EXHIBIT 10.1
Vasomedical, Inc.
Shares of Series D Convertible Preferred Stock and Common Stock Warrants
SUBSCRIPTION AGREEMENT
----------------------
July 19, 2005
M.A.G. Capital, LLC
Mercator Momentum Fund, LP
Mercator Momentum Fund III, LP
Monarch Pointe Fund, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Vasomedical, Inc. a Delaware corporation (the "Company"), hereby confirms its
agreement with Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, and
Monarch Pointe Fund, Ltd. (collectively, the "Purchasers") and M.A.G. CAPITAL,
LLC ("MAG"), as set forth below.
1. The Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the Purchasers an aggregate of: (a)
Twenty-Five Thousand (25,000) shares of its Non-Voting Series D Convertible
Preferred Stock (the "Series D Stock"), which shall be convertible into shares
(the "Conversion Shares") of the Company's Common Stock (the "Common Stock") in
accordance with the formula set forth in the Certificate of Designation further
described below and (b) One Million Eight Hundred Ninety-Two Thousand Two
Hundred Nineteen (1,892,219) warrants, substantially in the form attached hereto
at Exhibit A (the "Warrants"), to acquire up to One Million Eight Hundred
Ninety-Two Thousand Two Hundred Nineteen (1,892,219) [calculated by dividing
$1,250,000 by the Ceiling Price] shares of Common Stock (the "Warrant Shares").
The rights, preferences and privileges of the Series D Stock are as set forth in
the Certificate of Designation of Series D Preferred Stock as filed with the
Secretary of State of the State of Delaware (the "Certificate of Designation")
in the form attached hereto as Exhibit B. The number of Conversion Shares and
Warrant Shares that any Purchaser may acquire at any time are subject to
limitation in the Certificate of Designation and in the Warrants, respectively,
so that the aggregate number of shares of Common Stock of which such Purchaser
and all persons affiliated with such Purchaser have beneficial ownership
(calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) does not at any time exceed 9.99% of the Company's then outstanding
Common Stock.
The Series D Stock and the Warrants are sometimes herein collectively referred
to as the "Securities." This Agreement, the Certificate of Designation,
Registration Rights Agreement and the Warrant Agreements are sometimes herein
collectively referred to as the "Transaction Documents."
1
The Securities will be offered and sold to the Purchasers without such offers
and sales being registered under the Securities Act of 1933, as amended
(together with the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated thereunder, the "Securities Act"), in
reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has made available
(including electronically via the SEC's ▇▇▇▇▇ system) to Purchasers its periodic
and current reports, forms, schedules, proxy statements and other documents
(including exhibits and all other information incorporated by reference) filed
with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). These reports, forms, schedules, statements, documents, filings
and amendments, are collectively referred to as the "Disclosure Documents." All
references in this Agreement to financial statements and schedules and other
information which is "contained," "included" or "stated" in the Disclosure
Documents (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules, documents, exhibits and
other information which is incorporated by reference in the Disclosure
Documents.
2. Representations and Warranties of the Company. Except as set forth on the
Disclosure Schedule (the "Disclosure Schedule") delivered by the Company to
Purchasers on the Closing Date (as defined in Section 3 below) or in the
Disclosure Documents, the Company represents and warrants to and agrees with
Purchasers and MAG as follows:
(a) The Disclosure Documents as of their respective dates did not, and will not
(after giving effect to any updated disclosures contained therein) as of the
Closing Date, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Disclosure
Documents and the documents incorporated or deemed to be incorporated by
reference therein, at the time they were filed or hereafter are filed with the
SEC, complied and will comply, at the time of filing, in all material respects
with the requirements of the Securities Act and/or the Exchange Act, as the case
may be, as applicable.
(b) Schedule A attached hereto sets forth a complete list of the subsidiaries of
the Company (the "Subsidiaries"). Each of the Company and its Subsidiaries has
been duly incorporated and each of the Company and the Subsidiaries is validly
existing in good standing as a corporation under the laws of its jurisdiction of
incorporation, with the requisite corporate power and authority to own its
properties and conduct its business as now conducted as described in the
Disclosure Documents and is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or other), properties, prospects or results of
operations of the Company and the Subsidiaries, taken as a whole (any such
event, a "Material Adverse Effect"); as of the Closing Date, the Company will
have the authorized, issued and outstanding capitalization set forth in on
Schedule B attached hereto (the "Company Capitalization"); except as set forth
in the Disclosure Documents or on Schedule A, the Company does not have any
subsidiaries or own directly or indirectly any of the capital stock or other
equity or long-term debt securities of or have any equity interest in any other
person; all of the outstanding shares of capital stock of the Company and the
Subsidiaries have been duly authorized and validly issued, are fully paid and
2
nonassessable and were not issued in violation of any preemptive or similar
rights and are owned free and clear of all liens, encumbrances, equities, and
restrictions on transferability (other than those imposed by the Securities Act
and the state securities or "Blue Sky" laws) or voting; except as set forth in
the Disclosure Documents, all of the outstanding shares of capital stock of the
Subsidiaries are owned, directly or indirectly, by the Company; except as set
forth in the Disclosure Documents, no options, warrants or other rights to
purchase from the Company or any Subsidiary, agreements or other obligations of
the Company or any Subsidiary to issue or other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company or any Subsidiary are outstanding; and except as set
forth in the Disclosure Documents or on Schedule C, there is no agreement,
understanding or arrangement among the Company or any Subsidiary and each of
their respective stockholders or any other person relating to the ownership,
registration or disposition of any capital stock of the Company or any
Subsidiary or the election of directors of the Company or any Subsidiary or the
governance of the Company's or any Subsidiary's affairs, and, if any, such
agreements, understandings and arrangements will not be breached or violated as
a result of the execution and delivery of, or the consummation of the
transactions contemplated by, the Transaction Documents.
