ECHOCATH, INC.
SUBSCRIPTION AGREEMENT
Echocath Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, President
Gentlemen:
I. Subscription. The undersigned, intending to be legally bound, hereby
irrevocably agrees to purchase from Echocath, Inc., a New Jersey corporation
(the "Company"), the number of shares (the "Shares") of the Company's Series B
Cumulative Convertible Preferred Stock (the "Preferred Stock"), set forth on the
signature page hereof, at a purchase price of $5.00 per Share.
II. Payment. The undersigned will pay for the subscription on the date hereof by
check payable in U.S. dollars or by wire transfer in U.S. dollars to an account
designated by the Company. The Company will file a Certificate of Amendment for
the Preferred Stock in the form of Exhibit A attached hereto and will issue
certificates representing the Shares within 30 days of the date hereof.
III. Acceptance of Subscription. The undersigned understands and agrees that the
Company in its sole discretion reserve the right to accept or reject this or any
other subscription for Shares, in whole or in part, notwithstanding prior
receipt by the undersigned of notice of acceptance of this subscription. The
Company shall have no obligation hereunder until the Company shall accept and
agree to the terms of this Subscription Agreement, as evidenced by the execution
and delivery to the undersigned of an executed copy of this Subscription
Agreement. If this subscription is rejected in whole, this Subscription
Agreement and all funds received from the undersigned will be returned without
interest or deduction, and this Subscription Agreement shall thereafter be of no
further force or effect. If this subscription is rejected in part, the funds for
such rejected portion of this subscription will be returned without interest or
deduction, and this Subscription Agreement shall continue in force and effect to
the extent this subscription was accepted.
IV. Representations and Warranties. The undersigned hereby acknowledges,
represents, warrants to and agrees with the Company as follows:
(a) None of the Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws. The
undersigned understands that the offering and sale of the Shares is
intended to be exempt from registration under the Securities Act, by
virtue of Section 4(2) and the rules and regulations promulgated
thereunder, based, in part, upon the representations, warranties and
agreements contained in this Subscription Agreement;
(b) The undersigned has access to the same kind of information which would
be available in registration statements filed by the Company under the
Securities Act;
(c) Neither the Securities and Exchange Commission (the "Commission") nor
any state securities commission has approved the Shares offered or passed
upon or endorsed the merits of the offering, and the offering of the
Shares has not been reviewed by any Federal, state or other regulatory
authority;
(d) The undersigned acknowledges that prior to the date hereof it has
received and reviewed a copy of the Company's annual report on Form
10-KSB, which annual report is attached hereto as Exhibit B;
(e) The undersigned acknowledges that all documents, records, and books
pertaining to the investment in the Shares have been made available for
inspection by it, its attorney, accountant, purchaser representative or
tax advisor (collectively, the "Advisors");
(f) The undersigned and the Advisors have had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting on
behalf of the Company concerning the offering of the Shares and all such
questions have been answered to the full satisfaction of the undersigned
and its Advisors;
(g) In evaluating the suitability of an investment in the Company, the
undersigned has not relied upon any representation or other information
(oral or written) other than as contained in documents or answers to
questions so furnished to the undersigned or its Advisors by the Company;
(h) The undersigned is unaware of, and in no way relying on, any form of
general solicitation or general advertising in connection with the offer
and sale of the Shares;
(i) The undersigned has such knowledge and experience in financial, tax,
and business matters so as to enable it to utilize the information made
available to it in connection with the offering of the Shares to evaluate
the merits and risks of an investment in the Shares and to make an
informed investment decision with respect thereto;
(j) The undersigned is not relying on the Company respecting the tax and
other economic considerations of an investment in the Shares, and the
undersigned has relied on the advice of, or has consulted with, only its
own Advisors;
(k) The undersigned is acquiring the Shares solely for its own account for
investment and not with a view to resale or distribution and the
undersigned will not sell or transfer the Shares until they are registered
for resale under the Securities Act or an exemption therefrom is
available;
(l) The undersigned must bear the economic risk of the investment
indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Act and
applicable state securities laws or an exemption from registration is
available. Legends shall be placed on the Shares to the effect that they
have not been registered under the Securities Act or applicable state
securities laws and appropriate notations thereof will be made in each of
the Company's stock books;
(m) The undersigned has adequate means of providing for the undersigned's
current needs and foreseeable personal contingencies and has no need for
the undersigned's investment in the Shares to be liquid;
(n) The undersigned is aware that an investment in the Shares involves a
number of very significant risks and is able to bear the loss of its
entire investment;
(o) The undersigned represents that it was not formed for the specific
purpose of acquiring the Shares, such entity is validly existing under the
laws of the state of its organization, the consummation of the
transactions contemplated hereby is authorized by, and will not result in
a violation of state law or its charter or other organizational documents,
such entity has full power and authority to execute and
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deliver this Subscription Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof, this
Subscription Agreement has been duly authorized by all necessary action,
this Subscription Agreement has been duly executed and delivered on behalf
of such entity and is a legal, valid and binding obligation of such
entity.
