EXHIBIT B
GlenRose Instruments Inc.
4% Convertible Debentures Due 2013
Subscription Agreement
Dear Sir or Madam:
1. Subscription. The undersigned, intending to be legally
bound, irrevocably subscribes for and agrees to purchase the aggregate
U.S. dollar amount of the 4% Convertible Debentures Due 2013 (each a
"Debenture" and collectively, the "Debentures"), of GlenRose Instruments
Inc., a Delaware corporation (the "Company"), indicated on the signature
page hereof, on the terms and conditions described herein and in the
Debenture.
The undersigned herewith delivers to the Company the consideration
("Purchase Price") required to purchase the Debenture subscribed for
hereunder by wire transfer funds payable to: GlenRose Instruments Inc.,
00 Xxxxx Xxxxxx, Xxxxxxx, XX 00000. The minimum subscription is for
$500,000 unless otherwise determined in the discretion of the Company.
Capitalized terms not otherwise defined in this Agreement have the
meanings specified in the Debenture.
2. Company Representations, Warranties and Covenants. Except as
disclosed pursuant to the Company's publicly available reports filed with
the Securities and Exchange Commission (the "SEC") pursuant to
Sections 12, 13 and 15(d)of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company represents and warrants to the undersigned
as follows as of the date hereof:
2.01 Organization and Standing of the Company. The Company is a
duly organized and validly existing corporation in good standing under
the laws of the jurisdiction in which it was organized and has all requisite
corporate power and authority for the ownership and operation of its
properties and for the carrying on of its business as now conducted and
as now proposed to be conducted. The Company is duly licensed or qualified
and in good standing as a foreign corporation authorized to do business in
all jurisdictions wherein the character of the property owned or leased,
or the nature of the activities conducted, by it makes such licensing or
qualification necessary except where the failure to have such licenses,
qualifications or authority would not have a material adverse effect on
the business of the Company ("Company Adverse Effect").
2.02 Corporate Action and Valid Issuance. The Company has all
necessary corporate power and authority to execute, deliver and perform
its obligations under this Agreement, the Investor Rights Agreement
executed as of the date hereof, the Debenture and any other agreements
and instruments executed in connection herewith (collectively, the
"Transaction Agreements"). All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of the Debentures, the authorization, execution, delivery
and performance of the Transaction Agreements and the consummation of the
transactions contemplated therein has been taken. The execution, delivery
and performance of the Transaction Agreements by the Company, the issuance
of the Common Stock (the "Conversion Shares") upon conversion of the
Debentures in accordance with their terms and the consummation of the
other transactions contemplated herein do not require any approval of
the Company's stockholders (other than such approval as has been obtained).
The Transaction Agreements have been duly executed and delivered by the
Company and constitute, and all the covenants therein contained constitute
the valid and legally binding obligations of the Company, enforceable in
accordance with their terms, subject only to the effect of bankruptcy,
insolvency, moratorium, and similar laws affecting the rights of creditors
generally. Neither the issuance of the Debentures, nor the issuance of
shares of Common Stock upon the conversion of the Debentures, is subject
to preemptive or other similar statutory or contractual rights and will
not conflict with any provisions of any agreement or instrument to which
the Company is a party or by which it is bound, including without
limitation, the articles of incorporation and bylaws of the Company.
2.03 Securities Act. The Company has complied and will comply
with all applicable federal and state securities laws in connection
with the issuance of the Debentures and any Conversion Shares. Neither
the Company nor anyone acting on its behalf has offered or will offer
to sell the Debentures, or solicit offers with respect thereto from,
or enter into any preliminary conversations or negotiations relating
thereto with, any person, so as to bring the issuance and sale of the
Debentures or the issuance of the Conversion Shares under the registration
provisions of the Securities Act or any state securities laws.
2.04 Employee Matters. Except as would not reasonably likely
to result in a Company Adverse Effect, each benefit plan of the Company
has been established and administered in accordance with its terms and in
compliance with the applicable provisions of Employee Retirement Income
Security Act of 1974, as amended, the Internal Revenue Code of 1986, as
amended, and other applicable laws, rules and regulations. The Company
and its subsidiaries are in compliance with all federal, state, local and
foreign requirements regarding employment.