(c) The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents. Each of the
Transaction Documents has been duly and validly authorized by the Company and,
when executed and delivered by the Company, will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as the enforcement thereof may be limited by (A)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally or (B) general principles of equity and the
discretion of the court before which any proceeding therefore may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the "Enforceability Exceptions").
(d) The Series D Stock and the Warrants have been duly authorized and, when
issued upon payment thereof in accordance with this Agreement, will have been
validly issued, fully paid and non-assessable. The Conversion Shares issuable
have been duly authorized and validly reserved for issuance, and when issued
upon conversion of the Series D Stock in accordance with the terms of the
Certificate of Designation, will have been validly issued, fully paid and non-
assessable. The Warrant Shares have been duly authorized and validly reserved
for issuance, and when issued upon exercise of the Warrants in accordance with
the terms thereof, will have been validly issued, fully paid and non-assessable.
The Common Stock of the Company conforms to the description thereof contained in
the Disclosure Documents. The stockholders of the Company have no preemptive or
similar rights with respect to the Common Stock.
(e) No consent, approval, authorization, license, qualification, exemption or
order of any court or governmental agency or body or third party is required for
the performance of the Transaction Documents by the Company or for the
consummation by the Company of any of the transactions contemplated thereby, or
the application of the proceeds of the issuance of the Securities as described
3
in this Agreement, except for such consents, approvals, authorizations,
licenses, qualifications, exemptions or orders (i) as have been obtained on or
prior to the Closing Date, (ii) as are not required to be obtained on or prior
to the Closing Date that will be obtained when required, or (iii) the failure to
obtain which would not, individually or in the aggregate, have a Material
Adverse Effect.
(f) Except as set forth on Schedule D, none of the Company or the Subsidiaries
is (i) in material violation of its articles of incorporation or bylaws (or
similar organizational document), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to it or any of its
properties or assets, which breach or violation would, individually or in the
aggregate, have a Material Adverse Effect, or (iii) except as described in the
Disclosure Documents, in default (nor to the Company's knowledge has any event
occurred which with notice or passage of time, or both, would constitute a
default) in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate or
agreement or instrument to which it is a party or to which it is subject, which
default would, individually or in the aggregate, have a Material Adverse Effect.
(g) The execution, delivery and performance by the Company of the Transaction
Documents and the consummation by the Company of the transactions contemplated
thereby and the fulfillment of the terms thereof will not (a) violate, conflict
with or constitute or result in a breach of or a default under (or an event
that, with notice or lapse of time, or both, would constitute a breach of or a
default under) any of (i) the terms or provisions of any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which any of the
Company or the Subsidiaries is a party or to which any of their respective
properties or assets are subject, (ii) the Certificate of Incorporation or
bylaws of any of the Company or the Subsidiaries (or similar organizational
document) or (iii) any statute, judgment, decree, order, rule or regulation of
any court or governmental agency or other body applicable to the Company or the
Subsidiaries or any of their respective properties or assets or (b) result in
the imposition of any lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of the
Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.
(h) The audited consolidated financial statements included in the Disclosure
Documents present fairly the consolidated financial position, results of
operations, cash flows and changes in shareholders' equity of the entities, at
the dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis; the interim un-audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations and cash flows of the entities, at the dates and for the periods
to which they relate subject to year-end audit adjustments and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis with the audited consolidated financial statements included
therein; the selected financial and statistical data included in the Disclosure
Documents present fairly the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
4
included therein, except as otherwise stated therein or in the notes thereto;
and each of the auditors previously engaged by the Company or to be engaged in
the future by the Company has represented to the Company that it is an
independent certified public accountant as required by the Securities Act for an
offering registered thereunder.
