SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
dated
as of June __,
2008,
by and among MedaSorb Technologies Corporation, a Nevada corporation (the
“Company”),
and
the subscribers identified on the signature page hereto (each a “Subscriber”
and
collectively “Subscribers”).
WHEREAS,
the
Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “1933
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided herein,
and the Subscribers, in the aggregate, shall purchase (i) not less than
$3,500,000 and up to $6,500,000 of stated value of 10% Series B Preferred Stock
of the Company (“Preferred
Stock”)
at a
purchase price (the “Purchase
Price”)
equal
to the stated value thereof which Preferred Stock shall be convertible into
shares of the Company’s common stock, $.001 par value (the “Common
Stock”)
hereof
subject to the rights and preferences described in the form of Certificate
of
Designation annexed hereto as Exhibit
A
(“Certificate
of Designation”),
and
(ii) in accordance with Section 9(s) of this Agreement, the “Additional
Securities”. The Preferred Stock, shares of Common Stock issuable upon
conversion of the Preferred Stock (the “Shares”)
and
the Additional Securities, are collectively referred to herein as the
“Securities”;
and
WHEREAS,
the
aggregate proceeds of the sale of the Preferred Stock contemplated hereby shall
be held in escrow pursuant to the terms of a Funds Escrow Agreement to be
executed by the parties substantially in the form attached hereto as
Exhibit B
(the
“Escrow Agreement”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscribers hereby agree as follows:
1. Closing.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement,
on
any “Closing
Date”
(as
defined in Section 2 hereof), each Subscriber shall purchase and the Company
shall sell to each Subscriber the Preferred Stock having the stated value set
forth on the signature page hereto (the “Stated
Value”).
The
aggregate Stated Value of the Preferred Stock to be purchased by the Subscribers
at the initial closing hereunder (the “Initial
Closing Date”),
shall
in the aggregate be not less than $3,500,000 nor more than $5,000,000 (the
“First
Closing Amount”).
Additional closings may be held within 60 calendar days following the Initial
Closing Date. Each Closing Date shall be the date that funds representing the
net amount due the Company for the Purchase Price for Preferred Stock purchased
by Subscribers in the Offering (as defined in Section 7(b)) is transmitted
by
wire transfer or otherwise to or for the benefit of the Company.
2. Closing
Date.
The
consummation of the transactions contemplated herein shall take place at the
offices of Xxxx Xxxxx LLP, 599 Lexington Avenue, New York, N.Y., upon the
satisfaction of all conditions to Closing set forth in this Agreement. Each
of
the Initial Closing Date and any other date on which a closing occurs hereunder
is referred to as a “Closing
Date”.
3. Subscriber’s
Representations, Warranties and Covenants.
Each
Subscriber hereby represents and warrants to and agrees with the Company, and
covenants, as applicable, only as to such Subscriber that:
(a) Organization
and Standing of the Subscribers.
If the
Subscriber is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power.
Each
Subscriber has the requisite power and authority to enter into and perform
this
Agreement and to purchase the Preferred Stock being sold to it hereunder. The
execution, delivery and performance of this Agreement by such Subscriber and
the
consummation by it of the transactions contemplated hereby and thereby have
been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is required. This Agreement
has been duly authorized, executed and delivered by such Subscriber and
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Subscriber enforceable against the Subscriber in
accordance with the terms thereof.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
such Subscriber of the transactions contemplated hereby or relating hereto
do
not and will not (i) result in a violation of such Subscriber’s charter
documents or bylaws or other organizational documents or (ii) conflict with,
or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule,
or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have
a
material adverse effect on such Subscriber). Such Subscriber is not required
to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Preferred Stock in accordance with the terms hereof, provided that for
purposes of the representation made in this sentence, such Subscriber is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.
(d) Information
on Company.
The
Subscriber has been furnished with or has had access at the XXXXX Website of
the
Commission to the Company’s Form 10-KSB for the year ended December 31, 2007 and
all other periodic reports filed by the Company with the Commission prior to
the
date hereof (hereinafter collectively referred to as the “Reports”).
In
addition, the Subscriber has received in writing from the Company and its
subsidiary such other information concerning their operations, financial
condition and other matters as the Subscriber has requested in writing (such
other information is collectively, the “Other
Written Information”),
and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities. Each Subscriber acknowledges that
it has received all the information it has requested from the Company that
it
considers necessary or appropriate for deciding whether to acquire the
Preferred
Stock,
and
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Preferred Stock and to obtain any additional information necessary to verify
the
accuracy of the information given the Subscriber. Nothing in this Section 3(d)
shall limit the Subscribers’ rights under the express provisions of this
Agreement.
(e) Information
on Subscriber.
The
Subscriber is, and will be at the time of the conversion of the Preferred Stock
an “accredited investor”, as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements
in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on
the
signature page hereto regarding the Subscriber is accurate.
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(f) Purchase
of Preferred Stock.
The
Subscriber will purchase the Preferred Stock as principal for its own account
for investment only and not with a view toward, or for resale in connection
with, the public sale or any distribution thereof.
(g) Compliance
with Securities Act.
The
Subscriber understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the 1933
Act
(based in part on the accuracy of the representations and warranties of
Subscriber contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such registration.
Notwithstanding anything to the contrary contained in this Agreement, such
Subscriber may transfer (without restriction and without the need for an opinion
of counsel) the Securities to its Affiliates (as defined below) provided that
each such Affiliate is an “accredited investor” under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this Agreement.
For
the purposes of this Agreement, an “Affiliate”
of
any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
person or entity. Affiliate when employed in connection with the Company
includes each Subsidiary as defined in Section 4(a) hereof. For purposes of
this
definition, “control” means the power to direct the management and policies of
such person or firm, directly or indirectly, whether through the ownership
of
voting securities, by contract or otherwise.
(h) Stock
Legends.
The
Preferred Stock shall bear the following legend:
“THIS
PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS PREFERRED
STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THESE
PREFERRED STOCK MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THESE PREFERRED STOCK
UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MEDASORB
TECHNOLOGIES CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”
The
Shares shall bear the following legend:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO MEDASORB
TECHNOLOGIES CORPORATION
THAT
SUCH REGISTRATION IS NOT REQUIRED."
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(i) Communication
of Offer.
The
offer to sell the Securities was directly communicated to the Subscriber by
the
Company. At no time was the Subscriber presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement,
or
any other form of general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently with such
communicated offer.
(j) Authority;
Enforceability.
This
Agreement and other agreements delivered together with this Agreement or in
connection herewith have been duly authorized, executed and delivered by the
Subscriber and are valid and binding agreements enforceable in accordance with
their 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;
and Subscriber has full corporate power and authority necessary to enter into
this Agreement and such other agreements and to perform its obligations
hereunder and under all other agreements entered into by the Subscriber relating
hereto.
(k) No
Governmental Review.
Each
Subscriber understands that no United States federal or state agency or any
other governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of
the
offering of the Securities.
(l) Correctness
of Representations.
Each
Subscriber represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and, unless a
Subscriber otherwise notifies the Company prior to the Closing Date shall be
true and correct as of the Closing Date.
(m) Survival.
The
foregoing representations and warranties shall survive until three years after
the Closing Date.
(n) Voting
Agreement.
Each
Subscriber agrees to vote all Shares purchased by it hereunder or hereafter
acquired by such Subscriber, and any other shares of capital stock of the
Company held by such Subscriber (i) to effect any and all amendments to the
Certificate of Incorporation of the Company in connection with effecting an
increase in the authorized shares of Common Stock, or a reverse stock split
of
the Common Stock (or combination of the foregoing), so that the Company shall
have sufficient shares of unissued Common Stock so as to permit the conversion
of all of the Preferred Stock and all other shares of preferred stock, warrants
and other convertible securities of the Company, in accordance with Section
9(f)
below, and (ii) in favor of the approval of any stock option plan or similar
stock incentive plan, approved of by the Company’s Board of Directors, provided
that the number of shares of Common Stock issuable under all such plans of
the
Company shall not exceed 15% of the Common Stock of the Company from time to
time outstanding on a fully diluted basis.