2.05 Capitalization; Status of Capital Stock
(a) On the date of this Agreement and immediately prior to
the issuance of Debentures contemplated by this Agreement, the Company
has a total authorized capitalization consisting of: (i) 10,000,000 shares
of Common Stock of which 3,117,647 are issued and outstanding and
(ii) 3,000,000 shares of Preferred Stock, of which none are issued and
outstanding. As of the date of this Agreement and immediately prior to
the issuance of Debentures contemplated by this Agreement, 700,000 shares
of Common Stock have been reserved for issuance in accordance with the
Company's 2005 Stock Option and Incentive Plan. Of those shares the Company
granted: (i) nonqualified options to purchase 230,000 shares of the Company's
Common Stock that are currently not exercised and (ii) 15,000 shares of
restricted common stock.
(b) Schedule 2.05 sets forth the capitalization of the Company
immediately following the issuance of the Debentures contemplated by this
Agreement including the number of shares of the following: (i) issued
and outstanding Common Stock; (ii) Common Stock reserved for issuance
upon conversion of Debenture, including the names of the holders of the
Debentures thereof; (iii) issued stock options, including vesting schedule
and exercise price; (iv) stock options not yet issued but reserved for
issuance; (v) issued and outstanding Preferred Stock; and (vi) warrants or
stock purchase rights, if any. All of the outstanding shares of capital
stock of the Company have been duly authorized, are validly issued and are
fully paid and nonassessable and were issued in compliance with all
applicable federal and state securities laws. The Debentures have been duly
authorized, and when issued, sold and delivered in accordance with the terms
and for the consideration set forth in this Agreement, will be validly
issued. The Company has duly reserved the Conversion Shares for issuance
upon conversion of the Debentures, and the Conversion Shares, when issued
and delivered upon conversion of the Debentures, will be duly authorized,
validly issued and fully paid and non assessable. Except as set forth on
Schedule 2.05, there are no options, warrants or rights to purchase shares
of capital stock or other securities of the Company authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue
shares of its capital stock or other securities. There are no restrictions
on the transfer of shares of capital stock of the Company other than those
imposed by the Transaction Agreements and state and federal securities
laws. No holder of any security of the Company is entitled to preemptive
or similar statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party, or which
are otherwise binding upon the Company, which have not been waived.
The offer and sale of all shares of capital stock and other securities
of the Company issued before the date hereof complied with or were
exempt from all federal and state securities laws.
2.06 Government Consents and Filings. Assuming the accuracy of the
representations made by the undersigned in Section 2 of this Agreement, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Company in connection
with the consummation of the transactions contemplated by this Agreement.
2.07 Litigation. There is no claim, action, suit, proceeding,
arbitration, complaint, charge or investigation pending or, to the
Company's knowledge, currently threatened against the Company which
individually or in the aggregate would reasonably be expected to have a
Company Adverse Effect, nor are there any orders, writs, injunctions,
judgments or decrees outstanding of any court or governmental agency or
instrumentality and binding upon the Company that would reasonably be
expected to have a Company Adverse Effect. To the Company's knowledge, the
Company is not currently subject to any investigation by any governmental
body with respect to any allegation of "backdating" options granted to any
employees or directors that would reasonably be expected to have a Company
Adverse Effect.
2.08 Intellectual Property. Except as would not reasonably be expected
to have a Company Adverse Effect: (a) the Company owns, or possesses
sufficient rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, trade secrets,
licenses, domain names, mask works, information and proprietary rights and
processes as are necessary to the conduct of the Company's business as now
conducted and as presently proposed to be conducted (collectively, "Company
Intellectual Property") necessary for the conduct of its business as currently
conducted; (b) to the Company's knowledge, the use by the Company of any
Company Intellectual Property used in the conduct of the Company's business as
currently conducted does not infringe on or otherwise violate the rights of
any person; (c) the use of any licensed Company Intellectual Property by the
Company is in accordance with applicable licenses pursuant to which the
Company acquired the right to use such Company Intellectual Property and
(d) to the knowledge of the Company, no person is challenging, infringing
on or otherwise violating any right of the Company with respect to any
Company Intellectual Property owned by and/or exclusively licensed to the
Company.
2.09 Compliance with Other Instruments. The Company is not in
violation or default (a) of any provisions of its articles of incorporation
or bylaws, (b) of any instrument, judgment, order, writ or decree, or
(c) under any agreement to which it is a party or by which it is bound,
or of any provision of federal or state statute, rule or regulation
applicable to the Company, the violation of which would have a Company
Adverse Effect.