V. Indemnification. The undersigned agrees to indemnify and hold harmless each
of the Company, their respective officers, directors, employees, agents, and
affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the undersigned of any
Agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VI. Registration of the Shares.
(a) Piggyback Registration Rights.
(i) If, at any time commencing after the date of this Subscription
Agreement and expiring five (5) years thereafter, the Company proposes to file a
registration statement or statements under the Securities Act for the public
sale of the Company's Class A Common Stock, no par value (the "Common Stock"),
for cash (other than in connection with a merger or pursuant to Form ▇-▇, ▇▇▇▇
▇-▇ or comparable registration statement) it will give written notice, at least
thirty (30) days prior to the filing of each such registration statement, to the
undersigned of its intention to do so. If the undersigned notifies the Company
in writing within ten (10) business days after receipt of any such notice of its
desire to include the shares of the Common Stock, which may be issued upon
conversion of the Shares (the "Common Shares") in such proposed registration
statement, the Company shall afford the undersigned the opportunity to have the
Common Shares registered under such registration statement; provided, however,
that in the case of an underwritten offering, if the Company notifies the
undersigned in writing that the managing underwriter of such offering has
notified the Company that the inclusion in the registration statement of any
portion of the Common Shares would have an adverse effect on such underwritten
offering, then the managing underwriter may limit the number of Common Shares to
be included in such registration statement only to the extent necessary to avoid
such adverse effect; provided, further, however, that in the event any shares of
Common Stock issued pursuant to any of the securities issued in the Company's
initial public offering ("IPO Securities") are to be included in such
underwritten offering, and the managing underwriter shall have determined to
limit the number of Common Shares or IPO Securities to be so included, then such
limitation shall be applied to the Common Shares and the IPO Securities, pro
rata based on the number of Common Shares and IPO Securities requested to be
included in such underwritten offering; and provided, further, however, that in
the event securities of the Company, other than IPO Securities, held by any
person or entity other than the Company or the undersigned ("Third Party
Securities") are to be included in such underwritten offering, and the managing
underwriter shall have determined to limit the number of Common Stock, IPO
Securities or Third Party Securities to be so included, then such limitation
shall be applied to the Common Shares, the IPO Securities and the Third Party
Securities, based on the number of Common Shares, IPO Securities and Third Party
Securities requested to be included in such underwritten offering so that the
amount of Third Party Securities are reduced by a percentage which is twice as
great as the percentage which the Common Shares and the IPO Securities are
reduced. Notwithstanding the provisions of this Section VI(a)(i), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section VI(a)(i) (irrespective of whether a written request for
inclusion of any such securities shall
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have been made) to elect not to file any such proposed registration statements
or to withdraw the same after the filing but prior to the effective date
thereof.
(ii) Following the effective date of a registration statement
filed pursuant to Section VI(a)(i), the Company shall, upon the written request
of the undersigned, forthwith supply such reasonable number of copies of the
registration statement, prospectus and other documents necessary or incidental
to the registration as shall be reasonably requested by the undersigned to
permit the undersigned to make a public distribution of the Common Shares. The
Company will use its reasonable efforts to qualify the Common Shares for sale in
such states as the undersigned shall reasonably request, provided that no such
qualification will be required in any jurisdiction where, solely as a result
thereof, the Company would be subject to general service of process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction. The obligations of the Company hereunder with respect to the
Common Shares are expressly conditioned on the undersigned furnishing to the
Company such appropriate information concerning the undersigned and the Common
Shares as the Company may reasonably request.
(iii) The Company shall bear the entire cost and expense of the
registration of the Common Shares pursuant to Section VI(a)(i); provided,
however, that the undersigned shall be solely responsible for the fees of any
counsel retained by the undersigned in connection with such registration and any
transfer taxes or underwriting discounts, commissions or fees applicable to the
Common Shares sold by the undersigned pursuant thereto.
(iv) Neither the filing of a registration statement by the Company
pursuant to this Section VI(a) nor the making of any request for prospectuses by
the undersigned shall impose upon the undersigned any obligation to sell the
Common Shares.
