EXHIBIT 4.3
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (this "Agreement") made as of the 31{st}
day of August, 1999 by and among EP MEDSYSTEMS, INC. (the "Company") and the
entities listed on Schedule I hereto (each, a "Purchaser" and collectively, the
"Purchasers").
RECITALS
WHEREAS, the Company desires to issue and sell to the Purchasers (i) an
aggregate of 1,135,000 shares of its authorized but unissued Common Stock (as
defined in Section 1.1) and (ii) warrants to purchase an aggregate of 567,500
shares of Common Stock; and
WHEREAS, each Purchaser desires to purchase that number of shares of
Common Stock and warrants shown next to its name on Schedule I hereto, all upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein made, and
in consideration of the representations, warranties and covenants herein
contained, the parties hereto agree as follows:
SECTION 1. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS; CLOSING
1.1 SUBSCRIPTION, SALE AND PURCHASE.
(a) Upon the terms and subject to the conditions of this
Agreement, on the Closing Date (as hereinafter defined) the Company agrees to
issue, sell and deliver to the Purchasers, and the Purchasers agree to purchase
from the Company, an aggregate of (i) 1,135,000 shares of the Company's Common
Stock, $.001 stated value per share (the "Common Stock") and (ii) warrants to
purchase an aggregate of 567,500 shares of Common Stock (the "Warrants" and
together with the Common Shares, the "Securities"). Hereinafter, "Common
Shares" means the shares of Common Stock purchased by the Purchasers hereunder.
(b) The quantity and aggregate purchase price for the
Securities purchased by each Purchaser is as set forth on Schedule I hereto
(the "Purchase Price").
1.2 CLOSING.
(a) The closing of the issuance and sale of the Securities to
the Purchasers hereunder shall be held at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Tischman ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-
5400 as soon as practicable following the satisfaction or waiver of all the
closing conditions set forth in Sections 4 and 5 but in no event later than
September 1, 1999. As used herein "Closing" shall mean the closing of the
issuance and sale of the Securities to the Purchasers hereunder and the
"Closing Date" shall mean the date on which such Closing takes place.
(b) At the Closing (or within three (3) business days of the
Closing Date), against satisfaction or waiver of each of the conditions set
forth in Sections 4 and 5, the Company shall deliver to each Purchaser (i)
stock certificates representing the Common Stock to be purchased by each such
Purchaser, duly executed by the Company, registered in each such Purchaser's
name (or the name of its nominee), free of all restrictive and other legends
(other than the legend specified in Section 8.2 and otherwise in form for good
delivery) and (ii) a Warrant for Warrant Shares (as defined in the Warrant),
all in the quantities set forth in Schedule I. At the Closing, against such
delivery of said stock certificates and Warrants (or evidence satisfactory to
the Purchasers that the stock certificates and Warrants will be delivered to
the Purchasers within three (3) business days of the Closing Date) and subject
to the satisfaction or waiver of each of the conditions set forth in Sections 4
and 5, the Purchasers will deliver to the Company, by wire transfer to a bank
in the United States specified by the Company for the account of the Company,
funds in an amount equal to the Purchase Price for the Securities being
purchased hereunder. The Purchase Price shall be allocated on the basis of
$2.745 per Common Share and $.01 per Warrant Share.
(c) The Company and the Purchasers agree that at one or more
subsequent closings to be held under this Agreement no later than September 10,
1999 (collectively the "Subsequent Closings" and each a "Subsequent Closing"),
the Company may issue and sell to the Purchasers identified in Schedule I or
one or more other accredited investors (within the meaning of Regulation D of
the Securities Act of 1933, as amended, (the "Securities Act")) an aggregate of
up to 1,135,000 Common Shares and warrants for 567,500 shares of Common Stock
on the same terms and conditions as the Securities are issued and sold
hereunder, with each such investor to sign a counterpart of this Agreement, and
Schedule I hereto, the Registration Rights Agreement and other related
instruments being amended automatically to reflect the inclusion of such
investor as a Purchaser hereunder. Each Subsequent Closing shall be held at
the offices of ▇▇▇▇▇ Cummis Radin Tischman ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A. or such other
mutually agreed location) at such date and time as may be agreed upon by such
investors and the Company. As to each Subsequent Closing the terms and
conditions of this Section 1.2 and Section 4 shall apply fully as of the date
of such Subsequent Closing as though the date of each Subsequent Closing were
the Closing Date hereunder, except for such adjustments as are necessary to
reflect the Closing of the transactions contemplated thereby.
1.3 NATURE OF OBLIGATIONS. The Company shall not be obligated to
issue and sell less than those Securities specified on Schedule I to each
Purchaser opposite its name. In committing to purchase the Securities under
this Section 1, each Purchaser is contracting severally (and not jointly) to
purchase only the number of Securities specified on Schedule I opposite its
name. No Purchaser shall be obligated to purchase any Securities unless all of
the Securities to be purchased by it as shown on Schedule I are tendered for
purchase. The Company shall pay all costs and expenses (i) incurred by it in
connection with this Agreement and contemplated transaction and (ii) provided
the Purchase Price for the Securities being purchased by EGS Private Healthcare
Partnership, L.P. and EGS Private Healthcare Counterpart, L.P. (together,
"EGS") is received by close of business September 2, 1999, the costs and
expenses of EGS and its legal counsel in connection with this Agreement and
the contemplated transactions incurred through the date hereof, up to an
aggregate of $10,000.
SECTION 2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has all requisite power and authority, and all
necessary licenses and permits, to own and lease its properties and assets and
to conduct its business as now conducted. Each subsidiary as referred to in the
SEC Reports (as hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority, and all necessary
licenses and permits, to own and lease its properties and assets and to conduct
its business as now conducted. The Company and its subsidiaries are each
qualified to do business as a foreign corporation and are in good standing in
all states where the conduct of their respective businesses or their ownership
or leasing of property requires such qualification, except where the failure to
so qualify would not have a material adverse effect on the Company's and the
subsidiaries' business, properties, assets, operations or condition (financial
or otherwise), taken as a whole.
2.2 AUTHORIZATION. The Company has all requisite power and
authority to execute and deliver this Agreement and each other agreement
required to be executed and delivered by it pursuant to this Agreement
(collectively, the "Company Agreements") and to carry out the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Company of this Agreement, and each other Company Agreement have been duly
authorized by all requisite corporate action, and this Agreement has been duly
executed and delivered by the Company and constitutes (and, when executed and
delivered against payment therefor as contemplated herein, each other Company
Agreement will constitute) the valid and binding obligation of the Company,
enforceable against the Company in accordance with their respective terms.
2.3 NO CONFLICT WITH LAW OR DOCUMENTS. The execution, delivery and
performance of this Agreement or any Company Agreement by the Company, the
issuance of the Common Shares sold hereunder, the issuance of the Warrant
Shares upon exercise of the Warrants and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not violate any
provision of law, any rule or regulation of any governmental authority, or any
judgment, decree or order of any court binding on the Company and, do not and
will not conflict with or result in any material breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties, assets or outstanding stock of the Company under its Amended and
Restated Certificate of Incorporation or By-Laws, or any material indenture,
mortgage, lease, agreement or other instrument to which the Company is a party
or by which it or any of its properties is bound (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
under any such indenture, mortgage, lease, agreement or other intstrument as
would not, individually or in the aggregate, have a material adverse effect on
the Company and its subsidiaries' business, properties, assets, operations or
condition (financial or otherwise) taken as a whole).
2.4 CAPITAL STOCK OF COMPANY.
(a) The authorized capital stock of the Company consists of:
(i) 5,000,000 shares of preferred stock of the Company, no par value per share,
of which no shares are issued and outstanding; and (ii) 25,000,000 shares of
Common Stock, no par value, $.00l stated value per share, of which 11,010,417
shares are issued and outstanding (including the offering contemplated
hereunder) and all such outstanding shares are validly issued, fully paid and
nonassessable, (iii) 1,000,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1995 Long Term Incentive Plan subject to Company
shareholder approval, (iv) 360,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1995 Director Option Plan, and (v) 1,016,957 shares
of Common Stock reserved for issuance pursuant to existing non-plan stock
options; of which with respect to the 1995 Long Term Incentive Plan, the 1995
Director Option Plan and other non-plan stock options, an aggregate of
1,806,845 options have been granted and are outstanding as of June 30, 1999.
(b) There are no preemptive or similar rights to purchase or
otherwise acquire shares of capital stock of the Company pursuant to any
provision of law or the Amended and Restated Certificate of Incorporation or
By-Laws of the Company or by agreement or otherwise. Except as set forth in
this Section 2.4, there are no outstanding subscriptions, warrants, options or
other rights or commitments of any character to subscribe for or purchase from
the Company, or obligating the Company to issue, any shares of capital stock of
the Company or any securities convertible into or exchangeable for such shares.
2.5 VALID ISSUANCE OF THE SECURITIES. The Securities when issued,
sold and delivered to each Purchaser in accordance with this Agreement will be
duly and validly issued, fully paid and non-assessable. There are no New
Jersey state or city taxes, fees or other charges payable in connection with
the execution or delivery of the Company Agreements or the Securities.
2.6 CONSENTS AND APPROVALS. Except for filings under Federal and
applicable state securities laws, no permit, consent, approval or authorization
of, or declaration to or filing with, any federal, state, local or foreign
governmental or regulatory authority or other person, not made or obtained,
other than the filing with, and approval of, the NASDAQ National Market System
("NASDAQ") with respect to the listing of the Securities which will be made
prior to Closing and the filing of any registration statement which may be
filed pursuant to the Registration Rights Agreement, is required in connection
with the execution or delivery of this Agreement or any Company Agreement by
the Company, the offer, issuance, sale or delivery of the Securities, or the
carrying out by the Company of the other transactions contemplated hereby. The
issuance and sale by the Company of the Securities as contemplated hereby will
not require compliance with the notification or other requirements of the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder, nor require any action by or approval of
the Company's shareholders as such or of any other individual or entity which
has not already been obtained.
2.7 PRIVATE OFFERING. Assuming the accuracy of the Purchasers'
representations and warranties contained in Section 3 herein, the offer,
issuance and delivery to the Purchasers' pursuant to the terms of this
Agreement of the Securities and, assuming compliance by the Purchasers with the
terms of this Agreement and applicable law, the Securities, are exempt from
registration under the Securities Act.