2.10 Absence of Liens. The property and assets that the Company owns
are free and clear of all mortgages, deeds of trust, liens, loans and
encumbrances, except for statutory liens for the payment of current taxes
that are not yet delinquent and encumbrances and liens that arise in the
ordinary course of business and do not materially impair the Company's
ownership or use of such property or assets. With respect to the property
and assets it leases, the Company is in compliance with such leases and, to
its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances other than those of the lessors of such property or assets.
2.11 Tax Returns and Payments. There are no federal, state, county,
local or foreign taxes dues and payable by the Company which have not been
timely paid. There are no accrued and unpaid federal, state, country,
local or foreign taxes of the Company which are due, whether or not
assessed or disputed. There have been no examinations or audits of any tax
returns or reports by any applicable federal, state, local or foreign
governmental agency. The Company has duly and timely filed all federal,
state, county, local and foreign tax returns required to have been filed
by it and there are in effect no waivers of applicable statutes of
limitations with respect to taxes for any year.
2.12 Permits. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business,
the lack of which could reasonably be expected to have a Company
Adverse Effect. The Company is not in default in any material respect
under any of such franchises, permits, licenses or other similar
authority.
2.13 No Brokers or Finders. No person other than Ladenburg
Xxxxxxx & Co. Inc. has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation
as a finder or broker because of any act or omission by the Company or
any agent of the Company.
2.14 SEC Reports; Financial Statements. The Company has filed all
required registration statements, prospectuses, reports, schedules, forms,
statements and other documents required to be filed by it with the SEC (the
"SEC Reports") since November 2006. The information contained or
incorporated by reference in the SEC Reports was true and correct in all
material respects as of the respective dates of the filing thereof with
the SEC (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing); and, as of such respective dates,
the SEC Reports did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. All of the SEC Reports, as of their respective
dates, complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder. The financial statements of the Company
included in the SEC Reports (collectively, the "Financial Statements") fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the dates indicated, and the results of
its operations and cash flows for the periods therein specified, all in
accordance with United States generally accepted accounting principles
applied on a consistent basis ("GAAP") throughout the periods therein
specified (except as otherwise noted therein, and in the case of
quarterly financial statements except for the absence of footnote disclosure
and subject, in the case of interim periods, to normal year-end
adjustments). Except as disclosed in the SEC Reports, the Company and its
Subsidiaries have not incurred any liabilities that are of a nature that
would be required to be disclosed on a balance sheet of the Company and its
Subsidiaries or the footnotes thereto prepared in conformity with GAAP,
other than (i) liabilities incurred in the ordinary course of business since
October 1, 2006, and (ii) liabilities that would not reasonably be expected
to have a Company Material Adverse Effect.
2.15 Absence of Changes. Since March 30, 2008, there have not
been any changes, circumstances, conditions or events which individually
or in the aggregate have had or would reasonably be expected to have a
Company Material Adverse Effect.
2.16 Officers' Conversion of Debt. Immediately prior to the
execution of this Agreement, all officers, directors, managers and
affiliates of the Company who had outstanding loans to the Company
converted all such loans into the same Debentures and each such
persons has executed an Investors Rights Agreement with
the same "lockup" provision to which the undersigned has agreed.
3. Investor Representations, Warranties and Covenants.
The undersigned hereby acknowledges, represents and warrants to,
and agrees with the Company as follows as of the date hereof:
(a) The undersigned is acquiring the Debenture for the
undersigned's own account as principal, for investment purposes only,
and not with a view to, or for, resale or distribution of all or
any part of the Debenture or any shares of the Company's Common Stock,
par value $0.01 per share, issued upon conversion of the Debenture (the
"Underlying Shares")(the "Debenture and the Underlying Shares
are collectively referred to herein as the "Securities"), and
no other person has a direct or indirect beneficial interest
in the Securities;
(b) The undersigned acknowledges its understanding that
the offering and sale of the Debentures is intended to be exempt from
registration under the Securities Act of 1933, as amended
(the "Securities Act"), by virtue of Sections 4(2) of the
Securities Act and Rule 505 of Regulation D ("Regulation D")
promulgated thereunder and Section 4(6) of the Securities Act, and, in
furtherance thereof, the undersigned represents and warrants to and
agrees with the Company that the undersigned has the financial ability
to bear the economic risk of the undersigned's investment, has
adequate means for providing for the undersigned's current needs and
contingencies and has no need for liquidity with respect to the
undersigned's investment in the Debenture.