4. Company
Representations and Warranties.
The
Company represents and warrants to and agrees with each Subscriber that except
as set forth in the Reports or as otherwise qualified in the “Transaction
Documents” (as defined in Section 4(c)):
(a) Due
Incorporation.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power to own its properties and to carry on its business is disclosed
in the Reports. The Company is duly qualified as a foreign corporation to do
business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not
have
a Material Adverse Effect. For purpose of this Agreement, a “Material
Adverse Effect”
shall
mean a material adverse effect on the financial condition, results of
operations, properties, business or prospects of the Company taken as a whole.
For purposes of this Agreement, “Subsidiary”
means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity) of which more than 50% of (i) the outstanding
capital stock having (in the absence of contingencies) ordinary voting power
to
elect a majority of the board of directors or other managing body of such
entity, (ii) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (iii) in the case of a trust, estate, association, joint venture
or
other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such entity.
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(b) Outstanding
Stock.
All
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
(c) Authority;
Enforceability.
This
Agreement, the Preferred Stock, Certificate of Designation, the Escrow
Agreement, and any other agreements delivered together with this Agreement
or in
connection herewith (collectively “Transaction Documents”)
have
been duly authorized, executed and delivered by the Company and are valid and
binding agreements enforceable in accordance with their 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. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
(d) Additional
Issuances.
There
are no outstanding agreements or preemptive or similar rights affecting the
Company’s common stock or equity and no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or agreements
or understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
Subsidiaries of the Company except as described on Schedule
4(d).
The
Common stock of the Company on a fully diluted basis outstanding as of the
last
trading day preceding the Closing Date is set forth on Schedule
4(d).
(e) Consents.
Except
as set forth in Schedule
4(e),
no
consent, approval, authorization or order of any court, governmental agency
or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, any Principal Market (as defined in Section 9(b) of this Agreement),
nor the Company’s shareholders is required for the execution by the Company of
the Transaction Documents and compliance and performance by the Company of
its
obligations under the Transaction Documents, including, without limitation,
the
issuance and sale of the Securities. The Offering and Transaction Documents
have
been unanimously approved by the Company’s board of directors.
(f) No
Violation or Conflict.
Assuming the representations and warranties of the Subscribers in Section 3
are
true and correct, neither the issuance and sale of the Securities nor the
performance of the Company’s obligations under this Agreement and all other
Transaction Documents will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an event
which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default in any material respect) of a material nature
under (A) the articles or certificate of incorporation, charter or bylaws of
the
Company, (B) any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or over the properties
or assets of the Company or any of its Affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or
other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
“lock-up” or similar provision of any underwriting or similar agreement to which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or
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(ii) result
in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates;
or
(iii) except
as
disclosed in Schedule
4(f),
result
in the activation of any anti-dilution rights or a reset or repricing of any
debt or security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any obligation of
the
Company; or
(iv) except
as
disclosed in Schedule
4(f),
result
in the activation of any piggy-back registration rights or pre-emptive right
of
any person or entity holding securities or debt of the Company or having the
right to receive securities of the Company.
(g) The
Securities.
The
Securities upon issuance:
(i) are,
or
will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) have
been
duly and validly authorized and on the date of issuance of the Shares upon
conversion of the Preferred Stock will be duly and validly issued, fully paid
and nonassessable or if registered pursuant to the 1933 Act, and resold pursuant
to an effective Registration Statement (as defined in Section 11.1(iv) hereof),
will be free trading and unrestricted;
(iii) will
not
have been issued or sold in violation of any preemptive or other similar rights
of the holders of any securities of the Company;
(iv) will
not
subject the holders thereof to personal liability by reason of being such
holders provided Subscriber’s representations herein are true and accurate and
Subscribers take no actions or fail to take any actions required for their
purchase of the Securities to be in compliance with all applicable laws and
regulations; and
(v) will
not
result in a violation of Section 5 under the 1933 Act.
(h) Litigation.
There
is no pending or, to the best knowledge of the Company, threatened action,
suit,
proceeding or investigation before any court, governmental agency or body,
or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the performance by the Company
of
its obligations under the Transaction Documents. Except as disclosed in the
Reports or as set forth in Schedule
4(h),
there
is no pending or, to the best knowledge of the Company, basis for or threatened
action, suit, proceeding or investigation before any court, governmental agency
or body, or arbitrator having jurisdiction over the Company, or any of its
Affiliates which litigation if adversely determined would have a Material
Adverse Effect.
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(i) Reporting
Company.
The
Company is a publicly-held company subject to reporting obligations pursuant
to
Section 13(a) and 15(d) of the Securities Exchange Act of 1934 (the
“1934
Act”)
and
has a class of common stock registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
all reports and other materials required to be filed thereunder with the
Commission during the preceding twenty-four months.
(j) No
Market Manipulation.
The
Company and its Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Securities or affect the price
at
which the Securities may be issued or resold, provided, however, that this
provision shall not prevent the Company from engaging in investor
relations/public relations activities consistent with past
practices.
(k) Information
Concerning Company and Subsidiary.
The
Reports contain all material information relating to the Company and its
operations, and financial condition as of their respective dates, and all the
information required to be disclosed therein. Since the last day of the fiscal
year of the most recent annual audited financial statements included in the
Reports (“Latest
Financial Date”),
and
except as modified in the Other Written Information or in the Schedules hereto,
there has been no Material Adverse Event relating to the Company’s business,
financial condition or affairs not disclosed in the Reports. The Reports do
not
contain any 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 not
misleading in light of the circumstances when made. The financial statements
included in the Reports (i) have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, (ii) fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments, and (iii) do not require any restatement
to comply with United States GAAP as of the Closing Date. The financial
statements contained within the Reports are reported on a consolidated basis
in
accordance with GAAP.
(l) Stop
Transfer.
The
Company will not issue any stop transfer order or other order impeding the
sale,
resale or delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous notice
of
such instruction is given to the Subscriber.
(m) Defaults.
The
Company is not in violation of its certificate or articles of incorporation
or
bylaws. The Company is (i) not in default under or in violation of any material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect, (ii) not in default with respect to any order of any
court, arbitrator or governmental body or subject to or party to any order
of
any court or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to the
Company’s knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse
Effect.
(n) Not
an
Integrated Offering.
Neither
the Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offer of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the OTC Bulletin Board (“Bulletin
Board”)
any
Principal Market as defined in Section 9(b) which would impair the exemptions
relied upon in this Offering or the Company’s ability to timely comply with its
obligations hereunder. Nor will the Company or any of its Affiliates take any
action or steps that would cause the offer or issuance of the Securities to
be
integrated with other offerings which would impair the exemptions relied upon
in
this Offering or the Company’s ability to timely comply with its obligations
hereunder. The Company will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of the
Securities, which would impair the exemptions relied upon in this Offering
or
the Company’s ability to timely comply with its obligations
hereunder.
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(o) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor to its knowledge, any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the 0000 Xxx)
in
connection with the offer or sale of the Securities.
(p) Listing.
The
Company’s common stock is listed on the Bulletin Board under the symbol MSBT.OB.
The Company has not received any oral or written notice that the Common Stock
is
not eligible nor will become ineligible for listing on the Bulletin Board nor
that the Common Stock does not meet all requirements for the continuation of
such listing. The Company satisfies all the requirements for the continued
quotation of the Common Stock on the Bulletin Board.