(i) Except as described in the Disclosure Documents, there is not pending or, to
the knowledge of the Company, threatened any action, suit, proceeding, inquiry
or investigation, governmental or otherwise, to which any of the Company or the
Subsidiaries is a party, or to which their respective properties or assets are
subject, before or brought by any court, arbitrator or governmental agency or
body, that, if determined adversely to the Company or any such Subsidiary,
would, individually or in the aggregate, have a Material Adverse Effect or that
seeks to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Securities to be sold hereunder or the application
of the proceeds therefrom or the other transactions described in the Disclosure
Documents.
(j) The Company and the Subsidiaries own or possess adequate licenses or other
rights to use all patents, trademarks, service marks, trade names, copyrights
and know-how that are material and necessary to conduct their businesses as
described in the Disclosure Documents. None of the Company or the Subsidiaries
has received any written notice of infringement of (or knows of any such
infringement of) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how that, if such
assertion of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
(k) Each of the Company and the Subsidiaries possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals presently required or necessary to own or lease, as the case may
be, and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Disclosure
Documents ("Permits"), except where the failure to obtain such Permits would
not, individually or in the aggregate, have a Material Adverse Effect and none
of the Company or the Subsidiaries has received any notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Disclosure Documents and except where such revocation or modification
would not, individually or in the aggregate, have a Material Adverse Effect.
(l) Subsequent to the respective dates as of which information is given in the
Disclosure Documents and except as described therein, (i) the Company and the
Subsidiaries have not incurred any material liabilities or obligations, direct
or contingent, or entered into any material transactions not in the ordinary
course of business or (ii) the Company and the Subsidiaries have not purchased
any of their respective outstanding capital stock, or declared, paid or
otherwise made any dividend or distribution of any kind on any of their
respective capital stock or otherwise (other than, with respect to any of such
Subsidiaries, the purchase of capital stock by the Company), (iii) there has not
been any material increase in the long-term indebtedness of the Company or any
of the Subsidiaries, (iv) there has not occurred any event or condition,
5
individually or in the aggregate, that has a Material Adverse Effect, and (v)
the Company and the Subsidiaries have not sustained any material loss or
interference with respect to their respective businesses or properties from
fire, flood, hurricane, earthquake, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding.
(m) There are no material legal or governmental proceedings nor are there any
material contracts or other documents required by the Securities Act to be
described in a prospectus that are not described in the Disclosure Documents.
Except as described in the Disclosure Documents, none of the Company or the
Subsidiaries is in default under any of the contracts described in the
Disclosure Documents, has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties thereto,
except for such defaults or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries has good and marketable title to
all real property described in the Disclosure Documents as being owned by it and
good and marketable title to the leasehold estate in the real property described
therein as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate,
have a Material Adverse Effect. All material leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such Subsidiary;
subject to the Enforceability Exceptions, are, to the knowledge of the Company,
valid and enforceable against the other party or parties thereto and are in full
force and effect.
(o) Each of the Company and the Subsidiaries has filed all necessary federal,
state and foreign income and franchise tax returns, except where the failure to
so file such returns would not, individually or in the aggregate, have a
Material Adverse Effect, and has paid all taxes shown as due thereon; and other
than tax deficiencies which the Company or any Subsidiary is contesting in good
faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would, individually or
in the aggregate, have a Material Adverse Effect.
(p) None of the Company or the Subsidiaries is, or immediately after the Closing
Date will be, required to register as an "investment company" or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
(q) None of the Company or the Subsidiaries or, to the knowledge of any of such
entities' directors, officers, employees, agents or controlling persons, has
taken, directly or indirectly, any action designed, or that might reasonably be
expected, to cause or result in the stabilization or manipulation of the price
of the Common Stock.
(r) None of the Company, the Subsidiaries or to the Company's knowledge, any of
their respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act) directly, or through any agent, engaged in any form of general
solicitation or general advertising (as those terms are used in Regulation D
6
under the Securities Act) in connection with the offering of the Securities or
engaged in any other conduct that would cause such offering to be constitute a
public offering within the meaning of Section 4(2) of the Securities Act.
Assuming the accuracy of the representations and warranties of the Purchasers in
Section 6 hereof, it is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchasers in the manner contemplated by this
Agreement to register any of the Securities under the Securities Act.
(s) There is no strike, labor dispute, slowdown or work stoppage with the
employees of the Company or any of the Subsidiaries which is pending or, to the
knowledge of the Company or any of the Subsidiaries, threatened.
(t) Each of the Company and the Subsidiaries carries general liability insurance
coverage as set forth on Schedule E.
(u) Each of the Company and the Subsidiaries maintains internal accounting
controls which provide reasonable assurance that (A) transactions are executed
in accordance with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to maintain
accountability for its assets, and (C) access to its material assets is
permitted only in accordance with management's authorization and (D) the values
and amounts reported for its material assets are compared with its existing
assets at reasonable intervals.
(v) Except for fees payable to MAG and ▇▇▇▇▇▇▇ Capital and Capitoline Finance
Group and their affiliates, the Company does not know of any claims for
services, either in the nature of a finder's fee or financial advisory fee, with
respect to the offering of the Securities and the transactions contemplated by
the Transaction Documents.