(c) The undersigned is an "accredited investor" as
defined in Rule 501(a) of Regulation D under the Securities Act;
(d) The undersigned:
(1) The undersigned understands and has evaluated the
risks of a purchase of the Debenture;
(2) has been given the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the
offering of the Debentures, and has been given the opportunity to
obtain such information as the undersigned has deemed necessary regarding
the Company, the Debenture or the Underlying Shares to the extent that the
Company possesses such information or can acquire it without unreasonable
effort;
(3) has not relied on any oral representation, warranty or
information in connection with the offering of the Debentures by the
Company, or any officer, employee, agent or affiliate of the Company;
(4) has determined that the Debenture is a suitable investment
for the undersigned and that at this time the undersigned can bear
a complete loss of the undersigned's investment therein;
(5) has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating
the merits and risks of the undersigned's investment in the Debenture;
(e) If the undersigned is a corporation, limited liability
company, partnership, trust, qualified plan or other entity, it
is authorized and qualified to become a holder of the Securities,
and the person signing this Subscription Agreement on behalf of
such entity has been duly authorized to do so;
(f) Any information which the undersigned has heretofore
furnished and herewith furnishes to the Company with respect to the
undersigned's financial position and business experience is correct
and complete as of the date of this Agreement and if there should
be any material change in such information prior to issuance to
the undersigned of the Debenture, the undersigned will
immediately furnish such revised or corrected information
to the Company;
(g) The foregoing acknowledgments, representations,
warranties and agreements shall survive the closing at which
the Debenture is issued;
(h) The undersigned acknowledges that the undersigned
has not purchased the Debenture as a result of any general
solicitation or general advertising; and
(i) The undersigned's overall commitment to investments
which are not readily marketable is not disproportionate to the
undersigned's net worth, and the undersigned's investment in the
Debenture and will not cause such overall commitment to become
excessive.
4. Investor Awareness. The undersigned acknowledges that:
(a) No federal or state agency has passed upon the
Securities or made any finding or determination as to the
fairness of this investment;
(b) There is no established market for the Securities of
and no assurance has been given that any public market for them
will develop;
(c) The Securities may not be sold, pledged or otherwise
transferred, except as may be permitted under the Securities Act
and applicable state securities laws pursuant to registration
or exemption therefrom; and accordingly, the undersigned may be
required to bear the financial risks of an investment in the
Securities for an indefinite period of time;
(d) The undersigned consents to (i) the placing of a
legend substantially in the form set forth below on the
certificates representing the Underlying Shares stating
that the Underlying Shares have not been registered and
setting forth the restriction on transfer contemplated hereby,
and (ii) the placing of a stop transfer order on the books of
the Company with respect to the Securities.
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended.
These shares have been acquired for investment and not with a
view to distribution or resale and may not be sold, mortgaged,
pledged, hypothecated or otherwise transferred without an
effective registration statement for such sales under the
Securities Act of 1933, or an opinion of counsel for the
corporation that registration is not required under such Act.
The shares represented by this certificate are also subject
to the provisions of a certain Investor Rights Agreement
dated July 25, 2008 and may not be transferred except
in accordance with the provisions of that agreement."
5. Miscellaneous.
(a) Indemnity by Investor. The investor agrees
to indemnify and hold harmless the Company, its affiliates,
directors, officers, employees, agents and controlling persons
(the Company and each such person being a ("Company
Indemnified Party"), from and against any and all losses, claims,
damages, liabilities and expenses whatsoever (including, but not
limited to, any and all expenses whatsoever reasonably incurred
investigating, preparing or defending against any litigation
commenced or threatened or any claim whatsoever), joint or several,
as incurred, to which such Company Indemnified Party may become
subject under any applicable United States federal or state law
or the laws of any other domestic or foreign jurisdiction, or otherwise,
and related to or arising out of or based upon any false
representation, warranty or acknowledgment, or breach or failure
by the undersigned to comply with any covenant or agreement made
by the undersigned herein or in any other document
furnished by the undersigned to any of the foregoing in connection
with this transaction.
(b) Indemnity by the Company. The Company agrees to
indemnify and hold harmless the undersigned, its affiliates,
directors, officers, employees, agents and controlling persons
(the undersigned and each such person being an "Investor
Indemnified Party"), from and against any and all losses, claims,
damages, liabilities and expenses whatsoever (including, but
not limited to, any and all expenses whatsoever reasonably
incurred investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever),
joint or several, as incurred, to which such Investor
Indemnified Party may become subject arising out of or
resulting from (1) any inaccuracy or breach of the Company's
representations and warranties in this Agreement or
(2) the Company's breach of agreements or covenants made
by the Company in this Agreement or (3) any action, suit,
proceeding or investigation by any governmental entity or
any other person relating to this Agreement or the
transactions contemplated hereby.