(q) No
Undisclosed Liabilities.
The
Company has no liabilities or obligations which are material, individually
or in
the aggregate, which are not disclosed in the Reports and Other Written
Information, other than those incurred in the ordinary course of the Company’s
businesses since the Latest Financial Date and which in the aggregate, would
not
reasonably be expected to have a Material Adverse Effect, except as disclosed
on
Schedule
4(q).
As of
the Closing Date, the consolidated liabilities of the Company, including its
Subsidiaries, will not exceed $1,550,000.
(r) No
Undisclosed Events or Circumstances.
Since
the Latest Financial Date, no event or circumstance has occurred or exists
with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has
not been so publicly announced or disclosed in the Reports.
(s) Capitalization.
The
authorized and outstanding capital stock of the Company as of the date of this
Agreement and the Closing Date (not including the Securities) are set forth
on
Schedule
4(d).
Except
as set forth on Schedule
4(d),
there
are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company or any of its
Subsidiaries. All of the outstanding shares of Common Stock of the Company
have
been duly and validly authorized and issued and are fully paid and
nonassessable.
(t) Dilution.
The
Company’s executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders
of
the Company’s equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment
that
the issuance of the Securities is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Shares upon
conversion of the Preferred Stock is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests
of
other shareholders of the Company or parties entitled to receive equity of
the
Company.
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(u) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind during the two fiscal years preceding the
date
of this Agreement, presently existing, or reasonably anticipated by the Company
to arise, between the Company and the accountants and lawyers formerly or
presently employed by the Company, including but not limited to disputes or
conflicts over payment owed to such accountants and lawyers.
(v) Transfer
Agent.
The
name, address, telephone number, fax number, contact person and email address
of
the Company’s transfer agent is set forth on Schedule
4(v)
hereto.
(w) Investment
Company.
Neither
the Company nor any Affiliate is an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.
(x) Subsidiary
Representations.
The
Company makes each of the representations contained in Sections 4(a), (b),
(d),
(e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as same
relate to its sole Subsidiary, MedaSorb Technologies, Inc., a Delaware
corporation (“MedaSorb Delaware”). Other than MedaSorb Delaware, the Company has
no Subsidiaries.
(y) Company
Predecessor.
All
representations made by or relating to the Company of a historical or
prospective nature and all undertakings described in Sections 9(g) through
9(l)
shall relate, apply and refer to the Company, its predecessors, and MedaSorb
Delaware.
(z) Correctness
of Representations.
The
Company represents that the foregoing representations and warranties are true
and correct as of the date hereof in all material respects, and, unless the
Company otherwise notifies the Subscribers prior to the Closing Date, shall
be
true and correct in all material respects as of the Closing Date.
(aa) ISO
Pool.
On the
Initial Closing Date, the incentive stock option pool of the Company, including
awarded and un-awarded stock options, is as set forth on Schedule
4(d).
(bb) Survival.
The
foregoing representations and warranties shall survive until three years after
the Closing Date.
(cc) D&O
Insurance.
All
nominees of NJTC Venture Fund SBIC, L.P. (“NJTC”)
appointed to the Board of Directors of the Company on the Initial Closing Date
pursuant to the Certificate of Designation shall be subject to coverage under
the Company’s directors and officers liability insurance policies on the same
terms as the Company’s then existing directors.
5. Regulation
D Offering.
The
offer and issuance of the Securities to the Subscribers is being made pursuant
to the exemption from the registration provisions of the 1933 Act afforded
by
Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
D
promulgated thereunder. On the Closing Date, the Company will provide an opinion
reasonably acceptable to Subscriber from the Company’s legal counsel opining on
the availability of an exemption from registration under the 1933 Act as it
relates to the offer and issuance of the Securities and other matters reasonably
requested by Subscribers. The Company will provide, at the Company’s expense,
such other legal opinions in the future as are reasonably necessary for the
issuance and resale of the Common Stock issuable upon conversion of the
Preferred Stock pursuant to an effective registration statement or Rule 144
under the 1933 Act.
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6. Preferred
Stock.
6.1 Conversion
of Preferred Stock.
(a) Upon
the
conversion of any Preferred Stock, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel to assure that the Company’s transfer agent shall issue stock
certificates in the name of Subscriber (or its nominee) or such other persons
as
designated by Subscriber and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such conversion.
The Company warrants that no instructions other than these instructions have
been or will be given to the transfer agent of the Company’s Common Stock and
that, unless waived by the Subscriber, the Shares will be freely transferable,
and will not contain a legend other than the usual 1933 Act restriction from
transfer legend. If and when the Subscriber sells the Shares and assuming (i)
the Registration Statement (as defined below) is effective and the prospectus,
as supplemented or amended, contained therein is current and (ii) the Subscriber
confirms in writing to the transfer agent that the Subscriber has or will comply
with the prospectus delivery requirements, upon delivery to the purchaser,
the
restrictive legend will be immediately removed and the Shares upon such sale
will be free-trading, and freely transferable. In the event that the Shares
are
sold in a manner that complies with an exemption from registration, the Company
will promptly instruct its counsel to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely, if pursuant to Rule 144(b)(1)
of
the 1933 Act, or for 90 days if pursuant to the other provisions of Rule 144
of
the 1933 Act).
(b) Nothing
contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of
a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required
to
be paid or other charges hereunder exceed the maximum permitted by such law,
any
payments in excess of such maximum shall be credited against amounts owed by
the
Company to the Subscriber and thus refunded to the Company.
6.2 Adjustments.
The
Conversion Price and amount of Shares issuable upon conversion of the Preferred
Stock shall be equitably adjusted and as described in this Agreement and the
Certificate of Designation.
6.3 Redemption.
The
Preferred Stock shall not be redeemable or callable except as described in
the
Certificate of Designation.
7. Broker/Legal
Fees.
(a) Broker’s
Fee.
The
Company on the one hand, and each Subscriber (for itself only) on the other
hand, agree to indemnify the other against and hold the other harmless from
any
and all liabilities to any persons claiming brokerage commissions or finder’s
fees on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions. The Company
represents that to its knowledge there are no parties entitled to receive fees,
commissions, or similar payments from the Company in connection with the
transaction described in this Agreement.
(b) Legal
Fees.
The
Company shall pay on the Initial Closing Date out of funds held pursuant to
the
Escrow Agreement, in respect of legal fees for services rendered to the
Subscribers in connection with this Agreement and the purchase and sale of
the
Preferred Stock (the “Offering”),
a
cash fee of up to $60,000 to Xxxx Xxxxx LLP, a cash fee of up to $7,500 to
Grushko & Xxxxxxx, P.C., and a cash fee of $27,500 to Xxxxxxxx and Xxxxxxxx
LLP. An additional cash payment in the amount of $50,000 will be paid to Xxxxxx
Godward Kronish LLP on the Initial Closing Date out of funds held pursuant
to
the Escrow Agreement as partial payment of legal fees due to it. Following
the
Initial Closing Date, the Company shall pay a cash legal fee to Xxxxxxx Xxxxxx
& Green. P.C. of up to $5,000.
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8. Closing
Conditions.
The
obligations of each Subscriber under this Agreement are subject to the Company's
fulfillment on or before Closing of each of the following
conditions:
8.1 Conditions
of Subscriber’s Obligations to Close.
(a) Representations
and Warranties.
Each of
the representations and warranties of the Company contained in this Agreement
that are qualified as to materiality must be true and correct in all respects,
and each of the representations and warranties of the Company contained in
this
Agreement which are not qualified as to materiality must be true and correct
in
all material respects, in each case, as of the Closing Date.