(w) The Common Stock is traded on the NASDAQ Small Cap (the "NASDAQ Small Cap").
Except as described in the Disclosure Documents, the Company currently is not in
violation of, and the consummation of the transactions contemplated by the
Transaction Documents will not violate, any rule of the National Association of
Securities Dealers.
(x) The Company is eligible to use Form S-3 for the resale of the Conversion
Shares and the Warrant Shares by Purchasers or their transferees and the Warrant
Shares by Purchasers, MAG or their transferees. The Company has no reason to
believe that it is not capable of satisfying the registration or qualification
requirements (or an exemption therefrom) necessary to permit the resale of the
Conversion Shares and the Warrant Shares under the securities or "blue sky" laws
of any jurisdiction within the United States.
(y) Set forth on Schedule F is the Company's intended use of the proceeds from
this transaction.
(z) None of the officers or directors of the Company (i) has been convicted of
any crime (other than traffic violations or misdemeanors not involving fraud) or
is currently under investigation or indictment for any such crime, (ii) has been
found by a court or governmental agency to have violated any securities or
commodities law or to have committed fraud or is currently a party to any legal
7
proceeding in which either is alleged, (iii) has been the subject of a
proceeding under the bankruptcy laws or any similar state laws, or (iv) has been
an officer, director, general partner, or managing member of an entity which has
been the subject of such a proceeding.
(aa) The Company's most recent SEC review commenced on April 12, 2005. To date,
there has been no response from the SEC to the Company's written submission.
(bb) The Company's CUSIP number is 922321 10 4.
3. Purchase, Sale and Delivery of the Securities.
(a) Issuance of Series D Stock and Warrants. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Purchasers, and Purchasers agree to purchase from the
Company, 25,000 shares of Series D Stock at $100.00 per share in the amounts
shown on the signature page hereto. In connection with the purchase and sale of
Series D Stock, for no additional consideration, the Purchasers and MAG will
receive Warrants to purchase up to an aggregate of 1,892,219 shares of Common
Stock , subject to adjustment as set forth in the Warrants, in the amounts set
forth on the signature page hereto.
(b) Closing. The closing of the transactions described herein (the "Closing")
shall take place at a time and on a date (the "Closing Date") to be specified by
the parties, which will be no later than 5:00 p.m. (Pacific time) on July 20,
2005. On the Closing Date, the Company shall deliver (a) certificates in
definitive form for the Series D Stock in the names and amounts set forth on the
signature page hereto, (b) Warrants, in the names and amounts set forth on the
signature page hereto, (c) the Subscription Agreement, Certificate of
Designation and Registration Rights Agreement, each duly executed on behalf of
the Company, and (d) the Opinion of Counsel in the form attached hereto as
Exhibit C. On the Closing Date, Purchasers shall deliver (i) 70% of the Purchase
Price or $1,750,000 by wire transfer of immediately available funds to the
Company, and (ii) the Subscription Agreement and Registration Rights Agreement,
each duly executed on behalf of the Purchasers and MAG. The Closing will occur
when all documents and instruments necessary or appropriate to effect the
transactions contemplated herein are exchanged by the parties and all actions
taken at the Closing will be deemed to be taken simultaneously.
(c) Payment of Fees. Upon receipt by the Company of the Purchase Price, the
Company shall deliver to MAG by wire transfer of immediately available funds,
the Due Diligence Fee in the amount of $125,000, and the legal fees in the
amount of $15,000.
(d) Conditions to Final Funding. Provided that no Event of Default, (as that
term is defined in Section 10 below) has occurred, within two trading days after
Company (i) files the Registration Statement and (ii) delivers to MAG and
Purchaser a certificate executed on behalf of the Company by its Chief Financial
Officer certifying that all representations and warranties made by the Company
herein are true and correct in all material respects as of the date of the
8
Registration Statement, the Purchaser covenants and agrees to deliver to the
Company the balance of the Purchase Price or $750,000. In the event that
Purchaser fails to deliver the balance of the Purchase Price within ten (10)
trading days after the conditions to delivery set forth in this Section 3(d) are
satisfied, then the number of shares of Series D Stock issued to Purchaser in
excess of the Purchaser Price actually paid by Purchaser shall automatically
cancel and all of the Warrants shall automatically cancel.
(e) In the event that on or before 70 days after the Closing Date, the
conditions to funding the balance of the Purchase Price have not been satisfied
by Company or waived in writing by Purchaser and MAG, then (a) the Purchaser's
obligation to fund the balance of the Purchase Price shall terminate, and (b)
the number of shares Series D Stock issued to Purchaser in excess of the
Purchaser Price actually paid by Purchaser shall automatically cancel. The
Warrants shall be remain in full force and effect as originally issued.