(c) Modification. Except as otherwise provided
herein, neither this Agreement nor any provisions hereof shall
be modified, discharged or terminated except by an instrument
in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
(d) Binding Effect. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and assigns. If the undersigned
is more than one person, the obligation of the undersigned shall
be joint and several and the agreements, covenants, representations,
warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and his heirs,
executors, administrators and successors.
(e) Entire Agreement. This instrument contains
the entire agreement of the parties and there are no representations,
warranties, acknowledgments, covenants or other agreements except
as stated or referred to herein.
(f) Assignability. This Agreement is not transferable
or assignable by the undersigned.
(g) Governing Law and Forum. Notwithstanding the
place where this Agreement may be executed by any of the parties
hereto, all the terms and provisions hereof shall be construed
in accordance with and governed by the laws of the Commonwealth of
Massachusetts, without giving effect to its conflict of law
principles. Any dispute which may arise out of or in connection
with this Agreement shall be adjudicated before a court located
in Middlesex County, Massachusetts and the parties hereby submit
to the exclusive jurisdiction of the courts of the Commonwealth
of Massachusetts located in Boston, Massachusetts and of the
federal courts in Boston, Massachusetts with respect to any action
or legal proceeding commenced by any party, and irrevocably waive
any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court
or respecting the fact that such court is an inconvenient forum,
relating to or arising out of this Agreement or any acts or
omissions relating to the sale of the Shares, and the undersigned
consents to the service of process in any such action or legal
proceeding by means of registered or certified mail, return
receipt requested, in care of the address set forth below or
such other address as the undersigned shall furnish in writing
to the Company. In the event any such action is brought, whether
at law or in equity, then the prevailing party shall be paid
its reasonable attorney's fees, expenses and disbursements arising
out of such action. The undersigned hereby waives trial by jury
in any action or proceeding involving, directly or indirectly,
any matter (whether sounding in tort, contract, fraud or otherwise)
in any way arising out of or in connection with this Agreement or
the Holder's purchase of the Shares.
(h) Expenses and Other Rights. The Company shall
pay reasonable out-of-pocket fees and expenses up to $15,000
incurred by the undersigned in connection with the Transaction
Agreements. The Company agrees that if it enters into an
agreement in connection with the Debentures with another investor
that provides for a material economic benefit or material right
that is not provided to the undersigned in the Transaction
Agreements, the undersigned shall be automatically entitled
to such material economic benefit or right without the execution
of any amendment to the Transaction Agreements.
[The balance of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the undersigned has executed this Agreement on this
25th day of July, 2008.
Manner in which Title is to be held (Please Check One):
1. ___ Individual
2. ___ Joint Tenants With Right of Survivorship
3. ___ Community Property
4. ___ Tenants in Common
5. ___ Married with Separate Property
EXECUTION BY NATURAL PERSONS
_________________________________________________________________
Exact Name(s) in Which Title is to be Held
(If Joint Tenant or Tenants in Common, both persons must
sign and this page must contain all information for both
persons).
___________________________________ ___________________________________
Signature Signature
___________________________________ ___________________________________
Name (Please Print) Name (Please Print)
__________________________________ __________________________________
Residence: Number and Street Residence: Number and Street
___________________________________ ___________________________________
City, State, Zip Code City, State, Zip Code
___________________________________ ___________________________________
Social Security Number Social Security Number
___________________________________
Telephone Number
___________________________________
Email
Accepted this _____ day of July 2008, on behalf of the Company.
GLENROSE INSTRUMENTS INC.
By: __________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
EXECUTION BY SUBSCRIBER THAT IS AN ENTITY
(Corporation, Limited Liability Company, Partnership, Trust,
Etc.)
Xxxx Strategic Partners IV, L.P., a Delaware limited partnership
Name of Entity (Please Print)
Date of Incorporation or Organization: July 25, 2007
State of Principal Offices: 000 Xxxxxxxxxx Xx.,
Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Federal Taxpayer Identification Number: ________________
Xxxx Strategic Partners IV, L.P.
By: Xxxx Strategic XX XX, L.P.,
its general partner
By: Xxxx Strategic XX XX, L.L.C.,
its general partner
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Managing Member
Accepted this 25th day of July 2008, on behalf of the Company.
GLENROSE INSTRUMENTS INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
