGS, INC. By: /s/ Jim Davis --------------------------------- Name: Jim Davis --------------------------------- Title: President Confirmed and acknowledged: SILVER KEY MINING COMPANY, INC. By: /s/ J. Rockwell Smith --------------------------------- Name: J. Rockwell Smith --------------------------------- Title: President 3 EX-10.7 9 ex10-7.txt CERTIFICATE OF DESIGNATION EXHIBIT 10.7 SILVER KEY MINING COMPANY, INC. A Nevada Corporation CERTIFICATE OF DESIGNATION OF SERIES A $1.17 CONVERTIBLE PREFERRED STOCK Pursuant to the Nevada Revised Statutes, Section 78.1955, the undersigned, being an officer of Silver Key Mining Company, Inc., a Nevada corporation (the "Corporation"), does hereby certify that the following resolution was adopted by the unanimous consent of the Corporation's board of directors (the "Board") authorizing the creation and issuance of 5,000,000 shares of Series A $1.17 Convertible Preferred Stock: RESOLVED, that pursuant to authority expressly granted to and vested in the Board by the Articles of Incorporation, as amended, of the Corporation, the Board hereby creates five million (5,000,000) shares of Series A $1.17 Convertible Preferred Stock of the Corporation and authorizes the issuance thereof, and hereby fixes the designation thereof, and the voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereon (in addition to the designation, preferences and relative, participating and other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Articles of Incorporation, as amended, of the Corporation, which are applicable to the preferred stock, if any) as follows: 1. Designation. The series of preferred stock shall be designated and known as "Series A $1.17 Convertible Preferred Stock" (the "Series A Preferred Stock"). The number of shares constituting the Series A Preferred Stock shall be 5,000,000. Each share of the Series A Preferred Stock shall have a stated value equal to $1.17 (the "Stated Value"). 2. Conversion Rights. The Series A Preferred Stock shall be convertible into the common stock, $0.001 par value, of the Corporation ("Common Stock") as follows: (a) Optional Conversion. Subject to and upon compliance with the provisions of this Section 2, a holder of any shares of the Series A Preferred Stock (a "Holder") shall have the right, at such Holder's option at any time, to convert any of such shares of the Series A Preferred Stock held by the Holder into fully paid and non-assessable shares of the Common Stock at the then Conversion Rate (as defined herein). (b) Automatic Conversion. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then-effective Conversion Rate upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least two-thirds of the then outstanding shares of the Series A Preferred Stock, or (ii) upon the closing of a Qualified Public Offering. As used herein, a "Qualified Public Offering" shall be the commitment, underwritten public offering of the Corporation's Common Stock registered under the Securities Act of 1933, as amended (the "Securities Act"), at a public offering price (prior to underwriters' discounts and expenses) equal to or exceeding $3.00 per share of Common Stock (as adjusted for any stock dividends, combinations or split with respect to such shares), which generates aggregate net proceeds to the Corporation (after deduction for underwriters' discounts and expenses relating to the issuance, including without limitation fees of the Corporation's counsel) equal to or exceeding $15,000,000. (c) Conversion Rate. Each share of the Series A Preferred Stock is convertible into the number of shares of the Common Stock as shall be calculated by dividing the Stated Value by $1.17 (the "Conversion Price"; the conversion rate so calculated, the "Conversion Rate"), subject to adjustments as set forth in Section 2(e) hereof. (d) Mechanics of Conversion. (i) The Holder may exercise the conversion right specified in Section 2(a) by giving written notice to the Corporation at any time, that the Holder elects to convert a stated number of shares of the Series A Preferred Stock into a stated number of shares of Common Stock, and by surrendering the certificate or certificates representing the Series A Preferred Stock to be converted, duly endorsed to the Corporation or in blank, to the Corporation at its principal office (or at such other office as the Corporation may designate by written notice, postage prepaid, to all Holders) at any time during its usual business hours, together with a statement of the name or names (with addresses) of the person or persons in whose name the certificate or certificates for Common Stock shall be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (ii) If the conversion is in connection with the closing of a Qualified Public Offering, the conversion may, at the option of any holder tendering shares of Series A Preferred Stock for conversion, be conditioned upon the closing of the Qualified Public Offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Series A Preferred Stock shall not be deemed to have converted such Series A Preferred Stock until immediately prior