(v) The undersigned, upon receipt of notice from the Company that
an event has occurred which requires a post-effective amendment to a
registration statement or a supplement to a prospectus included therein, shall
promptly discontinue the sale of the Common Shares until the undersigned
receives a copy of a supplemented or amended prospectus from the Company, which
the Company shall provide as soon as practicable after such notice.
(vi) Notwithstanding anything else to the contrary contained in
this Subscription Agreement, if the undersigned requests to have any of the
Common Shares registered under the Securities Act pursuant to this Section
VI(a), and if such Common Shares are so registered, then this Section VI(a)
shall be of no further force or effect.
(b) Demand Registration.
(i) At any time commencing September 1, 1997 and expiring five (5)
years from the date of this Subscription Agreement, the undersigned shall have
the right (which right is in addition to the registration rights under Section
VI(a) hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Commission, on one occasion, a registration statement
and such other documents, including a prospectus, as may be necessary in the
opinion of counsel for the Company, in order to comply with the provisions of
the Securities Act, so as to permit a public offering and sale of the Common
Shares.
(ii) If the undersigned exercises its registration request,
pursuant to Section VI(b)(i) above, between September 1st and November 1st (the
"Window Period") of any given year, the registration costs and filing fees
incurred in connection with such registration (the "Costs") shall be divided
evenly between the undersigned and the Company; provided, however, that the
Costs payable by the undersigned shall be capped
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at $25,000. If the undersigned exercises such registration request on a date
outside of the Window Period, the Costs shall be divided evenly between the
undersigned and the Company; provided, however, that the Costs payable by the
undersigned shall be capped at $40,000. Costs shall not include any amounts
payable to the undersigned's counsel, any transfer taxes or underwriting
discounts, commissions or fees applicable to the Common Shares, which shall be
payable solely by the undersigned. Notwithstanding the foregoing, if the
registration statement to which the Costs are associated is, due solely to
actions of the Company, not declared effective by the Commission within six
months from the date it is first filed with the Commission, then the Company
shall pay all Costs associated with such registration statement.
(iii) In connection with any registration under Section VI(b)
hereof, the Company covenants and agrees as follows:
a. The Company shall use its best efforts to file a
registration statement within sixty (60) days of receipt of any demand therefor,
except that if such demand is made during the Window Period, the Company shall
use its best efforts to file a registration statement within 60 days of the end
of the Window Period, shall use its best efforts to have any registration
statements declared effective at the earliest possible time, and shall furnish
the undersigned such number of prospectuses as shall reasonably be requested;
provided, however, that the Company may, at any time, delay the filing or delay
or suspend the effectiveness of such demand registration or, without suspending
such effectiveness, instruct the undersigned not to sell any securities included
in such demand registration, (i) if the Company shall have determined upon the
written advice of counsel (confirmation of which notice shall be provided to the
undersigned in writing by such counsel) that the Company would be required to
disclose any actions taken or proposed to be taken by the Company in good faith
and for valid business reasons, including without limitation, the acquisition or
divestiture of assets, which disclosure would have a material adverse effect on
the Company or on such actions, or (ii) if required by law, to update the
prospectus relating to any such registration to include updated financial
statements (a "Suspension Period") by providing the undersigned with written
notice of such Suspension Period and the reasons therefor; and provided further,
that the Suspension Periods, in the aggregate, do not exceed sixty (60) days.
The Company shall provide such notice as soon as practicable and in any event
prior to the commencement of such a Suspension Period. The obligations of the
Company hereunder with respect to the Common Shares are expressly conditioned on
the undersigned furnishing to the Company such appropriate information
concerning the undersigned and the Common Shares as the Company may reasonably
request.
b. The Company agrees that it will use its best efforts to
maintain the effectiveness of any registration statement filed pursuant to
Section VI(b) hereof for a period of 1 year from the effective date of such
registration statement.
c. The Company will take all necessary action which may be
required in qualifying or registering the Common Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the undersigned, provided
that the Company shall not be obligated to execute or file any general consent
to service of process or to qualify as a foreign corporation to do business
under the laws of any such jurisdiction.
(iv) Neither the filing of a registration statement by the Company
pursuant to this Section VI(b) nor the making of any request for prospectuses by
the undersigned shall impose upon the undersigned any obligation to sell the
Common Shares.
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(v) The undersigned, upon receipt of notice from the Company that an
event has occurred which requires a post-effective amendment to a registration
statement or a supplement to a prospectus included therein, shall promptly
discontinue the sale of the Common Shares until the undersigned receives a copy
of a supplemented or amended prospectus from the Company, which the Company
shall provide as soon as practicable after such notice.