(b) Performance.
The
Company shall have performed and complied in all material respects with all
agreements, covenants and conditions required to be performed and complied
with
by it under the Transaction Documents at or before the Closing.
(c) No
Suspension.
No
order enjoining the consummation of the transactions contemplated hereby or
the
offering or sale of the Preferred Stock shall have been issued, and no
proceedings for that purpose or a similar purpose shall have been initiated
or
pending, or, to the best of the Company's knowledge, shall be contemplated
or
threatened, nor shall any order have been issued halting the trading of the
Company's Common Stock.
(d) Capitalization.
Immediately prior to the consummation of the Closing, the Company will have
an
authorized capitalization as set forth on Schedule
4(d).
(e) Officer’s
Certificate.
The
Subscribers shall have received certificates of the Chief Executive Officer
and
Chief Financial Officer of the Company, dated as of the Closing Date, certifying
in their capacity as officers of the Company, as to the fulfillment of the
conditions set forth in subparagraphs (a), (b) and (c) above.
(f) No
Material Adverse Change.
At
Closing, the Chief Executive Officer and the Chief Financial Officer of the
Company shall have provided a certificate to NJTC confirming that there have
been no material adverse changes in the condition (financial or otherwise)
or
prospects of the Company from the date of the financial statements included
in
the Reports.
(g) Opinion
of Counsel.
The
Company shall have delivered to the Subscribers an opinion dated as of the
Closing Date and addressed to the Subscribers from Cane Xxxxx LLP, Nevada counsel
for the Company with regards to matters of good standing, due incorporation,
non
contravention, that the securities issued are validly issued fully paid and
non-assessable, litigation and such matters as are reasonably appropriate in
transactions of this type, in substantially the form attached hereto as
Exhibit
C.
Further, the Company shall have delivered to the Subscribers
an
opinion as of the Closing Date, and, addressed to the Subscribers, from Xxxxx
& Xxxxxx LLP, New York counsel to the Company with regards to all other
matters reasonably requested in substantially the form attached hereto as
Exhibit
D.
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(h) Stock
Certificates.
The
Company shall have delivered to each Subscriber certificates representing that
number of Shares equal to the number of shares of Preferred Stock purchased
by
such Subscriber.
(i) Lock-up
Agreements.
Other
than as set forth on Schedule
8(i),
the
Company shall have delivered to NJTC “Lock-up” agreements from each of its
current officers, directors and shareholders owning greater than 5% of the
Company’s outstanding Common Stock (or securities which are convertible or
exchangeable into Common Stock) which are satisfactory to NJTC and having a
duration of twelve (12) months.
(j) SBA
Agreements.
The
Company shall have delivered to NJTC SBA Forms 480, 652, and 1031, which shall
be in full force and effect.
(k) Waivers.
Except
with respect to anti-dilution protections provided to Xx Xxxxx in connection
with entering into his employment agreement, the Company shall deliver permanent
and binding waivers and consents from all relevant stockholders of the Company,
including, without limitation, the June 30, 2006 purchasers of the Company’s 10%
Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”),
(i) waiving such stockholder’s and warrant holder’s right permanently to any
rights relating to anti-dilution protection whatsoever except as contained
in
the Certificate of Designation, (ii) waiving any rights of first refusal or
preemptive rights with respect to the transactions contemplated hereby, and
(iii) waiving their registration rights with respect to the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock and exercise
of
the warrants issued in connection therewith, in substantially the form set
forth
as Exhibit
E.
9. Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
(a) Stop
Orders.
The
Company will advise the Subscribers, within four hours after the Company
receives notice of issuance by the Commission, any state securities commission
or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing.
The
Company shall promptly secure the listing of the Shares upon each national
securities exchange, or electronic or automated quotation system upon which
they
are or become eligible for listing and shall maintain such listing so long
as
any Preferred Stock is outstanding. The Company will maintain the listing of
its
Common Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq
National Market System, Bulletin Board, or New York Stock Exchange (whichever
of
the foregoing is at the time the principal trading exchange or market for the
Common Stock (the “Principal Market”)),
and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock
from any Principal Market. As of the date of this Agreement, the Bulletin Board
is the Principal Market.
(c) Market
Regulations.
The
Company shall notify the Commission, the Principal Market and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to Subscriber.
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(d) Filing
Requirements.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will (A) comply in all
respects with its reporting and filing obligations under the 1934 Act, (B)
cause
its Common Stock to continue to be registered under Section 12(b) or 12(g)
of
the 1934 Act, and (C) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted
by
the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such registration under the 1934 Act or to terminate or suspend its reporting
and filing obligations under said acts until two (2) years after the Closing
Date. Until the earlier of the resale of the Common Stock by each Subscriber,
the Company will use its best efforts to continue the listing or quotation
of
the Common Stock on a Principal Market and will comply in all respects with
the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Principal Market. The Company agrees to timely file a Form D with respect
to
the Securities if required under Regulation D, if required, and to provide
a
copy thereof to each Subscriber promptly after such filing
(e) Use
of
Proceeds.
The
proceeds of the Offering will be employed by the Company for the purposes set
forth on Schedule
9(e)
hereto.
(f) Stock
Split; Reservation.
Following the Initial Closing Date, the Company undertakes to use its
commercially reasonable efforts (but in no event later than 180 days following
the Initial Closing Date) to increase its authorized shares of Common Stock,
or
effect a reverse stock split (or combination of the foregoing) to permit the
conversion or exercise, as applicable, of all preferred stock, warrants and
other convertible securities of the Company outstanding on the Initial Closing
Date. In addition, immediately following such increase or reverse split, the
Company shall reserve, pro
rata,
on
behalf of the Subscribers from its authorized but unissued Common Stock, a
number of common shares equal to 175% of the amount of Common Stock necessary
to
allow each Subscriber to be able to convert all Preferred Stock issuable
pursuant to this Agreement and dividends thereon. Failure to have sufficient
shares reserved pursuant to this Section 9(f) for five (5) consecutive business
days or fifteen (15) days in the aggregate shall be a material default of the
Company’s obligations under this Agreement and an Event of Default pursuant to
the Certificate of Designation.
(g) Taxes.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings
to
foreclose any lien which may have attached as security therefore.
(h) Insurance.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will keep its material
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company’s line of business, in
amounts sufficient to prevent the Company from becoming a co-insurer and not
in
any event less than one hundred percent (100%) of the insurable value of the
property insured; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks and liability
to
persons and property to the extent and in the manner customary for companies
in
similar businesses similarly situated and to the extent available on
commercially reasonable terms.
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(i) Books
and Records.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will keep true records
and books of account in which full, true and correct entries will be made of
all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent
basis.
(j) Governmental
Authorities.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company shall duly observe and
conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties or
assets.
(k) Intellectual
Property.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business, unless it
is
sold for value.
(l) Properties.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will keep its material
properties in good repair, working order and condition, reasonable wear and
tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably
be
expected to have a Material Adverse Effect.
(m) Confidentiality/Public
Announcement.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement or as otherwise
required in any other Commission filing, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber, except to the extent required by law and then only upon five
days prior notice to Subscriber. In any event and subject to the foregoing,
the
Company shall file a Form 8-K or make a public announcement describing the
Offering not later than the third business day after the Closing Date. In the
Form 8-K or public announcement, the Company will specifically disclose the
amount of common stock outstanding immediately after the Closing.
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(n) Further
Registration Statements.