2.8 CERTIFICATE OF INCORPORATION AND BY-LAWS. The copies of the
Company's Amended and Restated Certificate of Incorporation and By-Laws, as
amended, in the form delivered to the Purchasers are true and correct copies of
such documents and are in full force and effect.
2.9 SEC FILINGS. The Company has delivered to the Purchasers, or
has made available, prior to the date hereof true and correct copies of (i) its
Annual Report on Form 10-KSB for its year ended December 31, 1998 and Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 1999 and June 30, 1999
and (ii) all other reports and documents filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1999. All documents described in this
Section 2.9 are hereinafter referred to as the "SEC Reports." The Company has
made all filings required to be made by it under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
securities laws of any state, and any rules and regulations promulgated
thereunder. The Company's reports and other documents filed with the SEC
pursuant to the Exchange Act conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, and none of such documents contained any untrue statement of
material fact or omitted to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company is currently eligible to utilize a
registration statement on Form S-3 with respect to the registration of the
Registrable Securities (as defined in the Registration Rights Agreement)
required by Section 1.2 of the Registration Rights Agreement contemplated by
Section 4.8 hereof.
2.10 LITIGATION. Except as set forth in the SEC Reports, there is no
pending or, to the knowledge of the Company, threatened suit, action or
litigation, or administrative, arbitration or other proceeding or governmental
inquiry or investigation questioning the validity of this Agreement or the
transactions contemplated hereby, or affecting in any material adverse respect
the Company and its subsidiaries, taken as a whole.
2.11 COMPLIANCE WITH LAWS. The Company and each subsidiary is in
compliance with all laws, ordinances, rules and regulations of governmental
authorities applicable to or affecting it, its properties or its business,
except where non-compliance would not have a material adverse effect on the
business, properties, assets, operations or condition (financial or otherwise)
of the Company and its subsidiaries taken as a whole, and neither the Company
nor any subsidiary has received written notice of any claimed default with
respect to such laws, ordinances, rules and regulations.
2.12 FINANCIAL STATEMENTS.
(a) (i) The audited consolidated balance sheets and
shareholders' equity of the Company and its subsidiaries as of December 31,
1998 and 1997, and (ii) the audited consolidated statements of income and cash
flow of the Company and its subsidiaries, for the two years ended December 31,
1998 and 1997, together with the notes thereto, copies of all of which have
heretofore been furnished to the Purchasers, or have been made available, in
each case, present fairly in all material respects the consolidated financial
position of the Company and its subsidiaries at such dates and the consolidated
results of their operations and their consolidated cash flows for the periods
then ended, in conformity with generally accepted accounting principles,
consistently applied ("GAAP"). The audited consolidated balance sheet dated
December 31, 1998 is referred to herein as the "Balance Sheet".
(b) Since December 31, 1998 (the "Balance Sheet Date"), there
has been no material adverse change in the business, properties, assets,
operations or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole.
2.13 ASSETS. The Company and each subsidiary has good and marketable
title to all of the real and personal properties and assets reflected on the
Balance Sheet as being owned by the Company or such subsidiary at the Balance
Sheet Date, except for properties and assets sold or otherwise disposed of in
the ordinary course of business since the Balance Sheet Date or that are not
material to its business.
2.14 TAX MATTERS. The Company and each subsidiary has filed all U.S.
Federal, state, local, foreign and other tax returns which were required to be
filed on or before the date hereof and has paid all taxes which have become due
and payable. All such reports and returns (copies of which have been made
available to the Purchasers) were materially accurate and complete when filed
and reflect all taxes required to be paid by the Company and its subsidiaries
for the periods reported therein. No tax returns or reports of the Company or
any subsidiary are or ever have been under audit.
2.15 PATENTS, TRADEMARKS, PROPRIETARY RIGHTS.
(a) To the Company's knowledge, each of the Company and its
subsidiaries owns or has the right to use all of the Intellectual Property
Rights (as defined below), except where such failure would not have a material
adverse effect on the business, properties or assets of the Company and its
subsidiaries, taken as a whole. For purposes of this Agreement, "Intellectual
Property Rights" means all patents, copyrights, trademarks, service marks,
trade names, permits, trade secrets, computer programs, software designs and
related materials and other intellectual property that are used by the Company
or a subsidiary and are material to the conduct of the Company's or a
subsidiary's business.
(b) To the Company's knowledge, the Company's and each
subsidiary's use and enjoyment of the Intellectual Property Rights do not
violate any license or conflict with or infringe the intellectual property
rights of others in a manner which would materially and adversely affect the
business, assets, properties, operations or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole.
2.16 INSURANCE. All the insurable properties of the Company and the
subsidiaries are insured for the benefit of the Company and the subsidiaries
against all risks usually insured against by persons operating similar
properties in the locality where such properties are located under valid and
enforceable policies issued by insurance companies of recognized responsibility
in reasonably sufficient amounts.
2.17 USE OF PROCEEDS. The proceeds from the sale of the Securities
will be used by the Company for working capital purposes including research and
development expenses.
2.18 ENVIRONMENTAL COMPLIANCE.
(a) Neither the Company nor any subsidiary has generated,
stored, treated, discharged or disposed of any hazardous substances or
hazardous waste in violation of any applicable law or regulation, nor is the
Company or any subsidiary aware of any allegations that any such violations
have occurred. Neither the Company nor any subsidiary is aware of any claims,
investigations, litigation or administrative proceedings, whether actual or
threatened, against the Company or any subsidiary relating to any environmental
contamination of any property owned, used or leased by any of them or arising
out of any alleged violation of any environmental law or regulation.
(b) To the Company's knowledge, none of the real property
owned and/or occupied by the Company or any subsidiary has ever been used by
previous owners and/or operators to generate, manufacture, refine, transport,
treat, store, handle or dispose of "Hazardous Substances" or "Hazardous
wastes," as such terms are defined in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601, ET SEQ., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, ET SEQ., or applicable state and
local laws, or any regulations issued under any such laws.
2.19 MINUTE BOOKS. The minute books of the Company and its
subsidiaries heretofore made available for inspection by the Purchasers contain
summaries of all meetings of directors and shareholders since the incorporation
of the Company or such subsidiary, as applicable, and reflect accurately in all
material respects all transactions referred to in such minutes or records.
2.20 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any
subsidiary thereof is bound by or subject to, any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Company, has sought to
represent any of the employees, representatives or agents of the Company or any
such subsidiary thereof. There is no strike or other labor dispute involving
the Company or any subsidiary thereof pending, or to the knowledge of the
Company threatened, which could have a material adverse effect on the business,
assets, properties, operations or condition (financial or otherwise) of the
Company and its subsidiaries, taken as a whole, nor is the Company aware of any
labor organization activity involving any of the employees of the Company or
any subsidiary thereof.
2.21 COMPANY STATUS. The Company has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act, is in full compliance with all
reporting requirements of the Exchange Act, and the Company has maintained all
requirements for the continued listing of its Common Stock on NASDAQ, and such
Common Stock is currently listed and traded on NASDAQ subject to NASDAQ
acknowledgment of its receipt of the listing fee for the Securities being
issued hereunder and amendments to the listing of the Company's options.
2.22 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION IN REGARD
TO THIS TRANSACTION. The Company has not conducted any general solicitation
(as that term is used in Regulation D) with respect to any of the Securities,
nor has it made any offers or sales of any Securities or solicited any offers
to buy any Securities, under circumstances that would require registration of
the Securities under the Securities Act.
2.23 THIRD PARTY CONSENTS; BUSINESS NOT IN VIOLATION. The Company
has obtained from third parties all consents necessary to consummate the
transactions contemplated hereby and by the other Company Agreements. The
business of the Company and its subsidiaries is not being conducted in
violation of any law, ordinance or regulations of any governmental entity,
except for violations or potential violations which either individually or in
the aggregate do not and will not have a material adverse effect on the Company
and the subsidiaries business, properties, assets, operations or condition
(financial or otherwise) taken as a whole.
2.24 NO INTEGRATION. Neither the Company nor any of its
subsidiaries nor any person acting on the Company's behalf has, directly or
indirectly, at any time within the past six (6) months made any offer or sale
of any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale of the Securities as contemplated hereby or (ii) cause the
offering of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the National Association of Securities
Dealers ("NASD"), as applicable.
2.25 INVESTMENT COMPANY. The Company is not, and is not controlled
by or under common control with an affiliate of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
2.26 PERMITS. Each of the Company and its subsidiaries possesses
all franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct its business as described in the SEC Reports
except where the failure to possess such permits would not, individually or in
the aggregate, have a material adverse effect on the Company or its
subsidiaries, or their businesses, properties, assets, operations or condition
(financial or otherwise) taken as a whole ("Material Permits"), and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
2.27 YEAR 2000 COMPLIANCE. Each of the Company and its subsidiaries
has initiated a review and assessment of all areas within its business and
operations that could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by the Company or its
subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, the Company believes that the computer
applications that are currently material to the business and operations of each
of the Company and its subsidiaries are reasonably expected to be able to
perform properly date-sensitive functions for all dates before and after
January 1, 2000, except to the extent that a failure to do so would not either
individually or in the aggregate have a material adverse effect on the Company
and its subsidiaries business, properties, assets, operations or condition
(financial or otherwise) taken as a whole.
2.28 FULL DISCLOSURE. 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 the light of the circumstances under which they were made,
not misleading.
SECTION 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES
The Purchasers understand that the sale to them of the Securities will not
be registered under the Securities Act, on the grounds that the sales provided
for in this Agreement are exempt pursuant to Section 4(2) of the Securities Act
and/or Regulation D promulgated under Section 4(2) of the Securities Act, and
that the reliance of the Company on such exemptions is predicated in part on
the Purchasers' representations, warranties, covenants and acknowledgments set
forth in this Section 3.
3.1 PRE-EXISTING ENTITY. Each Purchaser that is an entity
represents and warrants to the Company that it was not organized for the
specific purpose of purchasing the Securities purchased by it hereunder.
3.2 PRINCIPAL PLACE OF BUSINESS. Each Purchaser represents and
warrants to the Company that the address of its principal place of business or
residence is as set forth on Schedule I hereto.