4. Certain Covenants of the Company. The Company covenants and agrees with each
Purchaser as follows:
(a) None of the Company or any of its Affiliates will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Securities Act) which could be integrated with the sale of the
Securities in a manner which would require the registration under the Securities
Act of the Securities.
(b) The Company will not become, at any time prior to the expiration of three
years after the Closing Date, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate company that is
or is required to be registered under the Investment Company Act.
(c) None of the proceeds of the Series D Stock will be used to reduce or retire
any insider note or convertible debt held by an officer or director of the
Company.
(d) Subject to Section 10 of this Agreement, the Conversion Shares and the
Warrant Shares will be eligible for trading on the NASDAQ Small Cap or such
market on which the Company's shares are subsequently listed or traded,
including the over-the-counter bulletin board, immediately following the
effectiveness of the Registration Statement.
(e) The Company will use commercially reasonable efforts to do and perform all
things required to be done and performed by it under this Agreement and the
other Transaction Documents and to satisfy all conditions precedent on its part
to the obligations of the Purchasers to purchase and accept delivery of the
Securities.
(f) Commencing on the Closing Date and continuing until the Registration
Statement is deemed effective by the SEC, the Purchasers shall have a right of
first refusal (the "Right of First Refusal") on any financing in which the
Company is the issuer of debt or equity securities. Notwithstanding the
foregoing, the Right of First Refusal shall not apply to financing in which
Company issues debt or equity securities to officers or directors of the Company
where the terms of such financing are no more favorable than the terms set forth
herein and the securities are issued at or above the volume weighted average
price on the date of issuance.
9
5. Conditions of the Purchasers' Obligations. The obligation of each Purchaser
to purchase and pay for the Securities is subject to the following conditions
unless waived in writing by the Purchaser:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects (other than
representations and warranties with a Material Adverse Effect qualifier, which
shall be true and correct as written) on and as of the Closing Date; the Company
shall have complied in all material respects with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date.
(b) None of the issuance and sale of the Securities pursuant to this Agreement
or any of the transactions contemplated by any of the other Transaction
Documents shall be enjoined (temporarily or permanently) and no restraining
order or other injunctive order shall have been issued in respect thereof; and
there shall not have been any legal action, order, decree or other
administrative proceeding instituted or, to the Company's knowledge, threatened
against the Company or against any Purchaser relating to the issuance of the
Securities or any Purchaser's activities in connection therewith or any other
transactions contemplated by this Agreement, the other Transaction Documents or
the Disclosure Documents.
(c) The Purchasers shall have received certificates, dated the Closing Date and
signed by the Chief Executive Officer and the Chief Financial Officer of the
Company, to the effect of paragraphs 5(a) and (b).
(d) The Purchasers shall have received an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, LLP with respect to the authorization of the Series D Stock, the
Conversion Shares, the Warrants and the Warrant Shares and other customary
matters in the form attached hereto as Exhibit C.
6. Representations and Warranties of the Purchasers.
(a) Each Purchaser and MAG represents and warrants to the Company that the
Securities to be acquired by it hereunder (including the Conversion Shares and
the Warrant Shares that it may acquire upon conversion or exercise thereof, as
the case may be) are being acquired for its own account for investment and with
no intention of distributing or reselling such Securities (including the
Conversion Shares and the Warrant Shares that it may acquire upon conversion or
exercise thereof, as the case may be) or any part thereof or interest therein in
any transaction which would be in violation of the securities laws of the United
States of America or any State. Nothing in this Agreement, however, shall
prejudice or otherwise limit a Purchaser's right to sell or otherwise dispose of
all or any part of such Conversion Shares or Warrant Shares under an effective
registration statement under the Securities Act and in compliance with
applicable state securities laws or under an exemption from such registration.
By executing this Agreement, each Purchaser further represents that such
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to any Person with respect
to any of the Securities.
(b) Each Purchaser and MAG understands that the Securities (including the
Conversion Shares and the Warrant Shares that it may acquire upon conversion or
10
exercise thereof, as the case may be) have not been registered under the
Securities Act and may not be offered, resold, pledged or otherwise transferred
except (a) pursuant to an exemption from registration under the Securities Act
(and, if requested by the Company, based upon an opinion of counsel acceptable
to the Company) or pursuant to an effective registration statement under the
Securities Act and (b) in accordance with all applicable securities laws of the
states of the United States and other jurisdictions.
Each Purchaser and MAG agrees to the imprinting, so long as appropriate, of the
following legend on the Securities (including the Conversion Shares and the
Warrant Shares that it may acquire upon conversion or exercise thereof, as the
case may be):
The shares of stock evidenced by this certificate have not been registered under
the U.S. Securities Act of 1933, as amended, and may not be offered, sold,
pledged or otherwise transferred ("transferred") in the absence of such
registration or an applicable exemption therefrom. In the absence of such
registration, such shares may not be transferred unless, if the Company
requests, the Company has received a written opinion from counsel reasonably
satisfactory to the Company in form and substance satisfactory to the Company
stating that such transfer is being made in compliance with all applicable
federal and state securities laws.