VII. Registration Indemnification.
(a) The Company shall indemnify and hold harmless the undersigned from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in any registration statement
covering the Common Shares filed by the Company under the Securities Act, any
post-effective amendment to such registration statement, or any prospectus
included therein required to be filed or furnished by reason of Section VI of
this Subscription Agreement or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except, insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the undersigned expressly for use therein, which indemnification shall include
each person, if any, who controls the undersigned within the meaning of the Act;
provided, however, that the indemnification in this paragraph VII(a) with
respect to any prospectus shall not inure to the benefit of the undersigned (or
to the benefit of any person controlling the undersigned) on account of any such
loss, claim, damage or liability arising from the sale of the Common Shares by
the undersigned, if a copy of a subsequent prospectus correcting the untrue
statement or omission in such earlier prospectus was provided to the undersigned
by the Company prior to the subject sale and the subsequent prospectus was not
delivered or sent by the undersigned to the purchaser prior to such sale; and
provided further, that the Company shall not be obligated to so indemnify the
undersigned or other person referred to above unless the undersigned or other
person, as the case may be, shall at the same time indemnify the Company, its
directors, each officer signing such registration statement and each person, if
any, who controls the Company within the meaning of the Securities Act, from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in such registration statement, any
registration statement or any prospectus required to be filed or furnished by
reason of this Subscription Agreement or caused by any omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by the undersigned expressly for
use therein.
(b) If for any reason the indemnification provided for in the preceding
subparagraph is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
VIII. Board Seat. If at any time, through the date which is three years from the
date of this Subscription Agreement, a seat on the Company's Board of Directors
(the "Board") shall become vacant, for whatever reason, and if the Company
determines, in its sole discretion, to fill such vacant Board seat, then the
Company shall notify the undersigned and the undersigned shall have thirty (30)
days following such
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notification to provide the Company with the name of an individual to fill such
Board seat. If the Company approves such individual, which approval shall not be
unreasonably withheld, then the Company shall elect such individual to the
Board. If such individual is not approved then the undersigned shall have the
right to submit the names of additional individuals until one is elected to the
Board. Once one individual nominated by the undersigned is elected to the Board
the undersigned shall not have the right to nominate any additional individuals
to the Board.
IX. Series A Preferred Stock. The Company hereby represents that there are
currently no shares of the Company's Series A Convertible Preferred Stock
("Series A Stock") issued and/or outstanding and the Company hereby covenants
that it will not issue any shares of Series A Stock while there are any shares
of the Preferred Stock issued and outstanding.
X. Irrevocability; Binding Effect. The undersigned hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the undersigned, except
as required by applicable law, and that this Subscription Agreement shall
survive the death or disability of the undersigned and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the undersigned is
more than one person, the obligations of the undersigned hereunder shall be
joint and several and the agreements, representations, warranties, and
acknowledgments herein shall be deemed to be made by and be binding upon each
such person and his heirs, executors, administrators, successors, legal
representatives, and permitted assigns.
XI. Modification. This Subscription Agreement shall not be modified or waived
except by an instrument in writing signed by the party against whom any such
modification or waiver is sought.
XII. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to either of the Company, at the address set forth above,
or (b) if to the undersigned, at the address set forth on the signature page
hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section X). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
XIII. Assignability. Following the initial purchase of the Shares, the rights
and obligations hereunder are assignable by the undersigned; provided, however,
that anyone to whom this Subscription Agreement is assigned must agree in
writing to be bound by all of the terms and provisions hereof but the rights and
obligations of the undersigned under Section VIII of this Subscription Agreement
are not transferable or assignable.
XIV. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the internal laws of the State of New Jersey
without regard to its conflicts of laws principles.
XV. Blue Sky Qualification. The Sale of the Shares is expressly conditioned upon
the exemption from qualification of the offer and sale of the Shares from
applicable Federal and state securities laws. The Company shall not be required
to qualify this transaction under the securities laws of any jurisdiction and,
should qualification be necessary, the Company shall be released from any and
all obligations to maintain its offer, and may rescind any sale contracted, in
the jurisdiction.
XVI. Counterparts. This Subscription Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute
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this subscription by signing any of such counterpart and delivering the same by
telex, telecopy, telegraph, cable or otherwise in writing (each delivery by any
of such means to be deemed to be "in writing" for purposes of this Subscription
Agreement).
XVII. Use of Pronouns. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 27th day of February, 1997.
Number of Shares Subscribed: 280,000 Shares of Preferred Stock
Total Subscription Amount: $1,400,000
EP MEDSYSTEMS, INC.
By:
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Name:
Title:
Taxpayer Identification Number
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Address
ACCEPTED AND AGREED
ECHOCATH, INC.
By:
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Name:
Title:
Date: February 27, 1997
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