Except
for a registration statement filed exclusively on behalf of the Subscribers
pursuant to Section 11 of this Agreement or on Form S-8, the Company will not
file any registration statements nor amend any already filed registration
statement with the Commission or with state regulatory authorities without
the
consent of the Subscribers nor allow any other registration statement to be
declared effective by the Commission until the sooner of (i) the Registration
Statement shall have been current and available for use in connection with
the
resale of the Registrable Securities (as defined in Section 11.1(i)) for a
period of 180 days (“Exclusion
Period”),
(ii)
the date on which all the Shares have been resold or transferred by the
Subscribers pursuant to the Registration Statement or Rule 144, or (iii) the
date on which all the Shares may be resold or transferred by the Subscribers
pursuant to Rule 144(b) without regard to volume limitations. The Exclusion
Period will be tolled during the pendency of an Event of Default as defined
in
the Certificate of Designation.
(o) Blackout.
The
Company undertakes and covenants that until the end of the Exclusion Period,
the
Company will not enter into any acquisition, merger, exchange or sale or other
transaction that could have the effect of delaying the effectiveness of any
pending registration statement or causing an already effective registration
statement to no longer be effective or current for a period ten (10) or more
consecutive days nor more than twenty (20) days in the aggregate during any
consecutive three hundred and sixty five (365) day period.
(p) Non-Public
Information.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf will provide any Subscriber or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Subscriber shall have agreed in writing to receive such
information. The Company understands and confirms that each Subscriber shall
be
relying on the foregoing representations in effecting transactions in securities
of the Company.
(q) Negative
Covenants.
So long
as at least twenty-five percent (25%) of the shares of Preferred Stock issued
on
the Initial Closing Date are outstanding, without the consent of the
Subscribers, including NJTC, if it is then the
holder of at least 25% of the shares of Preferred Stock issued to it on the
Initial Closing Date,
the
Company will not directly or indirectly:
(i) create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”)
upon
any of its property, whether now owned or hereafter acquired except for (A)
the
Excepted Issuances (as defined in Section 12(a) hereof), (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith
and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business
in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing
of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property,(f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed
by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or (g) indebtedness relating the New Jersey Economic
Development Authority or CIT Healthcare, LLC (each of (a) through (g), a
“Permitted
Lien”)
and
(C) indebtedness for borrowed money which is not senior or pari passu to the
rights of the Subscribers to receive assets of the Company upon bankruptcy
or
dissolution;
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(ii) amend
its
certificate of incorporation, bylaws or its charter documents so as to adversely
affect any rights of the Subscriber, except as otherwise provided in this
Agreement;
(iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the Transaction Documents;
(iv) prepay
any financing related debt obligations; or
(v) engage
in
any transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $25,000
in any calendar year other than (i) for payment of salary or consulting fees
for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company, and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company, or interest previously
owned by officers, directors, or employees of the Company as described on
Schedule
9(q).
(r) Board
Observer.
So long
as Xxxx Medical Technologies, LLC (“CMT”)
is the
holder of at least twenty-five percent (25%) of the shares of Preferred Stock
purchased by it on the Initial Closing Date, CMT shall have the right to have
its designee receive notices of, and attend as an observer, all meetings of
the
board of directors of the Company. The Company shall indemnify such observer
in
the same manner as it indemnifies directors of the Company, and to the extent
it
can do so at no additional cost, the Company shall include such observer under
the Company’s directors and officers liability insurance policies.
(s) Post
Closing Covenants.
(i) Within
30
days following the Initial Closing Date, the Company will issue to the
Subscribers that purchase Preferred Stock on the Initial Closing Date, a
security (the “Additional
Security”)
that
will provide such Subscribers with the right to purchase an additional
$1,500,000 of Preferred Stock, in the aggregate, at its Stated Value within
15
months following the Initial Closing Date, pro rata in accordance with their
investment on the Initial Closing Date, provided,
however,
that
the Additional Security issued to NJTC shall provide it with the right to
purchase up to the greater of (x) its pro rata share of its investment in the
Preferred Stock or (y) $750,000 in Stated Value of Preferred Stock. The
Additional Security shall be delivered in accordance with applicable laws and
regulations and in form and substance otherwise reasonably satisfactory to
the
Company, NJTC and their respective counsel. No holder of an Additional Security
shall be required to exercise its right thereunder to purchase additional shares
of Preferred Stock.
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(ii) The
option agreements evidencing the options to be issued on the Initial Closing
Date to purchase 5,885,250 shares of Common Stock, as set forth on Schedule
4(d),
shall
provide for vesting over a three-year period (25% upon issuance, and an
additional 25% upon each of the first, second and third anniversaries of
issuance), without any acceleration of such vesting upon the termination of
employment of the holder of such option.
(iii) Attached
hereto as Exhibit
F
is the
Company’s “100-Day Plan” (the “Plan”).
Following the conclusion of the period covered by the Plan, the Board of
Directors of the Company will evaluate the Company’s performance as compared to
the Plan and make appropriate recommendations following such evaluation.
(iv) On
or
prior to the Initial Closing Date, the Company and each of the employees listed
on Schedule
9(s)
that are
party to employment agreements with the Company shall enter into amendments
to
such agreements providing for (a) the termination of such agreements on December
31, 2008, (b) the Company’s ability to terminate employment in the event the
Board of Directors is not, in its reasonable discretion, satisfied with the
employee’s performance, subject to a 30-day cure period and an additional 15-day
notice period following such cure period, (c) no acceleration of non-vested
stock options upon termination of employment, and (d) severance payments equal
to two weeks of base salary for each year of service with the Company. In
connection with such amendments, such employees shall enter into separate
non-disclosure and non-compete agreements (“NDAs”)
with
provisions in the same form as the non-disclosure and non-compete provisions
in
the current employment agreements such employees are a party to. On or prior
to
Initial Closing Date, each employee of the Company listed on Schedule
9(s)
shall
agree in writing to enter into the amendments and NDAs provided for herein.
(v) Following
the termination of the employment agreements under clause (iv) above, the
Company may or may not enter into new employment agreements with Company
employees consistent with the terms of the amended employment agreements
provided for under clause (iv), provided that all Company employees (whether
or
not party to written employment agreements) shall be entitled to severance
payments equal to two weeks of base salary for each year of service with the
Company.
(vi) Until
such time as the Company has completed the current clinical study in process
in
Germany of up to 80 patients with acute respiratory distress syndrome or acute
lung injury in the setting of sepsis, the Company shall not increase the salary
of any of its employees or pay any cash bonuses to any such employee.
(t) Post
Closing Issuances.
Other
than with respect to Excepted Issuances, during the 6-month period following
the
Initial Closing Date, the Company shall not issue Common Stock, or securities
convertible into Common Stock, at per share price (or with a conversion or
exercise price per share of Common Stock, as applicable) less than the
conversion price of the Preferred Stock.
10. Covenants
of the Company and Subscriber Regarding Indemnification.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers’ officers, directors, agents, Affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation
by
Company or breach of any warranty by Company in this Agreement, the Transaction
Documents or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant
or
undertaking to be performed by the Company hereunder, or any other agreement
entered into by the Company and Subscriber relating hereto.
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(b) Each
Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
and each of the Company’s officers, directors, agents, Affiliates, control
persons against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon
the
Company or any such person which results, arises out of or is based upon (i)
any
material misrepresentation by such Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach
or
default in performance by such Subscriber of any covenant or undertaking to
be
performed by such Subscriber hereunder, or any other agreement entered into
by
the Company and Subscribers, relating hereto.
(c) In
no
event shall the liability of any Subscriber or permitted successor hereunder
or
under any Transaction Document or other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
actually received by such Subscriber upon the sale of “Registrable Securities”
(as defined herein).
(d) The
procedures set forth in Section 11.6 shall apply to the indemnification set
forth in Sections 10(a) and 10(b) above.
11.1 Registration
Rights.
The
Company hereby grants the following registration rights to holders of the
Securities.