3.3 PURCHASE WITHOUT VIEW TO DISTRIBUTE. Each Purchaser represents
and warrants to the Company that the Securities to be purchased by it are being
acquired by such Purchaser for its own account, not as a nominee or agent, and
not with a view to resale or distribution within the meaning of the Securities
Act, and the rules and regulations thereunder, and such Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose any
of the Securities in violation of the Securities Act or any applicable state
securities laws.
3.4 RESTRICTIONS ON TRANSFER. Each Purchaser (i) acknowledges that
the Securities are "Restricted Securities" under the Federal securities laws
and are not registered under the Securities Act, (ii) acknowledges that the
Securities to be acquired by it must be held indefinitely by it unless they are
subsequently registered under the Securities Act or an exemption from
registration is available, (iii) is aware that any routine sales under Rule 144
of the SEC under the Securities Act of Securities may be made only in limited
amounts and in accordance with the terms and conditions of that Rule and that
in such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, (iv) is aware that Rule 144 is not
presently available for use by the Purchaser for resale of any such Securities
and (v) is aware that, except as provided in Section 4.8 herein, the Company is
not obligated to register under the Securities Act any sale, transfer or other
disposition of the Securities.
3.5 ACCESS TO INFORMATION. Each Purchaser confirms that the
Company has made available to it the opportunity to ask questions of and
receive answers from the Company's officers and directors concerning the terms
and conditions of the offering and the business and financial condition of the
Company and its subsidiaries, and to acquire, and such Purchaser has received
to its satisfaction, such additional information, in addition to that set forth
herein, about the business and financial condition of the Company and its
subsidiaries and the terms and conditions of the offering as it has requested.
3.6 ADDITIONAL REPRESENTATIONS OF THE PURCHASER. Each Purchaser
represents and warrants that (i) it is an "accredited investor" as such term
is defined in Rule 501 promulgated under the Securities Act, (ii) its financial
situation is such that it can afford to bear the economic risk of holding the
Securities for an indefinite period of time and suffer complete loss of its
investment in the Securities, (iii) its knowledge and experience in financial
and business matters are such that it is capable of evaluating the merits and
risks of its purchase of the Securities as contemplated by this Agreement, (iv)
it has all requisite power and authority to execute, deliver and perform this
Agreement, (v) and the purchase of the Securities by it has been duly and
properly authorized and this Agreement has been duly executed and delivered by
it or on its behalf and constitutes the valid and binding obligation of such
Purchaser, and is enforceable against such Purchaser in accordance with its
terms, and (vi) it has no contract, arrangement or understanding with any
broker, finder of similar agent with respect to the transactions contemplated
by this Agreement.
3.7 LEGENDS. Each Purchaser understands that the certificates
evidencing the Common Shares shall bear the legend set forth in Section 8.2
herein.
SECTION 4.CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
Each Purchaser's obligation to purchase and make payment for the
Securities subscribed for hereunder by it on the Closing Date is subject, at
its option, to the satisfaction of each of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date, the
representations and warranties contained in Section 2 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date, and the Company shall have so certified to the Purchasers
in writing.
4.2 PERFORMANCE. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
material respects, and the Company shall have so certified to the Purchasers in
writing.
4.3 OPINION OF COUNSEL TO THE COMPANY. On the Closing Date, the
Purchasers shall have received an opinion from counsel for the Company, dated
the Closing Date, which shall be in a form reasonably acceptable to the
parties.
4.4 PROCEEDINGS; CERTIFIED COPIES. All proceedings to be taken in
connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident
thereto, shall be satisfactory in form and substance to the Purchasers. The
Purchasers shall have received such certified copies or other copies of such
documents as they may reasonably request.
4.5 NO PROCEEDING OR LITIGATION. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
4.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change since the Balance Sheet Date in the business, properties,
assets, operations, or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole.
4.7 BLUE SKY COMPLIANCE. The Company shall have complied with all
applicable requirements of federal and state securities or "blue sky" laws with
respect to the issuance of the Securities sold at the Closing.
4.8 REGISTRATION RIGHTS AGREEMENT. The Company shall have executed
and delivered a Registration Rights Agreement in the form attached hereto as
Exhibit A.
4.9 WARRANT. The Company shall have executed and delivered a
Warrant in the form attached hereto as Exhibit B.
4.10 NASDAQ LISTING. The Securities shall have been approved for
listing on NASDAQ subject to NASDAQ's acknowledgment of receipt of the
appropriate filing fees.
SECTION 5.CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Securities subscribed for by the
Purchasers on the Closing Date is subject, at the Company's option, to the
satisfaction of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date, the
representations and warranties contained in Section 3 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date and the Purchasers shall have so certified to the Company
in writing.
5.2 PERFORMANCE. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Purchasers
on or prior to the Closing Date shall have been performed or complied with in
all material respects, and the Purchasers shall have so certified to the
Company in writing.
5.3 NO PROCEEDING OR LITIGATION. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
SECTION 6.COVENANTS OF THE COMPANY PRIOR TO CLOSING
6.1 OPERATION OF BUSINESS IN ORDINARY COURSE. Prior to the Closing,
the Company and each subsidiary will operate its business only in the usual and
normal course.
6.2 CONDITIONS PRECEDENT. The Company and the Purchasers shall use
their best efforts to cause the conditions specified in Sections 4 and 5 to be
satisfied by the Closing Date.
SECTION 7.COVENANTS OF THE PARTIES AFTER CLOSING
7.1 RULE 144. The Company covenants that (i) the Company will use
its best efforts to comply with the current public information requirements of
Rule 144 (c) (1) under the Securities Act; and (ii) at all such times as Rule
144 is available for use by the holders of the Securities, the Company will
furnish each such holder upon request with all information within the
possession of the Company required for the preparation and filing of Form 144.
7.2 DELIVERY OF FINANCIAL STATEMENTS. From the Closing Date and for
as long as each Purchaser owns 5% or more of the outstanding Common Stock, the
Company shall deliver to Purchaser, a copy of each and every report on Form 10-
KSB, Form 8-K, Form 10-QSB, Proxy Report and all other reports filed by the
Company or any subsidiary with the SEC within fifteen (15) days of such filing.
7.3 INSPECTION. From the Closing Date and for as long as each
Purchaser owns 5% or more of the outstanding Common Stock, upon reasonable
advance written notice, the Company and each subsidiary shall permit such
Purchaser, at its expense, to visit and inspect the properties of the Company
and each of its subsidiaries during normal business hours, and to discuss its
affairs, finances, and accounts with its executive officers in each case for
any purpose reasonably related to such Purchaser's investment in the Company,
provided that such Purchaser shall agree not to disclose any confidential
information received as a result thereof. Any such Purchaser is authorized to
disclose to any one or more of the other Purchasers any information it
discovers as a result of such inspections, provided such other Purchaser agrees
not to disclose any confidential information received. The rights set forth in
this Section 7.3 shall be in addition to and not in lieu of the rights of
inspection that any holder of Securities may have under applicable law.
7.4 WAIVERS' CONSENTS, ETC. Compliance with any of the covenants
in this Section 7 may be waived, either generally or in the particular
instance, and any consent required thereunder may be given, by holders of
Common Shares sufficient to consent to an amendment to this Agreement under
Section 10.8.
7.5 RIGHT OF FIRST REFUSAL. In the event that at any time or from
time to time during the period ending February 29, 2000, the Company proposes
to issue or sell any equity securities or debt securities which are convertible
into or exchangeable for its Common Stock (other than (i) securities issued or
sold pursuant to an underwritten public offering by the Company, (ii)
securities issued or sold or in connection with a merger or consolidation or
sale of all or substantially all of the Company's assets, (iii) securities
issued under or pursuant to the Company's stock option plans as may have been
or may be amended (with approval of the Company's Board of Directors) from time
to time, (iv) securities issued upon exercise of warrants or options
outstanding on the date hereof or, in the case of options, granted pursuant to
the stock option plans referred to in clause (iii) above, and (v) securities
issued to any third party that is reasonably determined by the Company's Board
of Directors to constitute a prospective strategic partner, then the Company
shall give written notice (the "Proposal Notice") to the Purchaser of such
proposed issuance specifying the terms and conditions thereof in reasonable
detail, and the Purchaser shall have the right, exercisable by written notice
delivered within 15 business days of the date of receipt by the Purchaser of
the Proposal Notice, to subscribe for and purchase its pro-rata portion (as
compared with the other Purchasers hereunder) of all or some of the Common
Stock or other securities proposed to be issued, on the same terms and
conditions specified in the Proposal Notice. To eliminate doubt, the parties
have agreed that any medical device manufacturer or distributor shall be deemed
to be a prospective strategic partner. If (i) the notice required to be given
pursuant to this Section 7.5 has been duly given and (ii) the Purchaser has not
subscribed for or purchased within the 15 business day option period prescribed
in this Section 7.5 all or some of the Common Stock or other securities
proposed to be issued, then the Company shall have the right, for a period of
90 calendar days from the expiration of such 15 business day option period, to
sell such Common Stock or other securities on terms and conditions no more
favorable to the purchaser thereof as the terms and conditions offered to the
Purchaser.
7.6 FILING OF CURRENT REPORT ON FORM 8-K. On or before the second
business day following the Closing Date, the Company shall file a Current
Report on Form 8-K with the SEC describing the terms of the transaction
consummated at the Closing.
7.7 FORM D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
the Purchaser promptly after such filing.
SECTION 8.COMPLIANCE WITH SECURITIES ACT; RESTRICTIONS ON TRANSFERABILITY
OF COMMON SHARES.
8.1 COMPLIANCE WITH SECURITIES ACT. The Common Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act and applicable state securities laws in respect of any such
transfer.
8.2 RESTRICTIVE LEGEND. Each certificate representing the Common
Shares and any shares of Common Stock or other securities issued upon any stock
split, stock dividend, recapitalization, merger, consolidation, similar event,
shall (unless otherwise permitted by the provisions of Section 8.4 below) be
stamped or otherwise imprinted with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW AND THE TRANSFERABILITY HEREOF IS SUBJECT TO THE
PROVISIONS OF A COMMON STOCK AND WARRANT PURCHASE AGREEMENT BY AND AMONG
EP MEDSYSTEMS, INC. AND THE PURCHASERS LISTED ON SCHEDULE I THERETO."