The legend set forth above may be removed if and when the Conversion Shares or
the Warrant Shares, as the case may be, are disposed of pursuant to an effective
registration statement under the Securities Act or in the opinion of counsel to
the Company experienced in the area of United States Federal securities laws
such legends are no longer required under applicable requirements of the
Securities Act. The Series D Stock, the Warrants, the Conversion Shares and the
Warrant Shares shall also bear any other legends required by applicable Federal
or state securities laws, which legends may be removed when in the opinion of
counsel to the Company experienced in the applicable securities laws, the same
are no longer required under the applicable requirements of such securities
laws. The Company agrees that it will provide each Purchaser, upon request, with
a substitute certificate, not bearing such legend at such time as such legend is
no longer applicable. Each Purchaser agrees that, in connection with any
transfer of the Conversion Shares or the Warrant Shares by it pursuant to an
effective registration statement under the Securities Act, such Purchaser will
comply with all prospectus delivery requirements of the Securities Act. The
Company makes no representation, warranty or agreement as to the availability of
any exemption from registration under the Securities Act with respect to any
resale of the Series D Stock, the Warrants, the Conversion Shares or the Warrant
Shares.
(c) Each Purchaser and MAG is an "accredited investor" within the meaning of
Rule 501(a) of Regulation D under the Securities Act. Neither Purchaser nor MAG
learned of the opportunity to acquire Securities or any other security issuable
by the Company through any form of general advertising or public solicitation.
(d) Each Purchaser and MAG represents and warrants to the Company that it has
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, having been represented by counsel, and has so
11
evaluated the merits and risks of such investment and is able to bear the
economic risk of such investment and, at the present time, is able to afford a
complete loss of such investment.
(e) Each Purchaser represents and warrants to the Company that (i) the purchase
of the Securities to be purchased 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 legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; (ii) the purchase of the
Securities to be purchased by it does not conflict with or violate its charter,
by-laws or any law, regulation or court order applicable to it; and (iii) the
purchase of the Securities to be purchased by it does not impose any penalty or
other onerous condition on the Purchaser under or pursuant to any applicable law
or governmental regulation.
(f) Each Purchaser and MAG represents and warrants to the Company that neither
it nor any of its directors, officers, employees, agents, partners, members,
controlling persons or shareholders holding 5% or more of the Common Stock
outstanding on the Closing Date, has taken or will take, directly or indirectly,
any actions designed, or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock.
(g) Each Purchaser and MAG acknowledges it or its representatives have reviewed
the Disclosure Documents and further acknowledges that it or its representatives
have been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
merits and risks of investing in the Securities; (ii) access to information
about the Company and the Company's financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment in the Securities; and (iii) the opportunity to obtain
such additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy and
completeness of the information contained in the Disclosure Documents.
(h) Each Purchaser and MAG represents and warrants to the Company that it has
based its investment decision solely upon the information contained in the
Disclosure Documents and such other information as may have been provided to it
or its representatives by the Company in response to their inquiries, and has
not based its investment decision on any research or other report regarding the
Company prepared by any third party ("Third Party Reports"). Each Purchaser
understands and acknowledges that (i) the Company does not endorse any Third
Party Reports and (ii) its actual results may differ materially from those
projected in any Third Party Report.
(i) Each Purchaser and MAG understands and acknowledges that (i) any
forward-looking information included in the Disclosure Documents supplied to
Purchaser by the Company or its management is subject to risks and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company's actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.
12
(j) Each Purchaser and MAG understands and acknowledges that (i) the Securities
are offered and sold without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and that the
Company and its counsel will rely upon, the accuracy and truthfulness of the
foregoing representations and Purchaser hereby consents to such reliance.
7. Covenants of Purchasers Not to Short Stock. Purchasers, on behalf of
themselves and their affiliates, hereby covenant and agree not to, directly or
indirectly, offer to "short sell", contract to "short sell" or otherwise "short
sell" the securities of the Company, including, without limitation, shares of
Common Stock that will be received as a result of the conversion of the Series D
Stock or the exercise of the Warrants.
8. Termination.
(a) This Agreement may be terminated in the sole discretion of the Company by
notice to each Purchaser if at the Closing Date:
(i) the representations and warranties made by any Purchaser in Section 6 are
not true and correct in all material respects; or
(ii) as to the Company, the sale of the Securities hereunder (i) is prohibited
or enjoined by any applicable law or governmental regulation or (ii) subjects
the Company to any penalty, or in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or government regulation that
would materially reduce the benefits to the Company of the sale of the
Securities to such Purchaser, so long as such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement.