(i) On
no
more than two occasions, for a period commencing two hundred and eleven (211)
days after the Closing Date, and no later than two (2) years after the Initial
Closing Date, upon a written request therefor from any record holder or holders
of more than 50% of the Shares issued and issuable upon conversion of the
outstanding Preferred Stock, the Company shall prepare and file with the
Commission a registration statement under the 1933 Act registering up to 100%
of
the Shares issuable upon conversion of all of the Preferred Stock issued to
the
Subscribers on the Initial Closing Date (the “Registrable
Securities”).
For
purposes of Sections 11.1(i), 11.1(ii) and 11.1(iv), Registrable Securities
shall not include Securities which are (A) registered for resale in an effective
registration statement, (B) included for registration in a pending registration
statement, (C) which have been issued without further transfer restrictions
after a sale or transfer pursuant to Rule 144 under the 1933 Act, or (D) which
may be sold under Rule 144(b)(1) without restriction. Upon the receipt of such
request, the Company shall promptly give written notice to all other record
holders of the Registrable Securities that such registration statement is to
be
filed and shall include in such registration statement Registrable Securities
for which it has received written requests within ten (10) days after the
Company gives such written notice. Such other requesting record holders shall
be
deemed to have exercised their demand registration right under this Section
11.1(i).
(ii) If
the
Company at any time proposes to register any of its securities under the 1933
Act for sale to the public, whether for its own account or for the account
of
other security holders or both, except with respect to registration statements
on Forms X-0, X-0 or another form not available for registering the Registrable
Securities for sale to the public, provided the Registrable Securities are
not
otherwise registered for resale by the Subscribers or Holder pursuant to an
effective registration statement, each such time it will give at least fifteen
(15) days’ prior written notice to the record holder of the Registrable
Securities of its intention so to do. Upon the written request of the holder,
received by the Company within ten (10) days after the giving of any such notice
by the Company, to register any of the Registrable Securities not previously
registered, the Company will cause such Registrable Securities as to which
registration shall have been so requested to be included with the securities
to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the “Seller”
or
“Sellers”).
In
the event that any registration pursuant to this Section 11.1(ii) shall be,
in
whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be
sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the foregoing
provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
a delay of any registration statement referred to in this Section 11.1(ii)
without thereby incurring any liability to the Seller.
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(iii) If,
at
the time any written request for registration is received by the Company
pursuant to Section 11.1(i), the Company has determined to proceed with the
actual preparation and filing of a registration statement under the 1933 Act
in
connection with the proposed offer and sale for cash of any of its securities
for the Company’s own account and the Company actually does file such other
registration statement, such written request shall be deemed to have been given
pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
the
holders of Registrable Securities covered by such written request shall be
governed by Section 11.1(ii).
(iv) The
Company shall use its best efforts to file with the Commission a Form S-1
registration statement (the “Registration
Statement”)
(or
such other form that it is eligible to use) in order to register the Registrable
Securities for resale and distribution under the 1933 Act within one hundred
and
eighty (180) days after the Initial Closing Date (the “Filing
Date”),
and
cause the Registration Statement to be declared effective within two hundred
and
forty (240) days after the Initial Closing Date (the “Effective
Date”).
The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber, pro
rata,
and not
issued, employed or reserved for anyone other than each such Subscriber. The
Registration Statement will immediately be amended or additional registration
statements will be immediately filed by the Company as necessary to register
additional shares of Common Stock to allow the public resale of all Common
Stock
included in and issuable by virtue of the Registrable Securities. Except with
the written consent of the Subscriber, or as described on Schedule
11.1
hereto,
no securities of the Company other than the Registrable Securities will be
included in the Registration Statement. The Company shall have no obligation
to
file the Registration Statement by the Filing Date, or cause the Registration
Statement to be declared effective on the Effective Date, if the Registrable
Securities cease to constitute Registrable Securities pursuant to Section
11.1(i) as of such respective dates.
11.2 Registration
Procedures.
If and
whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii),
or (iv) to effect the registration of any Registrable Securities under the
1933
Act, the Company will, as expeditiously as possible:
(a) subject
to the timelines provided in this Agreement, prepare and file with the
Commission a registration statement required by Section 11, with respect to
such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly provide to the holders of
the
Registrable Securities copies of all filings and Commission letters of comment
and notify Xxxx Xxxxx LLP (Attn: Xxxxxx X. XxXxxxx) and Xxxxxxx Xxxxxx &
Green, P.C. (Attn: Xxxxx X. Xxxxxxx) on or before 6:00 PM EST not later than
the
first business Day after the Company receives notice that (i) the Commission
has
no comments or no further comments on the Registration Statement, and (ii)
the
registration statement has been declared effective (failure to timely provide
notice as required by this Section 11.2(a) shall be a material breach of the
Company’s obligation and an Event of Default as defined in the Preferred Stock
and a Non-Registration Event as defined in Section 11.4 of this
Agreement);
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(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective until such registration
statement has been effective for a period of two (2) years or the sale or
transfer of all Registrable Securities pursuant to the Registration Statement
or
pursuant to Rule 144, without regard to volume limitations, and comply with
the
provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance
with
the Sellers’ intended method of disposition set forth in such registration
statement for such period;
(c) furnish
to the Sellers, at the Company’s expense, such number of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement or make them electronically available;
(d) use
its
commercially reasonable best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or “blue
sky” laws of New York and such jurisdictions as the Sellers shall request in
writing, provided, however, that the Company shall not for any such purpose
be
required to qualify generally to transact business as a foreign corporation
in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) if
applicable, list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) notify
the Sellers within four hours of the Company’s becoming aware that a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained 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 light of the circumstances then existing or which becomes
subject to a Commission, state or other governmental order suspending the
effectiveness of the registration statement covering any of the
Shares;
(g) provided
same would not be in violation of the provision of Regulation FD under the
1934
Act, reasonably make available for inspection by the Sellers, and any attorney,
accountant or other agent retained by the Seller or underwriter, upon prior
written request, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company’s officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the Seller,
attorney, accountant or agent in connection with such registration statement;
and
(h) provide
to the Sellers copies of the Registration Statement and amendments thereto
not
later than one business day prior to the filing thereof with the Commission.
11.3 Provision
of Documents.
In
connection with each registration described in this Section 11, each Seller
will
furnish to the Company in writing such information and representation letters
with respect to itself and the proposed distribution by it as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
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11.4 Non-Registration
Events.