8.3 RESTRICTIONS ON TRANSFERABILITY. Until the Common Shares are
registered under the Securities Act, the Company shall not be required to
register the transfer of the Common Shares on the books of the Company unless
the Company shall have been provided with an opinion of counsel reasonably
satisfactory to it prior to such transfer to the effect that registration under
the Securities Act or any applicable state securities law is not required in
connection with the transaction resulting in such transfer. Each certificate
for Common Shares issued upon any transfer as above provided shall bear the
restrictive legend set forth in Section 8.2 above, except that such restrictive
legend shall not be required if the opinion of counsel reasonably satisfactory
to the Company referred to above is to the further effect that such legend is
not required in order to establish compliance with the provisions of the
Securities Act and any applicable state securities law.
8.4 TERMINATION OF RESTRICTIONS ON TRANSFERABILITY. The conditions
precedent imposed by this Section 8 upon the transferability of the Common
Shares shall cease and terminate as to any of the Common Shares when (i) such
securities shall have been registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition by
the seller or sellers thereof set forth in the registration statement covering
such securities, or (ii) at such time as an opinion of counsel satisfactory to
the Company shall have been rendered as required pursuant to the second
sentence of Section 8.3 to the effect that the restrictive legend on such
securities is no longer required, or (iii) when such securities are
transferable in accordance with the provisions of Rule 144 (k) promulgated
under the Securities Act and Section 8.3 above. Whenever the conditions imposed
by this Section 8 shall terminate as hereinabove provided with respect to any
of the Common Shares, the holder of any such securities bearing the legend set
forth in this Section 8 as to which such conditions shall have terminated shall
be entitled to receive from the Company, without expense (except for the
payment of any applicable transfer tax) new stock certificates not bearing such
legend.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made herein and in the certificates
delivered pursuant hereto are made as of the date hereof and shall survive the
execution and delivery of this Agreement and the issuance and sale of the
Securities hereunder for a period of one year.
SECTION 10.MISCELLANEOUS.
10.1 OWNER OF COMMON SHARES. The Company may deem and treat the
person in whose name the Securities are registered as the absolute owner
thereof for all purposes whatsoever, and the Company shall not be affected by
any notice to the contrary.
10.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the respective successors, executors,
personal representatives, heirs and permitted assigns of each of the parties
hereto.
10.3 BROKER OR FINDER. Each party to this Agreement represents and
warrants that, to the best of its knowledge, no broker or finder has acted for
such party in connection with this Agreement or the transactions contemplated
by this Agreement and that no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by such party. The Company
shall indemnify each Purchaser against, and hold it harmless from, any
liability, cost, or expense (including reasonable attorneys' fees and expenses)
resulting from any agreement, arrangement, or understanding made by the
Company, and each Purchaser shall indemnity the Company against, and hold the
Company harmless from, any liability, cost, or expense (including reasonable
attorneys fees and expenses) resulting from any agreement, arrangement, or
understanding made by such Purchaser with any third party, for brokerage or
finder's fees or other commissions in connection with this Agreement or any of
the transactions contemplated hereby.
10.4 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey,
without regard to conflicts of law principles.
10.5 NOTICE. Any notice or other communications required or
permitted hereunder shall be deemed given when delivered personally, or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, or by a recognized national overnight courier
service addressed as follows or to such other address or addresses as may
hereafter be furnished in writing by notice similarly given by one party to the
other:
To the Company: EP MedSystems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
To any Purchaser:At its address set forth on Schedule I hereto
Notice to any holder of Securities other than a Purchaser shall be given in a
like manner to such holder at the address reflected in the Company's records.
10.6 FULL AGREEMENT. This Agreement, together with the Securities
and the Exhibits and Schedules attached hereto or delivered herewith, and any
other documents delivered herewith, sets forth the entire understanding of the
parties with respect to the transactions contemplated hereby.
10.7 HEADINGS. The headings of the sections of this Agreement are
inserted for convenience of reference only and shall not be considered a part
hereof.
10.8 AMENDMENT. This Agreement may be modified, amended or changed
only with the written consent of the Company and the holders of at least 75.0%
of the Common Shares then outstanding.
10.9 SCHEDULES AND EXHIBITS. Disclosure of any fact or item in any
Schedule or Exhibit hereto referenced by a particular paragraph or section in
this Agreement shall be deemed to be disclosed with respect to any other
paragraph or section (whether or not an explicit cross-reference appears)
should the existence of such fact or item or its contents be relevant to that
other paragraph or section.
10.10 COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
[signature page follows]
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement on the date first set forth above.
EP MEDSYSTEMS, INC.
By:__________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:President and Chief Executive Officer
PURCHASERS:
EGS PRIVATE HEALTHCARE PARTNERSHIP, L.P.
By:___________________________________
Name:
Title:
EGS PRIVATE HEALTHCARE COUNTERPART, L.P.
By:___________________________________
Name:
Title
______________________________________
▇▇▇▇▇▇ ▇▇▇
______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SCHEDULE I
PURCHASER NUMBER OF COMMON NUMBER OF PURCHASE PRICE
SHARES WARRANT
SHARES
EGS Private Healthcare Partnership, 875,000 437,500 $ 2,406,250
L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
EGS Private Healthcare Counterpart, 125,000 62,500 $ 343,750
L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Ph.D. 50,000 25,000 $ 137,500
c/o EP MedSystems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ 50,000 25,000 $ 137,500
c/o EP MedSystems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 35,000 17,500 $ 96,250
c/o EP MedSystems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTAL 1,135,000 567,500 $ 3,121,250
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") made as of the 31{st} day
of August 1999, by and between EP MedSystems, Inc., a New Jersey Corporation
(the "Company"), and the purchasers listed on the signature page hereof (the
"Purchaser").
RECITALS
WHEREAS, the Company and the Purchaser are parties to the Common Stock and
Warrant Purchase Agreement dated of even date herewith (the "Stock Purchase
Agreement") of which the Purchaser is one of the purchasers listed on Schedule
I thereto (the "Schedule I Purchasers"), each of whom is receiving a form of
registration rights agreement identical to this Agreement; and
WHEREAS, in order to induce the Company to enter into the Stock Purchase
Agreement and to induce the Purchaser to invest funds in the Company pursuant
to the Stock Purchase Agreement, the Purchaser and the Company hereby agree
that this Agreement shall govern the rights of the Purchaser to cause the
Company to register shares of Common Stock issuable to the Purchaser and
certain other matters as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein made, and
in consideration of the representations, warranties and covenants herein
contained, the parties hereto agree as follows:
SECTION 1.REGISTRATION RIGHTS
The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The terms "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means the Purchaser and any transferees
of Registrable Securities permitted in accordance with Section 1.12.
(d) The term "Other Securities" means all securities which
may be, or are requested to be, included in a registration, other than newly
issued shares of Common Stock not issued pursuant to the exercise or conversion
of warrants, options or other convertible securities, except as provided in the
registration rights agreements identified in Schedule 2.10 hereto.
(e) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration
or ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means the Common Stock
issued pursuant to the Stock Purchase Agreement (the "Common Shares") or any
shares of Common Stock issued to the Purchaser or any Holder upon the exercise
of the Warrants (as defined in the Stock Purchase Agreement) by either (i) the
payment of the Exercise Price (as defined in the Warrant) (the "Paid For
Warrant Shares") or (ii) the cashless exercise of the Warrant pursuant to
Section 1(b) of the Warrant (the "Cashless Exercised Warrant Shares");
PROVIDED, HOWEVER, Registrable Securities shall include, but not be limited to,
a number of shares of Common Stock equal to no less than 100% of the maximum
number of shares of Common Stock which would be issuable upon exercise of the
Warrants, assuming such exercise occurred either (x) on the Closing Date or
(y) the date preceding the date of filing of the Registration Statement,
whichever date would produce a greater number of Registrable Securities. Such
registered shares of Common Stock shall be allocated among the holders pro rata
based on the total number of Registrable Securities issued or issuable as of
each date that a Registration Statement is declared effective by the
Commission.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issued pursuant
to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" means the Securities and Exchange
Commission.
(i) The term "Warrant Shares" shall mean both the Paid For
Warrant Shares and the Cashless Exercised Warrant Shares.
1.2 SHELF REGISTRATION.
(a) The Company shall, subject to the limitations specified
in this Agreement (i) file a shelf registration statement on Form S-3 or any
other form available to the Company as soon as practicable but in any event
within thirty (30) days from the date hereof (the "Filing Date") covering the
registration under the Act of all Common Shares then outstanding to be offered
or sold on a delayed or continuous basis as provided by this Agreement,
pursuant to Rule 415 of the Act (the "Shelf Registration Statement"); and (ii)
maintain the effectiveness of the Shelf Registration Statement until such date
as is the earlier of (i) the date on which all of the Registrable Securities
have been sold and (ii) the date on which the Registrable Securities may be
immediately sold without restriction (including without limitation as to volume
by each Holder thereof) and without registration under the Securities Act.
(b) At any time prior to September 1, 2004, in case the
Company shall receive from the Holders of at least fifty percent (50%) of the
Warrant Shares a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or part of such Warrant Shares owned by such Holder or Holders,
the Company shall promptly give written notice of the proposed registration and
any related qualification or compliance, to all other Holders, and shall
subject to the limitations specified in this Agreement (i) file a shelf
registration statement on Form S-3 or any other form available to the Company
as soon as practicable (the "Warrant Share Filing Date") covering the
registration under the Act of all requested Warrant Shares then outstanding to
be offered or sold on a delayed or continuous basis as provided by this
Agreement, pursuant to Rule 415 of the Act (the "Warrant Share Shelf
Registration Statement"); and (ii) maintain the effectiveness of the Warrant
Share Shelf Registration Statement until such date as is the earlier of (i) the
date on which all of the Warrant Shares so requested have been sold and (ii)
the date on which the Warrant Shares so requested may be immediately sold
without restriction (including without limitation as to volume by each Holder
thereof) and without registration under the Securities Act.
(c) If any offering pursuant to Section l.2 (a) hereof
involves an underwritten offering, an underwriter will be selected by the
Holders of three-fourths of the Registrable Securities then outstanding and
shall be reasonably acceptable to the Company. In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute Registrable
Securities through such underwriting shall (together with the Company as
provided in Section 1.4(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each Holder and
requested by such Holder to be included in such underwriting; provided,
however, that the number of shares of Registrable Securities to be included in
such underwriting shall not be reduced unless all Other Securities (as defined
below) are first entirely excluded from the underwriting.