(b) This Agreement may be terminated by any Purchaser or MAG by notice to the
Company given in the event that the Company shall have failed, refused or been
unable to satisfy all material conditions on its part to be performed or
satisfied hereunder on or prior to the Closing Date, or if after the execution
and delivery of this Agreement and immediately prior to the Closing Date,
trading in securities of the Company on the NASDAQ Small Cap shall have been
suspended.
(c) This Agreement may be terminated by mutual written consent of all parties.
9. Registration. Within 45 days after the Closing Date, the Company shall
prepare and file with the SEC a Registration Statement covering the resale of
the maximum number of Conversion Shares issuable upon conversion of the Series D
Stock and the Warrant Shares (collectively, the "Registrable Securities"), as
set forth in the Registration Rights Agreement attached hereto as Exhibit D.
Within 90 days after filing the Registration Statement, the Company will use
commercially reasonable efforts to have the Registration Statement declared
effective by the SEC.
10. Event of Default. If an Event of Default (as defined below) occurs, the
Purchasers and MAG shall have the right to exercise any or all of the rights
given to the Purchasers and MAG relating to the Securities, as further described
in the Certificate of Designation. In addition, the price at which the shares of
Series D Stock may be converted into Common Stock shall be reduced from 85% of
the Market Price (as defined in the Certificate of Designation) to 75% of the
Market Price, subject to the Ceiling Price and Floor Price as those terms are
defined in the Certificate of Designation. The Purchaser and MAG need not
13
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Purchaser and MAG may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Purchaser and MAG at any time prior
to payment hereunder. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
An "Event of Default" shall mean (a) the commencement by the Company of a
voluntary case or proceeding under the bankruptcy laws, (b) the breach by
Company of any of the covenants or representations made herein which is not
cured within 15 days after receipt of written notice from Purchaser of such
breach, or (c) the Company's failure to: (i) discharge or stay a bankruptcy
proceeding within 90 days of such action being taken against the Company, (ii)
file the Registration Statement with the SEC within 45 days after the Closing
Date, (iii) have the Registration Statement deemed effective by the SEC within
90 days after the date of filing of the Registration Statement and maintain the
effectiveness thereafter; (iv) maintain trading of the Company's Common Stock on
the NASDAQ Small Cap except for any periods when the stock is listed on the
over-the-counter bulletin board, the NASDAQ National Stock Market, the AMEX or
the NYSE, (v) pay the expenses referred to below or the Due Diligence Fee within
three (3) days after the Closing; (vi) pay dividends when due out of funds
legally available therefore., or (vii) deliver to Purchasers, or Purchasers'
broker, as directed, Common Stock that Purchasers have converted within five (5)
business days of such conversions.
IN THE EVENT THAT (A) THE COMPANY FAILS TO FILE THE REGISTRATION STATEMENT WITH
THE SEC WITHIN 45 DAYS AFTER THE CLOSING DATE (B) THE REGISTRATION STATEMENT IS
NOT DEEMED EFFECTIVE BY THE SEC WITHIN 90 DAYS AFTER INITIAL FILING, OR (C) THE
COMPANY FAILS TO MAINTAIN THE EFFECTIVENESS OF THE REGISTRATION STATEMENT ONCE
DEEMED EFFECTIVE, AS A REMEDY FOR SUCH AN EVENT OF DEFAULT, COMPANY SHALL PAY TO
PURCHASERS, IN CASH, $1,467 FOR EACH DAY THAT SUCH AN EVENT OF DEFAULT REMAINS
UNCURED. PURCHASERS AND COMPANY ACKNOWLEDGE AND AGREE THAT THEY HAVE MUTUALLY
DISCUSSED THE IMPRACTICALITY AND EXTREME DIFFICULTY OF FIXING THE ACTUAL DAMAGES
PURCHASERS WOULD INCUR IN THE CASE OF SUCH AN EVENT OF DEFAULT, AND THAT AS A
RESULT OF SUCH DISCUSSION THE PARTIES AGREE THAT $1,467 FOR EACH DAY THAT THE
REGISTRATION STATEMENT FILING IS DELAYED REPRESENTS A REASONABLE ESTIMATE OF THE
ACTUAL DAMAGES WHICH PURCHASERS WOULD INCUR IN THE CASE OF SUCH AN EVENT OF
DEFAULT. PURCHASERS AND COMPANY SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE
TERMS AND PROVISIONS OF THIS PARAGRAPH CONCERNING LIQUIDATED DAMAGES.
14
11. Notices. All communications hereunder shall be in writing and shall be hand
delivered, mailed by first-class mail, couriered by next-day air courier or by
facsimile and confirmed in writing (i) if to the Company, at the addresses set
forth below, or (ii) if to a Purchaser or MAG, to the address set forth for such
party on the signature page hereto.