to the closing of the Qualified Public Offering. (e) Conversion Rate Adjustments. The Conversion Price shall be subject to adjustment from time to time as follows: (i) Consolidation, Merger, Sale, Lease or Conveyance. In case of any consolidation or merger of the Corporation with or into another corporation, or in case of any sale, lease or conveyance to another corporation of all or substantially all the assets of the Corporation, each share of the Series A Preferred Stock shall after the date of such consolidation, merger, sale, lease or conveyance be convertible into the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable (at the time of such consolidation, merger, sale, lease or conveyance) upon conversion of such share of the Series A Preferred Stock would have been entitled upon such consolidation, merger, sale, lease or conveyance; and in any such case, if necessary, the provisions set forth herein with respect to the 2 rights and interests thereafter of the Holder of the shares of the Series A Preferred Stock shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock of other securities or property thereafter deliverable on the conversion of the shares of the Series A Preferred Stock. (ii) Stock Dividends, Subdivisions, Reclassification, or Combinations. If the Corporation shall (i) declare a dividend or make a distribution on its Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares; the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination, or reclassification shall be proportionately adjusted so that the Holder of any shares of the Series A Preferred Stock surrendered for conversion after such date shall be entitled to receive the number of shares of Common Stock that he would have owned or been entitled to receive had such Series A Preferred Stock been converted immediately prior to such date. Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur. (iii) Issuances of Securities. If at any time on or before January 15, 2005 the Corporation shall (i) sell or otherwise issue shares of the Common Stock at a purchase price per share less than the Conversion Price in effect immediately prior to such issuance, or (ii) sell or otherwise issue the Corporation's securities which are convertible into or exercisable for shares of the Corporation's Common Stock at a conversion or exercise price per share less than the Conversion Price in effect immediately prior to such issuance, then immediately upon such issuance or sale, the Conversion Price shall be adjusted to a price equal to the purchase price of the shares of Common Stock or the conversion or exercise price per share of the Corporation's securities sold or issued. If at any time after January 15, 2005, the Corporation shall (i) sell or otherwise issue shares of the Common Stock at a purchase price per share less than the Conversion Price in effect immediately prior to such issuance, or (ii) sell or otherwise issue the Corporation's securities which are convertible into or exercisable for shares of the Corporation's Common Stock at a conversion or exercise price per share less than the Conversion Price in effect immediately prior to such issuance, then immediately upon such issuance or sale, the Conversion Price shall be adjusted to a price determined by multiplying the Conversion Price immediately prior to such issuance by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance or sale, plus the number of shares of the Common Stock that the aggregate consideration received by the Corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of the additional shares to be issued at such issuance or sale. (iv) Excluded Transactions. No adjustment to the Conversion Price shall be required under this Section 2(e) in the event of the issuance of shares of Common Stock by the Corporation upon the conversion or exercise of or pursuant to any outstanding stock options or stock option plan now existing or hereafter approved by the Holders which stock options have an exercise or conversion price per share of less than the Conversion Price. (v) Reservation, Validity of Common Stock. The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of 3 Common Stock for the purpose of effecting conversion of the Series A Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding Series A Preferred Stock not therefore converted. Before taking any action which would cause an adjustment in the Conversion Rate such that Common Stock issuable upon the conversion of Series A Preferred Stock would be issued in excess of the authorized Common Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully-paid and non assessable shares of Common Stock at such adjusted Conversion Rate. Such action my include, but it is not limited to, amending the Corporation's articles of incorporation to increase the number of authorized Common Stock. (f) Approvals. If any shares of the Common Stock to be reserved for the purpose of conversion of shares of the Series A Preferred Stock require registration with or approval of any governmental authority under any Federal or state law before such shares may be validly issued or delivered upon conversion, then the Corporation will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be. If, and so long as, any Common Stock into which the shares of the Series A Preferred Stock are then convertible is listed on any national securities exchange, the Corporation will, if permitted by the rules of such exchange, list and keep listed on such exchange, upon official notice of issuance, all shares of such Common Stock issuable upon conversion. (g) Valid Issuance. All shares of Common Stock that may be issued upon conversion of shares of the Series A Preferred Stock will upon issuance be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof, and the Corporation shall take no action that will cause a contrary result. 