(d) Notwithstanding the foregoing, if the Company shall
furnish to the Holders a certificate signed by the Chief Executive Officer or
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental (a "Detrimental
Condition") to the Company and its shareholders for a registration statement to
be filed or to become or remain effective, as the case may be, (i) the Company
shall have the right to defer taking action with respect to the filing of the
Shelf Registration Statement or Warrant Share Shelf Registration Statement, as
the case may be, for a period of not more than ninety (90) days after the
Filing Date or the Warrant Share Filing Date, as the case may be, (ii) in case
a Shelf Registration Statement or a Warrant Share Registration Statement, as
the case may be, has been filed but has not become effective, the Company may
cause such registration statement to be withdrawn or may postpone amending or
supplementing such registration statement until such Detrimental Condition no
longer exists, but in no event for more than ninety (90) days, (iii) in case a
Shelf Registration Statement or a Warrant Share Registration Statement, as the
case may be, has been filed and has become effective, the Company may postpone
amending or supplementing such registration statement until such Detrimental
Condition no longer exists, but in no event for more than ninety (90) days or
(iv) require all Holders to suspend or cease selling any Registrable Securities
until such Detrimental Condition no longer exists, but in no event for more
than ninety (90) days, PROVIDED that the Company's right pursuant to this
Section 1.2(d) to give notice of a Detrimental Condition may not be exercised
for more than one hundred twenty (120) days in any twelve (12) month period
hereunder. The Company shall give written notice of its determination to
postpone or withdraw a registration statement and of the fact that the
Detrimental Condition for such postponement or withdrawal no longer exists, in
each case, promptly after the occurrence thereof. The following events or
circumstances may be a Detrimental Condition: a pending material acquisition,
merger or sale or purchase of assets, pending or threatened material
litigation, pending or threatened material regulatory or governmental action,
pending material change in the business, prospects, condition (financial or
other) or properties of the Company in each case, only for so long as
disclosure thereof has not been made in any press release or any filing under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). The
foregoing list is for illustrative purposes only and is not meant to be
exclusive.
(e) If the Company shall give any notice of postponement or
withdrawal of any registration statement or of suspension of selling the
Registrable Securities in accordance with subsection (d) above, the Company
shall not, during the period of postponement, withdrawal or suspension pursuant
to clauses (i), (ii), (iii) or (iv) of the prior paragraph, register any Common
Stock, other than pursuant to a registration statement on Form S-4 or S-8 (or
an equivalent registration form then in effect). Each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company that the
Company has determined to withdraw any registration statement pursuant to the
immediately preceding paragraph, such Holder will discontinue its disposition
of Registrable Securities pursuant to such registration statement and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such Holder's possession
of the prospectus covering such Registrable Securities that was in effect at
the time of receipt of such notice. If the Company shall have withdrawn or
prematurely terminated a registration statement filed under this Section 1.2
(whether pursuant to the immediately preceding paragraph, or as a result of any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court), the Company shall not be considered to have
effected an effective registration for the purposes of this Agreement until the
Company shall have filed a new registration statement covering the Registrable
Securities covered by the withdrawn registration statement and such
registration statement shall have been declared effective and shall not have
been withdrawn. If the Company shall give any notice of withdrawal or
postponement of a registration statement, the Company shall, at such time as
the Detrimental Condition that caused such withdrawal or postponement no longer
exists (but in no event later than ninety (90) days after the date of the
postponement or withdrawal), use its reasonable best efforts to effect the
registration under the Act of the Registrable Securities covered by the
withdrawn or postponed registration statement in accordance with this Section
1.2 (unless the Holder shall have withdrawn such request).
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities (other than a registration relating solely to the sale of
securities to participants in a Company stock option, stock purchase or similar
plan or a SEC Rule 145 transaction) at any time prior to (i) September 1, 2001
as to both the Common Shares and all Warrant Shares or (ii) September 1, 2004
as to only the Paid For Warrant Shares, the Company shall, at such applicable
time, promptly give each Holder of such securities written notice of such
registration. Upon the written request of each Holder of such securities given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 2.5, the Company shall, subject to the provisions of
Section 1.8 and Section 2.10, cause to be registered under the Act only those
securities held by each Holder properly noticed pursuant to this Section 1.3
that each such Holder has requested to be registered. No registration effected
pursuant to this Section 1.3 shall relieve the Company of its obligations to
effect the required registration pursuant to Section 1.2. Any Holder shall
have the right to withdraw his request for inclusion of its properly noticed
securities under this Section 1.3 in any registration statement pursuant to
this Section 1.3 by giving written notice to the Company of its request to
withdraw prior to the filing of such registration statement.
1.4 OBLIGATIONS OF THE COMPANY. When required under this Section 1
to effect the registration of the Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Shelf Registration
Statement or, if applicable, any other form of registration statement, as the
case may be, with respect to the Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective as soon
as possible after such registration statement was filed and to keep such Shelf
Registration Statement effective for the period specified in Section 1.2(a);
provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto, or comparable statements under
securities or blue sky laws of any jurisdiction, the Company will furnish to
one counsel for the Holders (the "Holders' Counsel") participating in the
planned offering (selected by the Holders of three-fourths of the Registrable
Securities then outstanding included in such registration), and the
underwriters, if any, copies of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders whose Registrable Securities are
covered by the Shelf Registration Statement such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its reasonable best efforts to register and qualify
the securities covered by the Shelf Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders whose Registrable Securities are covered by the Shelf
Registration Statement; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions unless the Company is already subject to service in such
jurisdiction.
(e) In the event the Registrable Securities are to be sold
through an underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. The Holders proposing to distribute Registrable
Securities through such underwritten public offering shall also enter into and
perform their obligations under such an agreement.
(f) In the event the Registrable Securities are to be sold
through an underwritten public offering, use its reasonable best efforts to
furnish, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 1, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, and (ii) a letter, dated such date, from the independent
certified public accountants of the Company addressed to the underwriters,
stating that such accountants are independent public accountants within the
meaning of the Act and the applicable published rules and regulations
thereunder, and otherwise in form and in substance as is customarily given by
independent certified public accountants to underwriters in connection with an
underwritten public offering.
(g) Promptly notify (i) each Holder selling Registrable
Securities covered by such registration statement and each managing
underwriter, if any: (A) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective,
(B) of the issuance by the SEC of any stop order suspending the effectiveness
of the registration statement or the initiation of any proceedings for that
purpose, (C) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the securities or blue-sky laws of any jurisdiction or the initiation of
any proceeding for such purpose, and (D) when a prospectus relating to the
registration statement is required to be delivered under the Act of the
happening of any event as a result of which the prospectus included in such
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 (ii) Holders' Counsel and each managing
underwriter of any request by the SEC for amendments or supplements to such
registration statement or prospectus related thereto or for additional
information. If the notification relates to an event described in clause
(i)(D), the Company shall, in accordance with paragraph (b) of this Section
1.4, promptly prepare and furnish to each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not 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 the light of the circumstances under which they were made
not misleading.
(h) Cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling Holders of Registrable
Securities and instruct any transfer agent and registrar of Registrable
Securities to release any stop transfer orders in respect thereto.
(i) Comply with all applicable rules and regulations of the
SEC, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder.
(j) (i) Cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) if no similar securities are then so listed, to either
cause all such Registrable Securities to be listed on a national securities
exchange or to secure designation of all such Registrable Securities as a
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") "national market system security" within the meaning of Rule 11Aa 2-
1 of the Exchange Act or, failing that, secure NASDAQ authorization for such
shares and, without limiting the generality of the foregoing, use its
reasonable best efforts to take all actions that may be required by the Company
as the issuer of such Registrable Securities in order to facilitate the
managing underwriter's arranging for the registration of at least two market
makers as such with respect to such shares with the National Association of
Securities Dealers, Inc. (the "NASD").
(k) Provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement.
(l) Deliver promptly to Holders' Counsel and each
underwriter, if any, copies of all correspondence between the SEC and the
Company, its counsel or auditors and all memoranda relating to discussions with
the SEC or its staff with respect to the registration statement, other than
those portions of any such memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of
such confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by Holders' Counsel, by any underwriter, if
any, participating in any disposition to be effected pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause all of the
Company's officers, directors and employees to supply all information
reasonably requested by Holders' Counsel or such underwriter, attorney,
accountant or agent in connection with such registration statement.
(m) Use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration statement.
(n) Upon written request, furnish to each Holder
participating in the offering and the managing underwriter, without charge, at
least one conformed copy of the registration statement and any post-effective
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference).
1.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1
(including without limitation, to maintain the accuracy of information
previously furnished by the Holders for use in the Shelf Registration
Statement) with respect to the Registrable Securities of the Holders whose
Registrable Securities are covered by the Shelf Registration Statement that
each of such Holders shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be reasonably requested by the Company
or required to effect the registration of such Holders' Registrable Securities.
1.6 EXPENSES OF REGISTRATION.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Article 1,
including, without limitation: (i) SEC, stock exchange or NASD registration and
filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses of compliance with state
securities or "blue sky" laws and in connection with the preparation of a "blue
sky" survey, including without limitation, reasonable fees and expenses of blue
sky counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) fees and disbursements of counsel for the Company and (vi) fees
and disbursements of the Company's independent public accountants (including
the expenses of any audit and/or "cold comfort" letter) and fees and expenses
of other persons, including special experts, retained by the Company.
(b) The Company shall pay all Expenses (other than
underwriting discounts and commissions and any transfer taxes) with respect to
any registration pursuant to Section 1.2, whether or not such registration
statement becomes effective or remains effective for the period contemplated by
Section 1.2(a).