If to the Company:
Vasomedical Inc
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. Telephone: 516-433-1200Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Communications shall be deemed to be given: (i) three (3) days after it is
received if sent by facsimile at the address and number set forth above;
provided that notices given by facsimile shall not be effective, unless either
(a) a duplicate copy of such facsimile notice is promptly given by depositing
the same in the mail, postage prepaid and addressed to the party as set forth
below or (b) the receiving party delivers a written confirmation of receipt for
such notice by any other method permitted under this paragraph; and further
provided that any notice given by facsimile received after 5:00 p.m.
(recipient's time) or on a non-business day shall be deemed received on the next
business day; (ii) five (5) business days after deposit in the United States
mail, certified, return receipt requested, postage prepaid, and addressed to the
party as set forth below; or (iii) the next business day after deposit with an
international overnight delivery service, postage prepaid, addressed to the
party as set forth below with next business day delivery guaranteed; provided
that the sending party receives confirmation of delivery from the delivery
service provider.
Change of a party's address or facsimile number may be designated hereunder by
giving notice to all of the other parties hereto in accordance with this
Section.
12. Survival Clause. The respective representations, warranties, agreements and
covenants of the Company and the Purchasers set forth in this Agreement shall
survive until the first anniversary of the Closing.
15
13. Fees and Expenses. Within three (3) days of Closing, the Company agrees to
pay Purchasers' legal expenses incurred in connection with the preparation and
negotiation of the Transaction Documents equal to $15,000. Any amounts paid by
Company upon execution of the Term Sheet will be credited against this amount.
14. Legal Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Warrants or the Certificate of
Designation, the prevailing party or parties shall be entitled to receive from
the other party or parties reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which the prevailing party or
parties may be reasonably entitled.
15. 8K Filing and Press Releases. The Company shall file a Form 8K with the SEC
within 5 trading days after the Closing Date setting forth the general terms of
the transaction. Neither party shall issue any press release relating to this
transaction without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed.
16. Successors. This Agreement shall inure to the benefit of and be binding upon
Purchasers, MAG and the Company and their respective successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other party.
17. No Waiver; Modifications in Writing. No failure or delay on the part of the
Company, MAG or any Purchaser in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. Except as otherwise set
forth herein, the remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the Company, MAG or any
Purchaser at law or in equity or otherwise. No waiver of or consent to any
departure by the Company, MAG or any Purchaser from any provision of this
Agreement shall be effective unless signed in writing by the party entitled to
the benefit thereof, provided that notice of any such waiver shall be given to
each party hereto as set forth below. Except as otherwise provided herein, no
amendment, modification or termination of any provision of this Agreement shall
be effective unless signed in writing by or on behalf of each of the Company,
MAG and the Purchasers. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company, MAG or any Purchaser from the terms
of any provision of this Agreement shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement, no notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.
16
18. Entire Agreement. This Agreement, together with Transaction Documents,
constitutes the entire agreement among the parties hereto and supersedes all
prior agreements, understandings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof and thereof.
19. Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby.
20. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE
TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. Counterparts. This Agreement may be executed in two or more counterparts and
may be delivered by facsimile transmission, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
22. If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this Agreement shall constitute a binding agreement among the Company, the
Purchasers and MAG.
23. Upon written notice from Company to Purchaser (a "Mandatory Conversion
Notice"), provided that the closing price of the Common Stock exceeds $1.30 per
share for at least the 20 consecutive trading days immediately preceding the
Mandatory Conversion Notice, and the Registration Statement is effective,
Company may require Purchaser to convert all or a portion of the then
outstanding Series D Preferred Stock. The Mandatory Conversion Notice shall
state the number of shares of Common Stock outstanding and number of shares to
be converted. Any conversion shall be subject to limitation such that the
beneficial ownership of Purchaser and its affiliates shall remain in the
aggregate below 9.99% of the total Common Stock outstanding at all times.
Very truly yours,
VASOMEDICAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
17
ACCEPTED AND AGREED:
Mercator Momentum Fund, LP Mercator Momentum Fund III, LP
By: M.A.G. CAPITAL, LLC By: M.A.G. CAPITAL, LLC
Its: General Partner Its: General Partner
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------- -------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Managing Member Managing Member
M.A.G. CAPITAL, LLC Monarch Pointe Fund, Ltd.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------- -------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Managing Member Its: President
Addresses for Notice to Purchasers and MAG:
M.A.G. CAPITAL, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Sheppard, Mullin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Mercator Mercator
Momentum Fund, Momentum Fund Monarch Pointe M.A.G.
LP III, LP Fund, Ltd. Capital, LLC Total
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Total Purchase Price $ 625,000 $ 385,000 $ 1,490,000 $ 2,500,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Paid At Closing $ 437,500 $ 269,500 $ 1,043,000 $ - $ 1,750,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Paid At Registration Filing $ 187,500 $ 115,500 $ 447,000 $ - $ 750,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Preferred Shares 6,250 3,850 14,900 - 25,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Warrants @ $.69/share 378,444 233,121 902,210 378,444 1,892,219
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
18