3. Liquidation. (a) Liquidation Preference. In the event of liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holders of the Series A Preferred Stock shall be entitled to receive, prior and before any distribution of assets shall be made to the holders of any Common Stock, an amount equal to the Stated Value per share of Series A Preferred Stock held by such Holder (the "Liquidation Pay Out"). After payment of the Liquidation Pay Out to each Holder and the payment of the respective liquidation preferences of the other preferred stock of the Corporation, if any, pursuant to the Corporation's Articles of Incorporation, as amended, each such Holder shall be entitled to share with the holders of the Common Stock, the remaining assets of the Corporation available for distribution to the Corporation's stockholders in proportion to the shares of Common Stock then held by the holders of the Common Stock and the shares of Common Stock which the holders then have the right to acquire upon conversion of the Series A Preferred Stock. (b) Ratable Distribution. If upon any liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation to be distributed among the Holders shall be insufficient to permit payment in full to the Holders of such Series A Preferred Stock, then all remaining net assets of the Corporation after the provision for the payment of the Corporation's debts shall be distributed ratably in proportion to the full amounts to which they would otherwise be entitled to receive among the Holders. 4 (c) Merger, Reorganization or Sale of Assets. For purposes of this Section 3, (i) any acquisition of the Corporation by means of merger or other form of corporate reorganization in which outstanding shares of the Corporation are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale of all or substantially all of the assets of the Corporation, shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of Series A Preferred Stock to receive at the closing in cash, securities or other property amounts as specified in Section 3(a) above. Whenever the distribution provided for in this Section 3 shall be payable in securities or property other than cash, the value of such distribution shall be the fair market value of such securities or other property as determined in good faith by the Board. 4. Voting Rights. Except as otherwise required under Nevada law, the Holders of the Series A Preferred Stock shall be entitled to vote at any meeting of stockholders of the Corporation (or any written actions of stockholders in lieu of meetings) with respect to any matters presented to the stockholders of the Corporation for their action or consideration. For the purposes of such stockholder votes, each share of Series A Preferred Stock shall be entitled to ten (10) votes for each share of Common Stock such share of Series A Preferred Stock would be convertible into at the record date set for such voting. Notwithstanding the foregoing, so long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, without first obtaining the approval of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock (i) alter or change the rights, preferences or privileges of the Series A Preferred Stock as outlined herein, or (ii) create any new class of series of capital stock having a preference over the Series A Preferred Stock as to the payment of dividends or the distribution of assets upon the occurrence of a Liquidation Event ("Senior Securities"), or (iii) alter or change the rights, preferences or privileges of any Senior Securities so as to adversely affect the Series A Preferred Stock. 5. Dividends. The Holders of the Series A Preferred Stock shall not be entitled to receive dividends. 6. No Preemptive Rights. No Holders of the Series A Preferred Stock, whether now or hereafter authorized, shall, as such Holder, have any preemptive right whatsoever to purchase, subscribe for or otherwise acquire, stock of any class of the Corporation nor of any security convertible into, nor of any warrant, option or right to purchase, subscribe for or otherwise acquire, stock of any class of the Corporation, whether now or hereafter authorized. 7. Exclusion of Other Rights. Except as may otherwise be required by law, the shares of the Series A Preferred Stock shall not have any preferences or relative, participating, optional or other special rights, other than those specifically set forth in this resolution (as such resolution may be amended from time to time) and in the Corporation's Articles of Incorporation, as amended. 