(c) Notwithstanding the foregoing, (i) the provisions of this
Section 1.6 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (ii) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (iii) the Company shall, in the case of all
registration under this Section 1, be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and
pay all Expenses incurred in connection with any registration filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.12), but excluding underwriting discounts and commissions
and transfer taxes, if any, relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless such Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by the Company (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the Company. If
the total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned as provided in Section 2.10 and
thereafter pro rata among the selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder or in such other proportions as shall mutually be agreed to by such
selling shareholders, with Other Securities being eliminated in their entirety
first). For purposes of the preceding parenthetical concerning apportionment,
for any selling shareholder that is a Holder of Registrable Securities and that
is a partnership or corporate partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
be deemed to be a single "selling shareholder," and any pro-rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
1.9 DELAY OF REGISTRATION. The Holders shall not have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder whose Registrable Securities are covered
by the Registration Statement, its directors, officers, fiduciaries, employees
and shareholders, members, managers, or general or limited partners (and the
directors, officers, employees and shareholders thereof), any underwriter (as
defined in the Act) for such Holders and each person, if any, who controls such
Holders or underwriter within the meaning of the Act or the Exchange Act, and
each officer, director, employee, shareholder or partner of such underwriter,
against any losses, claims, damages, or liabilities (joint or several) or
actions or proceedings (whether commenced or threatened) and expenses
(including reasonable fees of counsel and any amounts paid in any settlement
effected with the Company's prior written consent), to which they may become
subject under the Act, the Exchange Act or any state securities law, insofar as
such losses, claims, damages, or liabilities (or actions or proceedings in
respect thereof) ("Claims") or expenses arise out of or are based upon any of
the following statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus,
summary prospectus or final prospectus contained therein or any amendments or
supplements thereto, together with documents incorporated by reference therein,
(ii) 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, or (iii) any violation or alleged violation by the Company of the
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Act, the Exchange Act, any state securities law or
NASDAQ; and the Company will pay, as incurred, to such Holders, and each such
underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, expense or action or proceeding; provided, however,
that (A) the indemnity agreement contained in this Section 1.10 shall not apply
to amounts paid in settlement of any such Claim if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), (B) the Company shall not be liable in any case for any such Claim
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holders, or any such
underwriter or controlling person. Such indemnity and reimbursement of expenses
shall remain in full force and effect regardless of any investigation made by
or on behalf of such indemnified party and shall survive the transfer of such
securities by such Holder.
(b) To the extent permitted by law, each Holder whose
Registrable Securities are covered by the Shelf Registration Statement will,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, officers, fiduciaries and employees and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act, any
underwriter, and any controlling person of any such underwriter, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the Exchange Act,
insofar as such Claim arises out of or is based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Section 1.10, in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 1.10 shall not apply to amounts
paid in settlement of any such Claim if such settlement is effected without the
consent of such Holder, which consent shall not be unreasonably withheld;
provided that, in no event shall any indemnity under this Section 1.10 exceed
the net proceeds from the offering received by such Holder. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if (i) representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; or (ii) the indemnifying party
fails to take reasonable steps necessary to defend diligently the action or
proceeding within 30 days after receiving notice from such indemnified party.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.10.
(d) If the indemnification provided for in this Section 1.10
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any Claim or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such Claim or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such Claim or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. If, however, the allocation provided in the first
sentence of this paragraph is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified parry in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and
the indemnified party as well as any other relevant equitable considerations.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 1.10(d) were to be determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the preceding sentences
of this Section 1.10(d). The amount paid or payable in respect of any Claim
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending such
Claim. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. Notwithstanding anything
in this Section 1.10(d) to the contrary, no indemnifying party (other than the
Company) shall be required pursuant to this Section 1.10(d) to contribute any
amount in excess of the net proceeds received by such indemnifying party from
the sale of Registrable Securities in the offering to which the Claims of the
indemnified parties relate, less the amount of any indemnification payment made
by such indemnifying party pursuant to Section 1.10(b).
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times;
(b) take such action as is necessary to maintain the Holder's
ability to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns over
one percent (1%) of the outstanding common stock of the Company, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Act and the Exchange Act (at any
time after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents filed by the Company
with the SEC, and (iii) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 ASSIGNMENT OF REGISTRATION RIGHTS.
(a) The rights to cause the Company to register Registrable
Securities pursuant to this Section 1 may be assigned (but only with all
related obligations) by a Holder to a transferee or assignees of such
securities who acquires at least one percent (1 %) of the Registrable
Securities (as adjusted for stock splits, combinations and the like), provided:
(i) the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; (ii) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement, including, without
limitation, the provisions of Section 1.14 below; and (iii) such assignment
shall be effective only if such transfer is exempt from registration under the
Act. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holding of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings
of such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.
(b) Subject to clause (a) above, the right to have the
Company register the Registrable Securities pursuant to this Section 1 may not
otherwise be assigned; provided, however, that (i) any heir or the estate of a
Holder which acquires the Registrable Securities from such Holder by will or
intestate succession shall be entitled to have the Company register the
Registrable Securities pursuant to this Section 1 (provided that such heirs or
such estate shall have a single attorney-in-fact for the purpose of exercising
any rights, receiving any notices or taking any action under this Section 1),
and (ii) any individual Holder may sell, assign or transfer Registrable
Securities to his or her spouse or children or to a trust established for the
benefit of his or her spouse, children or himself or herself, and such
transferee shall he entitled to have the Company register the Registrable
Securities pursuant to this Section 1, if, and only if, such transferee agrees
in writing to be bound by the terms of this Agreement. In each such event and
for purposes of this Agreement, the term "Holder" as used herein shall include
all such heirs, such estate or such transferees.
1.13 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of three-fourths of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company that would allow such holder or prospective
holder to include such securities in any registration filed under Section 1.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders that is included.
1.14 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not,
to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
Common Stock included in such registration, and each Holder agrees to enter
into an agreement to such effect with such underwriter; provided, however, that
(a) all officers and directors of the Company enter into similar agreements,
(b) such market stand-off time period shall not' exceed 120 days, and (c) the
market stand-off period provided by this Section 1.14 shall be effective with
respect to only one registration statement designated by the Company. If the
underwriters agree to any waivers of such restrictions, then the Holders shall
be entitled to sell, transfer or dispose of the same number or amount of
securities of the Company as the person or entity receiving such waiver, upon
the same terms and conditions set forth in such waiver,
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holders (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.15 NO REQUIRED SALE. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
SECTION 2.MISCELLANEOUS
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
and provided that the transfer or assignment is in accordance with the terms
hereof, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties (including any permitted transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New Jersey without regard to
principles of conflicts or choice of laws.
2.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid or by a recognized national overnight courier and addressed to
the party to be notified at the address indicated for such party in the Stock
Purchase Agreement, or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties.
2.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
three-fourths of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section 2.6 shall be binding upon each
Holder of any Registrable Securities then outstanding, each future Holder of
all such Registrable Securities, and the Company.
2.7 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
2.8 NOMINEES FOR BENEFICIAL OWNERS. If Registrable Securities are
held by a nominee for the beneficial owner thereof, the beneficial owner
thereof may, at its option, be treated as the Holder of such Registrable
Securities for purposes of any request or other action by any Holder or Holders
of Registrable Securities pursuant to this Agreement (or any determination of
any number or percentage of shares constituting Registrable Securities held by
any Holder or Holders of Registrable Securities contemplated by this
Agreement), provided that the Company shall have received assurances reasonably
satisfactory to it of such beneficial ownership.
2.9 NO INCONSISTENT AGREEMENTS. Except as provided in Schedule
2.10 hereto and granted to the other Schedule I Purchasers, the rights granted
to the Holders of Registrable Securities hereunder do not in any way conflict
with and are not inconsistent with any other agreements to which the Company is
a party or by which it is bound. Without the prior written consent of the
holders of the majority of the Registrable Securities then outstanding, neither
the Company nor any Holder will, on or after the date of this Agreement, enter
into any agreement with respect to its securities which is inconsistent with
the rights granted in this Agreement or otherwise conflicts with the provisions
hereof, other than any lock-up agreement with the underwriters in connection
with any registered offering effected hereunder, pursuant to which the Company
shall agree not to register for sale, and the Company shall agree not to sell
or otherwise dispose of, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, for a specified period following
the registered offering. Except (i) as provided in Schedule 2.10 hereto and
(ii) for up to an aggregate of up to 50,000 shares of its securities, the
Company has not previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
person or entity.
2.10 PRIOR REGISTRATION RIGHTS. The Purchaser acknowledges that its
rights and obligations under this Agreement are granted subject to (i) the
prior registration rights identified in Schedule 2.10 hereto and (ii) the
rights granted to the other Schedule I Purchasers.
2.11 NO PIGGYBACK ON REGISTRATIONS. Except as provided in Schedule
2.10 hereto and provided to the other Schedule I Purchasers, neither the
Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in a
registration statement hereunder, and the Company shall not after the date
hereof enter into any agreement providing such right to any of its security
holders, unless the right so granted is subject in all respects to the prior
rights in full of the Holders set forth herein (but only to the extent such
rights are then in effect), and is not otherwise in conflict with the
provisions of this Agreement.
2.12 MOST FAVORED REGISTRATION RIGHTS. The Company shall not grant
to any person any registration rights ("New Registration Rights") with respect
to securities of the Company if such New Registration Rights are, in the
reasonable opinion of the Purchaser, superior in any material fashion to the
registration rights granted to the Purchaser pursuant to this Agreement (but
only to the extent such rights are then in effect), unless the holders of a
majority of the Registrable Securities consent to such New Registration Rights
in writing.
2.13 ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
[signature page follows]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EP MEDSYSTEMS, INC.
By:___________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:President and Chief Executive Officer
PURCHASER:
EGS PRIVATE HEALTHCARE PARTNERSHIP, L.P.
By:_________________________________
Name:
Title:
▇▇▇▇▇▇▇:▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EP MEDSYSTEMS, INC.
By:___________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:President and Chief Executive Officer
PURCHASER:
EGS PRIVATE HEALTHCARE COUNTERPART, L.P.
By:_________________________________
Name:
Title:
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EP MEDSYSTEMS, INC.
By:___________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:President and Chief Executive Officer
PURCHASER:
▇▇▇▇▇▇ ▇▇▇
By:_________________________________
Name:▇▇▇▇▇▇ ▇▇▇, individually
Address:
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EP MEDSYSTEMS, INC.
By:___________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:President and Chief Executive Officer
PURCHASER:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PH.D.
By:_________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D., individually
Address:
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EP MEDSYSTEMS, INC.
By:___________________________________
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:President and Chief Executive Officer
PURCHASER:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ESQ.
By:_________________________________
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., individually
Address:
SCHEDULE 2.10
1. Registration Rights Agreement between the Company and the Purchasers named
therein dated April 9, 1998.
2. Registration Rights Agreement by and between the Company and ▇▇▇▇▇ ▇.
▇▇▇▇▇ dated May 24, 1996.