The
Company and the Subscribers agree that the Sellers will suffer damages if the
Registration Statement is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, and any registration
statement required under Section 11.1(i) or 11.1(ii) is not filed within sixty
(60) calendar days after written request and declared effective by the
Commission within 120 days after such request or, if later, within 240 calendar
days after the Initial Closing Date with respect to any registration statement
required under Section 11.1(ii), and maintained in the manner and within the
time periods contemplated by Section 11 hereof, and it would not be feasible
to
ascertain the extent of such damages with precision. Accordingly, if (A) the
Registration Statement is not filed on or before the Filing Date, (B) is not
declared effective on or before the Effective Date, (C) due to the action or
inaction of the Company the Registration Statement is not declared effective
within three (3) business days after receipt by the Company or its attorneys
of
a written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments
which time will be reasonably extended if the Company is required to amend
the
Registration Statement to include additional financial statements, (D) if the
registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
within 60 days after such written request, or is not declared effective within
120 calendar days after such written request or, if later, within 240 calendar
days after the Initial Closing Date with respect to any Registration Statement
required under Section 11.1(ii), or (E) any registration statement described
in
Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but
shall
thereafter cease to be effective without being succeeded within twenty (20)
business days by an effective replacement or amended registration statement
or
for a period of time which shall exceed 30 days in the aggregate per year
(defined as a period of 365 days commencing on the Actual Effective Date (each
such event referred to in clauses (A) through (E) of this Section 11.4 is
referred to herein as a “Non-Registration Event”), then the Company shall
deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to two percent (2%) for each thirty (30) days or part thereof
of
the Purchase Price of the Preferred Stock remaining unconverted and conversion
price of Shares issued upon conversion of the Obligation Amount (as defined
in
the Certificate of Designation) owned of record by such holder which are subject
to such Non-Registration Event until such time as the Non-Registration Event
is
cured, provided,
however
that if
(i) a delay in the filing or effectiveness of the Registration Statement under
Section 11.1(iv), or any registration statement required under Section 11.1(i)
or 11.1(ii), is caused solely due to circumstances outside the Company’s
reasonable control, including, without limitation, as a result of comments
from
the Commission relating to Rule 415 under the 1933 Act, (ii) the Company has
used commercially reasonable efforts to cure the event causing such delay,
and
(iii) with respect to a registration statement requested to be filed by holders
of Registrable Securities pursuant to Sections 11.1(i) or 11.1(ii), such
registration statement is declared effective no later than 270 calendar days
after the written request of such holders, then such delay shall not
be
deemed a Non-Registration Event, and
provided,
further
that if
such delay in the filing or effectiveness of any registration statement required
under Section 11.1(i), 11.1(ii) or 11.1(iv), is caused solely due to comments
received by the Company from the Commission with respect to such registration
statement, including, without limitation, comments relating to Rule 415 under
the 1933 Act, then such delay shall not
be
deemed a Non-Registration Event. The Company must pay the Liquidated Damages
in
cash. The Liquidated Damages must be paid within ten (10) days after the end
of
each thirty (30) day period or shorter part thereof for which Liquidated Damages
are payable. In the event a Registration Statement is filed by the Filing Date
but is withdrawn prior to being declared effective by the Commission, then
such
Registration Statement will be deemed to have not been filed. All oral or
written comments received from the Commission relating to the Registration
Statement must be satisfactorily responded to within fifteen (15) business
days
after receipt of comments from the Commission. Failure to timely respond to
Commission comments is a Non-Registration Event for which Liquidated Damages
shall accrue and be payable by the Company to the holders of Registrable
Securities at the same rate set forth above. Notwithstanding the foregoing,
the
Company shall not be liable to the Subscriber under this Section 11.4 for any
events or delays occurring as a consequence of the acts or omissions of the
Subscribers contrary to the material obligations undertaken by Subscribers
in
this Agreement. Liquidated Damages will not accrue nor be payable pursuant
to
this Section 11.4 nor will a Non-Registration Event be deemed to have occurred
under this Section 11 for times during which Registrable Securities are
transferable by the holder of Registrable Securities pursuant to Rule 144(b)(1)
under the 1933 Act without restriction.
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11.5 Expenses.
All
expenses incurred by the Company in complying with Section 11, including,
without limitation, all registration and filing fees, printing expenses (if
required), fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or “blue sky” laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, and fees
of transfer agents and registrars, are called “Registration
Expenses.”
All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called “Selling
Expenses.”
The
Company will pay all Registration Expenses in connection with the registration
statement under Section 11. Selling Expenses in connection with each
registration statement under Section 11 shall be borne by the Seller and may
be
apportioned among the Sellers in proportion to the number of shares sold by
the
Seller relative to the number of shares sold under such registration statement
or as all Sellers thereunder may agree.
11.6 Indemnification
and Contribution.
(a) In
the
event of a registration of any Registrable Securities under the 1933 Act
pursuant to Section 11, the Company will, to the extent permitted by law,
indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions
of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
to
the Seller to the extent that any such damages arise out of or are based upon
an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus or supplement
to
the final prospectus delivered by the Company to the Seller with or prior to
the
delivery of written confirmation of the sale by the Seller to the person
asserting the claim from which such damages arise, (ii) the final prospectus
or
supplement to the final prospectus would have corrected such untrue statement
or
alleged untrue statement or such omission or alleged omission, or (iii) to
the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller,
or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
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(b) In
the
event of a registration of any of the Registrable Securities under the 1933
Act
pursuant to Section 11, each Seller severally but not jointly will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter
within the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter
and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage
or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability
of
the Seller hereunder shall be limited to the net proceeds actually received
by
the Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof, but the omission so to notify the indemnifying party shall
not
relieve it from any liability which it may have to such indemnified party other
than under this Section 11.6(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11.6(c), except
and only if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake
the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 11.6(c) for any legal expenses subsequently incurred
by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both
the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to
it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed
to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
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(d) In
order
to provide for just and equitable contribution in the event of joint liability
under the 1933 Act in any case in which either (i) a Seller, or any controlling
person of a Seller, makes a claim for indemnification pursuant to this Section
11.6 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or
the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 11.6 provides
for indemnification in such case, or (ii) contribution under the 1933 Act may
be
required on the part of the Seller or controlling person of the Seller in
circumstances for which indemnification is not provided under this Section
11.6;
then, and in each such case, the Company and the Seller will contribute to
the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Seller is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the registration statement bears
to
the public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (y) the Seller will not
be
required to contribute any amount in excess of the public offering price of
all
such securities sold by it pursuant to such registration statement; and (z)
no
person or entity guilty of fraudulent misrepresentation (within the meaning
of
Section 11(f) of the 0000 Xxx) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.
11.7 Delivery
of Unlegended Shares.
(a) Within
three (3) business days (such third business day being the “Unlegended
Shares Delivery Date”)
after
the business day on which the Company has received (i) a notice that Shares
or
any other Common Stock held by a Subscriber have been sold pursuant to the
Registration Statement or Rule 144 under the 1933 Act, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule 144,
as
applicable and if required, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters
of
the Subscriber and/or Subscriber’s broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion of
such
counsel, directing the delivery of shares of Common Stock without any legends
including the legend set forth in Section 4(h) above, reissuable pursuant to
any
effective and current Registration Statement described in Section 11 of this
Agreement or pursuant to Rule 144 under the 1933 Act (the “Unlegended Shares”);
and
(z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted Shares certificate, if any, to the Subscriber at the address specified
in the notice of sale, via express courier, by electronic transfer or otherwise
on or before the Unlegended Shares Delivery Date.
(b) In
lieu
of delivering physical certificates representing the Unlegended Shares, if
the
Company’s transfer agent is participating in the Depository Trust Company
(“DTC”)
Fast
Automated Securities Transfer program, upon request of a Subscriber, so long
as
the certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon,
the
Company agrees to cause its transfer agent to electronically transmit the
Unlegended Shares by crediting the account of Subscriber’s prime Broker with DTC
through its Deposit Withdrawal Agent Commission system. Such delivery must
be
made on or before the Unlegended Shares Delivery Date.
(c) The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than two business days after the Unlegended
Shares Delivery Date could result in economic loss to a Subscriber. As
compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber
for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company
fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to redeem all or any
portion of the Shares subject to such default at a price per share equal to
120%
of the purchase price of such Common Stock (“Unlegended
Redemption Amount”).
The
amount of the aforedescribed liquidated damages that have accrued to been paid
for the twenty day period prior to the receipt by the Subscriber of the
Unlegended Redemption Amount shall be credited against the Unlegended Redemption
Amount. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand.
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(d) In
addition to any other rights available to a Subscriber, if the Company fails
to
deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within seven (7) business days after the Unlegended Shares Delivery
Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a “Buy-In”),
then
the Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber’s total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase
price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the
Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.7 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
Shares based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or
for
any other reason, unless, an injunction or temporary restraining order from
a
court, on notice, restraining and or enjoining delivery of such Unlegended
Shares shall have been sought and obtained by the Company or at the Company’s
request or with the Company’s assistance, and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of 120% of the amount
of
the aggregate purchase price of the Common Stock which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber’s favor.