8. Headings of Subdivisions. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. 5 9. Severability of Provisions. If any right, preference or limitation of the Series A Preferred Stock set forth in this certificate of designation ("Certificate") (as such Certificate may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other rights, preferences and limitations set forth in this Certificate (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein. 10. Status of Reacquired Shares. No shares of the Series A Preferred Stock which have been issued and reacquired in any manner or converted into Common Stock may be reissued, and all such shares shall be returned to the status of undesignated shares of preferred stock of the Corporation. 11. Restrictions and Limitations. So long as any shares of the Series A Preferred Stock remain outstanding, the Corporation may not, without the vote or written consent by the holders of a majority of the outstanding shares of the Series A Preferred Stock, voting as a separate class: (a) Effect any sale, license, conveyance, exchange or transfer of all or substantially all of the assets of the Corporation or take any other action which will result in the holders of the Corporation's capital stock prior to the transaction owning less than 50% of the voting power of the Corporation's capital stock after the transaction; or (b) Amend or otherwise change the Corporation's Articles of Incorporation, bylaws or certificate of designation of any stock; or (c) Change the nature of the business of the Corporation or any of its subsidiaries; or (d) Authorize, issue, obligate itself to issue, or agree to the authorization or issuance by any of the subsidiaries of the Corporation of, any capital stock or securities convertible into or exercisable for any capital stock, having a preference over, or being on a parity with, the Series A Preferred Stock with respect to voting, dividends or upon liquidation other than the issuance of Common Stock, issuance of the Common Stock upon the conversion of shares of the Corporation's preferred stock or upon the exercise of any options or warrants which have been disclosed to the Holder in that certain Securities Purchase Agreement between the Corporation and the Holder dated as of even date herewith; or (e) Make acquisitions of fixed assets or capital stock or capital expenditures, except for the purchase of inventory or other assets in the ordinary course of business, in any 12-month period during which the aggregate amount of all such transactions exceeding $50,000; or (f) Enter into any credit facility or issue any debt, except for increases in debt under existing credit facilities as of the date hereof and the increase of trade credit or accounts payable in the ordinary course of business, involving any amount exceeding $50,000 in a single transaction or a series of transactions; or 6 (g) Sell shares of the Corporation's securities in a public offering registered under the Securities Act; or (h) Increase the number of directors on the Board above five; or (i) Enter into any transaction with any affiliate (as such term is used in Rule 144 promulgated pursuant to the Securities Act of 1933, as amended) of the Corporation or modify any existing agreement or understanding with such affiliate (except for any transaction with any of its wholly owned, operating subsidiaries in the ordinary course of business); or (j) File a voluntary or involuntary petition that commences a case under Title 11 of the United States Code (or any successor statutes) with respect to the Corporation, or consent to the institution of bankruptcy or insolvency proceedings against it, or file a petition seeking, or consent to, relief under any applicable federal or state law relating to bankruptcy or insolvency. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in its name and on its behalf by its President this 22nd day of October, 2002. By: /s/ J. Rockwell Smith ------------------------------------------ Name: J. Rockwell Smith Title: President of SILVER KEY MINING COMPANY, INC., a Nevada corporation 7 EX-99.1 10 ex99-1.txt JOINT FILING AGREEMENT EXHIBIT 99.1 JOINT FILING AGREEMENT In accordance with Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended, the persons names below agree to the joint filing on behalf of each of them of a Statement on Schedule 13D, including amendments thereto, with regard to the Common Stock and Preferred Stock of Silver Key Mining Company, Inc., a Nevada corporation, and further agree that this Joint Filing Agreement be included as an exhibit to such joint filings. In evidence thereof, the undersigned hereby execute this agreement as of the 22nd day of October, 2002. Date: October 22, 2002 /s/ R. Allen Stanford --------------------- R. Allen Stanford Date: October 22, 2002 STANFORD VENTURE CAPITAL HOLDINGS, INC. /s/ Jim Davis ------------- Jim Davis, President -----END PRIVACY-ENHANCED MESSAGE-----