3. Letter Agreement between the Company and American Medical Electronics,
Inc., dated April 22, 1994.
4. Letter Agreement between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇ dated December 15,
1995.
EXHIBIT B
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
[LOGO] EP MEDSYSTEMS, INC.
WARRANT FOR THE PURCHASE OF __________________ SHARES OF COMMON STOCK
Warrant No. EP99- ______This Warrant Expires on ___________________, 2004
THIS CERTIFIES that, for value received,
________________________________________, a _____________________________ ,
with an address at ______________________________________ (including any
permitted transferee, the "Holder"), is the registered holder of this Warrant,
which represents the right to purchase ________________________ (_______) fully
paid and nonassessable shares of the common stock, no par value, $.001 stated
value (the "Common Stock") of EP MedSystems, Inc., a New Jersey corporation
(the "Company"), at an initial exercise price equal to Three Dollars and Fifty
Cents ($3.50) per share (subject to adjustment as provided herein) (the
"Exercise Price") upon the terms and conditions set forth herein, at any time
or from time to time before 5:00 P.M. on _________________, 2004, New York time
(the "Exercise Period").
This Warrant is issued pursuant to that certain Common Stock and Warrant
Purchase Agreement dated as of August 31, 1999 by and among the Company and the
entities listed on Schedule I thereto (the "Purchase Agreement"). As used
herein, the term "this Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part. The number of shares of Common
Stock issuable upon exercise of this Warrant (the "Warrant Shares") and the
Exercise Price may be adjusted from time to time as hereinafter set forth.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised during the Exercise Period, as to
the whole or any lesser number of whole Warrant Shares, by the surrender of
this Warrant (with the election at the end hereof duly executed) to the
Company, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: President, or at such other place as is designated in writing by the
Company. Such executed election must be accompanied by payment in an amount
equal to the Exercise Price multiplied by the number of Warrant Shares for
which this Warrant is being exercised. Such payment may be made by certified
or bank cashier's check payable to the order of the Company.
(b) All or any part of this Warrant may be exercised on a
"cashless" basis, by stating in the Exercise Notice such intention and the
maximum number (the "Maximum Number") of shares of Common Stock the Holder
desires to purchase in consideration of cancellation of Warrants in payment for
such exercise. The number of shares of Common Stock the Holder shall receive
(the "Cashless Exercise Number") upon such exercise pursuant to this Section
1(b) shall equal the quotient that is obtained when the product of the Maximum
Number and the difference between the Current Weighted Market Price and the
then current Exercise Price is divided by the then Current Weighted Market
Price per share (as hereinafter defined). The Current Weighted Market Price
shall mean the average closing price of the Common Stock of the Company for the
prior twenty (20) consecutive trading days preceding the Company's receipt of
the Exercise Notice. The following is an example of the determination of the
Cashless Exercise Number:
X = Y(A-B)
A
Where X = the Cashless Exercise Number
Y = the Maximum Number
A = the Current Weighted Market Price of one share of
the Common Stock (at the date of such calculation)
B = the current Exercise Price (as adjusted to the date
of such calculation).
2. ISSUANCE OF CERTIFICATES UPON EXERCISE. Upon each exercise of the
Holder's rights to purchase Warrant Shares, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Warrant Shares shall not then have been actually
delivered to the Holder. As soon as practicable after each such exercise of
this Warrant, the Company shall issue and deliver to the Holder a certificate
or certificates for the Warrant Shares issuable upon such exercise, registered
in the name of the Holder or its designee. 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 right of the
Holder to purchase the balance of the Warrant Shares (or portions thereof)
subject to purchase hereunder.
3. COMPANY'S RIGHT TO REPURCHASE WARRANT. Notwithstanding any of the
other provisions of this Warrant, the Company shall have the right to call,
redeem and repurchase all or any part of this Warrant upon thirty (30) calendar
days prior written notice to the Holder (the "Repurchase Period") at $.01 per
share (the "Repurchase Price") at any time after the average closing price of
the Common Stock of the Company for any twenty (20) consecutive trading days
has equaled or exceeded $4.125 (subject to adjustment as provided below) (the
"Trigger Price"). Notice of any such repurchase will be mailed by the Company
to the Holder (the "Repurchase Notice"). Unless, prior to the expiration of
the Repurchase Period, the Holder exercises its right to purchase the Warrant
Shares covered by the Repurchase Notice, the Holder will forfeit its right to
do so, and will be entitled only to payment of the Repurchase Price of such
Warrant Shares so designated for repurchase. In the event the Company shall
call, redeem or otherwise repurchase all or any part of this Warrant, the same
shall thereupon be delivered by the Holder to the Company and be canceled by
the Company and retired. The Trigger Price shall be subject to the same
adjustment provided to be made to the Exercise Price pursuant to Section 6
below.
4. TRANSFER; RESTRICTIONS ON TRANSFER; COMPLIANCE WITH THE ACT;
REGISTRATION RIGHTS.
(a) Any Warrants issued upon the transfer or exercise in part of
this Warrant shall be numbered and shall be registered in a Warrant Register as
they are issued. The Company shall be entitled to treat the registered holder
of any Warrant on the Warrant Register as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person, and shall not be
liable for any registration or transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with the
knowledge of such facts that its participation therein amounts to bad faith.
This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares (or portions thereof), upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person if, in the opinion of counsel to the Company, such transfer does not
comply with the provisions of the Act and the rules and regulations thereunder.
(b) The Holder acknowledges that the Holder has been advised by the
Company that neither this Warrant nor the Warrant Shares have been registered
under the Act, that this Warrant is being or has been issued and the Warrant
Shares may be issued on the basis of the statutory exemption provided by
Section 4(2) of the Act or Regulation D promulgated thereunder, or both,
relating to transactions by an issuer not involving any public offering, and
that the Company's reliance thereon is based in part upon the representations
made by the original Holder in the Purchase Agreement. The Holder acknowledges
that he has been informed by the Company of, or is otherwise familiar with, the
nature of the limitations imposed by the Act and the rules and regulations
thereunder on the transfer of securities. In particular, the Holder agrees
that no sale, assignment or transfer of this Warrant or the Warrant Shares
issuable upon exercise hereof shall be valid or effective, and the Company
shall not be required to give any effect to any such sale, assignment or
transfer, unless (i) the sale, assignment or transfer of this Warrant or such
Warrant Shares is registered under the Act, it being understood that neither
this Warrant nor such Warrant Shares are currently registered for sale and that
the Company has no obligation or intention to so register this Warrant or such
Warrant Shares except as specifically noted in Section 4(c) below, or (ii) this
Warrant or such Warrant Shares are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 promulgated under the
Act, it being understood that Rule 144 is not available at the time of the
original issuance of this Warrant for the sale of this Warrant or such Warrant
Shares and that there can be no assurance that Rule 144 sales will be available
at any subsequent time, or (iii) such sale, assignment, or transfer is
otherwise exempt from registration under the Act.
(c) The Holders of this Warrant and the Warrant Shares are entitled
to the rights and benefits of all the terms, provisions and conditions of that
certain Registration Rights Agreement dated of even date herewith between the
Company and the purchasers listed on Schedule I thereto (the "Registration
Rights Agreement"), provided Holders of a majority of the Warrants issued
hereunder give written notice of the exercise of the registration rights
pursuant to the Registration Rights Agreement.
5. NONASSESSABLE RESERVATION OF SHARES. The Company shall at all times
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of providing for the exercise of the rights to purchase
all Warrant Shares granted pursuant to this Warrant, such number of shares of
Common Stock as shall, from time to time, be sufficient therefor. The Company
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor, shall
be validly issued, fully paid, nonassessable, and free of preemptive rights.
6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
(a) In case the Company shall at any time after the date this
Warrant was first issued (i) declare a dividend on the outstanding Common Stock
payable in shares of its capital stock, (ii) subdivide the outstanding Common
Stock, (iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock by reclassification of
the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price, and the number of Warrant Shares
issuable upon exercise of this Warrant, in effect at the time of the record
date for such dividend or of the effective date of such subdivision,
combination, or reclassification, shall be proportionately adjusted so that the
Holder after such time shall be entitled to receive the aggregate number and
kind of shares which, if such Warrant had been exercised immediately prior to
such time, the Holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the Current Market Price (as hereinafter defined) per
share of Common Stock on such record date, then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such record date plus the
number of shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be offered (or the aggregate
initial conversion or exchange price of the convertible or exchangeable
securities so to be offered) would purchase at such Current Market Price and
the denominator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock to be offered for subscription or purchase (or into which the convertible
or exchangeable securities so to be offered are initially convertible or
exchangeable); provided, however, that no such adjustment shall be made which
results in an increase in the Exercise Price and every adjustment shall be
subject to Section 6(f) hereof. Such adjustment shall become effective at the
close of business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
with respect to Warrants exercised after such expiration), to the Exercise
Price which would then be in effect had the adjustments made upon the issuance
of such rights, options, or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) actually issued. In case any
subscription price may be paid in consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common
Stock owned by or held for the account of the Company or any majority-owned
subsidiary shall not be deemed outstanding for the purpose of any such
computation.
(c) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness, cash (other than any
cash dividend which, together with any cash dividends paid within the 12 months
prior to the record date for such distribution, does not exceed 5% of the
Current Market Price at the record date for such distribution) or assets (other
than distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or changeable for shares of Common Stock (excluding those with
respect to the issuance of which an adjustment of the Exercise Price is
provided pursuant to Section 6(b) hereof), then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock on such record date, less the
fair market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such rights, options, or warrants or convertible or exchangeable securities, or
the amount of such cash, applicable to one share, and the denominator of which
shall be such Current Market Price per share of Common Stock. Such adjustment
shall become effective at the close of business on such record date.