12. (a)
Right
of First Refusal.
Until
three (3) years after the Actual Effective Date, the Subscribers shall be given
not less than seven (7) business days prior written notice of any proposed
sale
by the Company of its common stock or other securities or debt obligations,
except in connection with (i) full or partial consideration in connection with
a
strategic merger, acquisition, consolidation or purchase of substantially all
of
the securities or assets of corporation or other entity, (ii) the Company’s
issuance of securities in connection with strategic license agreements and
other
partnering arrangements so long as such issuances are not for the purpose of
raising capital which holders of such securities or debt are not at any time
granted registration rights, (iii) the Company’s issuance of Common Stock or the
issuances or grants of options to purchase Common Stock to employees, directors
or consultants of the Company pursuant to stock option plans and employee stock
purchase plans, (iv) the conversion or exercise, as applicable of convertible
securities of the Company outstanding on the Initial Closing Date and listed
on
Schedule
4(d),
(v) as
a result of conversion or issuance of Preferred Stock which are granted or
issued pursuant to this Agreement or as a result of conversion or issuance
of
Series A Preferred Stock, (vi) the payment of dividends on the Preferred Stock,
or Series A Preferred Stock, and liquidated and other damages hereunder or
in
respect of the Series A Preferred Stock, (vii) as has been described in the
Reports or Other Written Information filed with the Commission not later than
three Business Days before the Initial Closing Date and available on the XXXXX
system and (viii) the issuance of securities in connection with a commercial
bank lending arrangement, (collectively the foregoing are “Excepted
Issuances”).
Subject to the rights of the holders of the Series A Preferred Stock, the
Subscribers of the Preferred Stock herein shall have the right during the seven
(7) business days following receipt of the notice to participate in such
offering of common stock, debt or other securities in accordance with the terms
and conditions set forth in the notice of sale in the same proportion to each
other as their purchase of Preferred Stock in the Offering for up to the entire
amount of such other offering prior to any rights of first refusal which may
be
exercised by any other class of the Corporation’s securities (other than the
Series A Preferred Stock). In the event such terms and conditions are modified
during the notice period, the Subscribers shall be given prompt notice of such
modification and shall have the right during the seven (7) business days
following the notice of modification to exercise such right.
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(b) Maximum
Exercise of Rights.
In the
event the exercise of the rights described in Section 12(a) would result in
the
issuance of an amount of Common Stock of the Company that would exceed the
maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 4(c) of the Certificate of Designation, then the issuance
to Subscriber of such additional shares of Common Stock of the Company to such
Subscriber will be deferred in whole or in part until such time as such
Subscriber is able to beneficially own such Common Stock without exceeding
the
maximum amount set forth calculated in such manner. The determination of when
such Common Stock may be issued shall be made by each Subscriber as to only
such
Subscriber.
13. Miscellaneous.
(a) Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Medasorb Technologies
Corporation, 0 Xxxx Xxxx Xxxxx, Xxxxx X, Xxxxxxxx Xxxxxxxx, XX 00000, Attn:
Xx
Xxxxx, CEO, telecopier: (000) 000-0000, with a copy by telecopier only to:
Xxxxxx Godward Kronish LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx,
00000, Attn: Xxxxxx Xxxxxx, Telecopy 000-000-0000, and (ii)
if
to the Subscriber, to: the one or more addresses and telecopier numbers
indicated on the signature pages hereto, with an additional copy by telecopier
only: (a) to Xxxx Xxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Telecopy 000-000-0000; Telephone Number 000-000-0000, Attn: Xxxxxx X. XxXxxxx,
Esq., and (b) if such Subscriber is CMT or Xxxxxxx Partners, L.L.C., to Xxxxxxx
Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000, Telecopy
(000) 000-0000, Attn: Xxxxx X. Xxxxxxx, Esq.
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(b) Entire
Agreement; Assignment.
This
Agreement and other documents delivered in connection herewith represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. Neither
the Company nor the Subscribers have relied on any representations not contained
or referred to in this Agreement and the documents delivered herewith. No right
or obligation of the Company shall be assigned without prior notice to and
the
written consent of the Subscribers.
(c) Counterparts/Execution.
This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
(d) Law
Governing this Agreement.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to conflicts of laws principles that would
result in the application of the substantive laws of another jurisdiction.
Any
action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the civil or state
courts of New York or in the federal courts located in New York County.
The
parties and the individuals executing this Agreement and other agreements
referred to herein or delivered in connection herewith on behalf of the Company
agree to submit to the jurisdiction of such courts and waive trial by
jury.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid
or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
(e) Specific
Enforcement, Consent to Jurisdiction.
The
Company and Subscriber acknowledge and agree that irreparable damage may occur
in the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek one or more
preliminary and final injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 13(d) hereof, each of the Company,
Subscriber and any signator hereto in his personal capacity hereby waives,
and
agrees not to assert in any such suit, action or proceeding, any claim that
it
is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that
the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(f) Damages.
In the
event the Subscriber is entitled to receive any liquidated damages pursuant
to
the Transactions, the Subscriber may elect to receive the greater of actual
damages or such liquidated damages.
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27
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(g) Independent
Nature of Subscribers.
The
Company acknowledges that the obligations of each Subscriber under the
Transaction Documents are several and not joint with the obligations of any
other Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that each Subscriber has represented that
the decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made
or
given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have
any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the Registration Statement and (ii)
review by, and consent to, such Registration Statement by a Subscriber) shall
be
deemed to constitute the Subscribers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers.
The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or
the
transactions contemplated thereby.
(h) Consent.
As used
in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders of not less than (i) a majority of the Shares issuable upon
conversion of outstanding Preferred Stock owned by Subscribers on the date
consent is requested and (ii) the written consent of NJTC, if it is then a
holder of at least 25% of the shares of Preferred Stock issued to it on the
Initial Closing Date.
(i) Equal
Treatment.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of the Transaction Documents unless
the
same consideration is also offered to all the parties to the Transaction
Documents.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
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SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT ( )
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
|
a
Nevada corporation
|
|
|
By:
|
|
|
Title:
Chief Executive Officer
|
|
|
Dated:
_______________________, 2008
|
|
|
SUBSCRIBER
|
PURCHASE
PRICE AND STATED VALUE
OF PREFERRED STOCK
|
|
|
$_________
|
||
|
|
||
|
(Signature)
|
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LIST
OF EXHIBITS AND SCHEDULES
|
Exhibit A
|
Certificate
of Designation
|
|
Exhibit B
|
Escrow
Agreement
|
|
Exhibit C
|
Form
of Nevada Legal Opinion
|
|
Exhibit D
|
Form
of New York Legal Opinion
|
|
Exhibit E
|
Series
A Waiver (Agreement and Consent)
|
|
Exhibit F
|
100-Day
Plan
|
|
Schedule 4(d)
|
Additional
Issuances / Capitalization
|
|
Schedule 4(e)
|
Consents
|
|
Schedule 4(f)
|
Outstanding
Reset Rights
|
|
Schedule 4(h)
|
Litigation
|
|
Schedule 4(q)
|
Undisclosed
Liabilities
|
|
Schedule 4(v)
|
Transfer
Agent
|
|
Schedule 8(i)
|
Lock-up
Exceptions
|
|
Schedule 9(e)
|
Use
of Proceeds
|
|
Schedule 9(q)
|
Affiliate
Transactions
|
|
Schedule 9(s)
|
Employees
|
|
Schedule 11.1
|
Other
Registrable Securities
|
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