(d) In case the Company shall issue shares of Common Stock or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for Common Stock (excluding shares,
rights, options, warrants, or convertible or exchangeable securities issued or
issuable (i) in any of the transactions with respect to which an adjustment of
the Exercise Price is provided pursuant to Sections 6(a), 6(b), or 6(c) above,
(ii) upon any issuance of securities pursuant to this offering of Warrants or
the exercise of securities so issued, (iii) upon exercise of this Warrant or
any other warrants issued by the Company and outstanding on the date hereof,
(iv) upon any adjustment of the number of shares of Common Stock issuable upon
exercise of the Warrants pursuant to the Preamble hereof, (v) upon issuance or
exercise of stock options granted to the directors or employees of the Company
pursuant to the Company's stock option plans in effect on the date hereof, each
as may have been amended from time to time, or (vi) upon the conversion of any
outstanding convertible securities or convertible securities to be issued
pursuant to agreements in effect on the date hereof) at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants, or convertible or exchangeable securities, plus the
minimum aggregate consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (y) the maximum number of shares covered by
such rights, options, warrants, or convertible or exchangeable securities)
lower than the Current Market Price per share of Common Stock, in effect
immediately prior to such issuance, then the Exercise Price shall be reduced on
the date of such issuance to a price (calculated to the nearest cent)
determined by multiplying the Exercise Price in effect immediately prior to
such issuance by a fraction, (1) the numerator of which shall be an amount
equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issuance plus (B) the quotient obtained by dividing
the consideration received by the Company upon such issuance by such Current
Market Price, and (2) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such issuance; provided,
however, that no such adjustment shall be made which results in an increase in
the Exercise Price and every adjustment shall be subject to Section 6(f)
hereof. For the purposes of such adjustments, the maximum number of shares
which the holders of any such rights, options, warrants, or convertible or
exchangeable securities shall be entitled to initially subscribe for or
purchase or convert or exchange such securities into shall be deemed to be
issued and outstanding as of the date of such issuance, and the consideration
received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum aggregate consideration or premiums
stated in such rights, options, warrants, or convertible or exchangeable
securities to be paid for the shares covered thereby. No further adjustment of
the Exercise Price shall be made as a result of the actual issuance of shares
of Common Stock on exercise of such rights, options, or warrants or on
conversion or exchange of such convertible or exchangeable securities. On the
expiration or the termination of such rights, options, or warrants, or the
termination of such right to convert or exchange, the Exercise Price shall be
readjusted (but only with respect to this Warrant if exercised after such
expiration or termination) to such Exercise Price as would have obtained had
the adjustments made upon the issuance of such rights, options, warrants, or
convertible or exchangeable securities been made upon the basis of the delivery
of only the number of shares of Common Stock actually delivered upon the
exercise of such rights, options, or warrants or upon the conversion or
exchange of any such securities; and on any change of the number of shares of
Common Stock deliverable upon the exercise of any such rights, options, or
warrants or conversion or exchange of such convertible or exchangeable
securities or any change in the consideration to be received by the Company
upon such exercise, conversion, or exchange, including, without limitation, a
change resulting from the antidilution provisions thereof. In case the Company
shall issue shares of Common Stock or any such rights, options, warrants, or
convertible or exchangeable securities for a consideration consisting, in whole
or in part, of property other than cash or its equivalent, then the "price per
share" and the "consideration received by the Company" for purposes of the
first sentence of this Section 6(d) shall be as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error. Shares of Common Stock owned by or held for the account
of the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
(e) For the purpose of any computation under this Section 6, the
"Current Market Price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices for the 20 consecutive trading days
immediately preceding the date in question. The closing price for each day
shall be the last reported closing sales price or the last reported closing bid
price, as the case may be, on the principal national securities exchange
(including, for purposes hereof, the Nasdaq National Market) on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the highest
reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through Nasdaq or a similar
organization if Nasdaq is no longer reporting such information. If on any such
date the Common Stock is not listed or admitted to trading on any national
securities exchange and is not quoted by Nasdaq or any similar organization,
the fair value of a share of Common Stock on such date, as determined in good
faith by the board of directors of the Company, whose determination shall be
conclusive absent manifest error, shall be used.
(f) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05 (which amount will be proportionately adjusted in
the event of stock splits or the like); provided, however, that any adjustments
which by reason of this Section 6 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 6 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(g) In any case in which this Section 6 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the shares of Common Stock, if any, issuable upon such exercise
over and above the shares of Common Stock, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due ▇▇▇▇ or
other appropriate instrument evidencing the Holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(h) Whenever there shall be an adjustment as provided in this
Section 6, the Company shall promptly cause written notice thereof to be sent
by certified or registered mail, postage prepaid, to the Holder, at its address
as it shall appear in the Warrant Register, which notice shall be accompanied
by an officer's certificate setting forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
(i) The Company shall not be required to issue fractions of shares
of Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share would be issuable on the exercise of this
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the market price
of such share of Common Stock on the date of exercise of this Warrant, as
determined in good faith by the Company's Board of Directors.
7. RECLASSIFICATION; REORGANIZATION OR MERGER.
(a) In case of any consolidation with or merger of the Company with
or into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance, and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as
nearly equivalent as practicable to the adjustments in Section 6 above.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value or from a specified par value to no par, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or
as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock
for which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 6.
(c) Notwithstanding anything to the contrary herein contained, in
the event of a transaction contemplated by Section 7(a) in which the surviving,
continuing, successor, purchasing or leasing corporation demands that all
outstanding convertible notes and warrants be extinguished prior to the closing
date of the contemplated transaction, the Company shall give prior notice (the
"Merger Notice") thereof to the Holder advising the Holder of such transaction.
The Holder shall have ten (10) days after the date of the Merger Notice to
elect to (i) exercise this Warrant in the manner provided herein or (ii)
receive from the surviving, continuing, successor, or purchasing corporation
the same consideration receivable by a holder of the number of shares of Common
Stock for which this Warrant might have been exercised immediately prior to
such consolidation, merger, sale, or purchase reduced by such amount of the
consideration as has a market value equal to the Exercise Price, as determined
by the Board of Directors of the Company, whose determination shall be
conclusive absent manifest error. If the Holder fails to timely notify the
Company of its election, the Holder shall be deemed for all purposes to have
elected the option set forth in (ii) above. Any amounts receivable by a Holder
who has elected the option set forth in (ii) above shall be payable at the same
time as amounts payable to shareholders in connection with any such
transaction.
(d) The above provisions of this Section 7 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
8. CERTAIN NOTICES TO THE HOLDER. In case at any time the Company
shall propose to: (i) pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
(ii) issue any rights, warrants, or other securities to all holders of Common
Stock entitling them to purchase any additional shares of Common Stock or any
other rights, warrants, or other securities; (iii) effect any reclassification
or change of outstanding shares of Common Stock, or any consolidation, merger,
sale, lease, or conveyance of property, described in Section 7; or (iv) effect
any liquidation, dissolution, or winding-up of the Company; then, and in any
one or more of such cases, the Company shall give written notice thereof, by
certified or registered mail, postage prepaid, to the Holder at the Holder's
address as it shall appear in the Warrant Register, mailed at least fifteen
(15) days prior to (x) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (y) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (z) the date of such action which would require
an adjustment to the Exercise Price.
9. ISSUE TAX. The issuance of any shares or other securities upon the
exercise of this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the Holder and the Company shall not be required
to issue or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
10. RESTRICTIVE LEGEND. The Warrant Shares issued upon exercise of this
Warrant shall be subject to a stop transfer order and the certificate or
certificates evidencing such Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR APPLICABLE STATE SECURITIES LAWS.
11. LOST WARRANT. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction, or mutilation of this Warrant (and upon
surrender of this Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses and indemnity reasonably satisfactory
to the Company, the Company shall execute and deliver to the Holder thereof a
new Warrant of like date, tenor, and denomination.
12. NO SHAREHOLDER RIGHTS. The Holder of this Warrant shall not have
solely on account of such status, any rights of a shareholder of the Company,
either at law or in equity, or to any notice of meetings of shareholders or of
any other proceedings of the Company, except as provided in this Warrant.
13. GOVERNING LAW. This Warrant has been negotiated and consummated in
the State of New Jersey and shall be construed in accordance with the laws of
the State of New Jersey applicable to contracts made and performed within such
State, without regard to principles governing conflicts of law.
14. JURISDICTION. Each of the Company and the Holder of this Warrant,
irrevocably consents to the jurisdiction of the courts of the State of New
Jersey and of any federal court located in such State in connection with any
action or proceeding arising out of or relating to this Warrant, any document
or instrument delivered pursuant to, in connection with or simultaneously with
this Warrant, or a breach of this Warrant or any such document or instrument.
In any such action or proceeding, the Company waives personal service of any
summons, complaint or other process and agrees that service thereof may be made
in accordance with Section 15 hereof.
15. 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 by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given:
if to the Company:EP MedSystems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Holder:_____________________________________
_____________________________________
_____________________________________
Attention:_____________________________
Facsimile:_____________________________
or in either case, to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 15. 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. Any notice given by
other means permitted by this Section 15 shall be deemed given at the time of
receipt thereof.
[signature page follows]
IN WITNESS WHEREOF, this Warrant has been duly executed as of
_____________________, 1999.
EP MEDSYSTEMS, INC.
By:________________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
HOLDER
By:________________________________________________
Name:
Title:
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ___________________ hereby sells, assigns, and transfers
unto:
Name: _____________________________________________________________________
Address:
____________________________________________________________________________
Social Security or Employer Identification Number:__________________________
the right to purchase ____________ shares of Common Stock, no par value, $.001
stated value, of EP MedSystems, Inc. (the "Company") represented by the
attached Warrant, together with all right, title, and interest therein, and
does hereby irrevocably constitute and appoint _____________________________
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
Dated: ___________________
Signature: ____________________________________
Name:__________________________________________
NOTICE
THE SIGNATURE ON THE FOREGOING ASSIGNMENT MUST CORRESPOND TO THE NAME AS
WRITTEN UPON THE FACE OF THIS
WARRANT IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase _______ Warrant
Shares covered by the within Warrant, and tenders payment herewith in the
aggregate amount of $________, including (i) $________ by certified or bank
cashier's check or wire transfer, and/or (ii) cancellation of Warrants to
purchase ___ Warrant Shares based upon a Maximum Number (as therein defined) of
________, in accordance with the terms thereof, and requests that certificates
for such securities be issued in the name of, and delivered to:
_________________________________________________
_________________________________________________
_________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares covered by the within Warrant be registered in the name of, and
delivered to, the undersigned at the address stated below.
_________________________________________________
_________________________________________________
_________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
Name of Holder
______________________________
Dated:_____________ ______________________________
Signature
______________________________
Print Name
______________________________
Title (if entity)
Address:_________________________________________________________________
______________________________
Signature Guarantee