EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
December 26, 2003 by and among (i) EP MedSystems, Inc., a New Jersey corporation
(the "Company"), (ii) each purchaser of Common Stock (as defined below) pursuant
to the Stock Purchase Agreement (as defined below) (collectively, the
"Investors" and each individually, an "Investor"), and (iii) each person or
entity that subsequently becomes a party to this Agreement pursuant to, and in
accordance with, the provisions of Section 12 hereof (each an "Investor
Permitted Transferee" and collectively, the "Investor Permitted Transferees");
WHEREAS, the Company has agreed to issue and sell to the Investors, and the
Investors have agreed to purchase from the Company up to an aggregate of
3,200,000 shares (the "Purchased Shares") of the Company's common stock, no par
value, $0.001 stated value per share (the "Common Stock"), all upon the terms
and conditions set forth in that certain Common Stock Purchase Agreement, dated
of even date herewith, between the Company and the Investors (the "Stock
Purchase Agreement"); and
WHEREAS, the terms of the Stock Purchase Agreement provide that it shall be
a condition precedent to the closing of the transactions thereunder, for the
Company and the Investors to execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. Definitions. The following terms shall have the meanings provided
therefor below or elsewhere in this Agreement as described below:
"Affiliate" of a party means any other Person controlling, controlled by or
under common control with the specified Person. For the purposes of this
definition, "control" means the power to direct the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Board" shall mean the board of directors of the Company.
"Closing" shall have the meaning ascribed to such term in the Stock
Purchase Agreement.
"Closing Date" shall have the meaning ascribed to such term in the Stock
Purchase Agreement.
"Effectiveness Deadline" shall be one hundred twenty (120) days after the
Closing Date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and all of the rules and regulations promulgated thereunder.
"Filing Date Deadline" shall be thirty (30) days after the Closing Date.
"Investors" shall mean, collectively, the Investors and the Investor
Permitted Transferees; provided, however, that the term "Investors" shall
not include any of the Investors or any of the Investor Permitted
Transferees that ceases to own or hold any Purchased Shares.
"Majority Holders" shall mean, at the relevant time of reference thereto,
those Investors holding more than fifty percent (50%) of the Registrable
Shares held by all of the Investors.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Person" shall mean an individual, corporation, company, partnership, firm,
association, joint venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other entity.
"Qualifying Holder" shall have the meaning ascribed thereto in Section 12
hereof.
"Registrable Shares" shall mean (i) the Purchased Shares, (ii) any shares
of Common Stock issued pursuant to Section 3(e) or Section 3(f) hereof and
(iii) any shares of Common Stock issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as) a
dividend or other distribution (including a stock split or reverse stock
split) with respect to, or in exchange for, or in replacement of, the
shares of Common Stock referred to in clause (i) or (ii) of this
definition.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act and any
successor or substitute rule, law or provision.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and all
of the rules and regulations promulgated thereunder.
2. Effectiveness; Termination. This Agreement shall become effective and
legally binding only if the Closing occurs. This Agreement shall terminate
and be of no further force or effect, automatically and without any action
being required of any party hereto, upon the termination of the Stock
Purchase Agreement pursuant to Section 7 thereof. Nothing contained herein
or in any agreement or document relating to this transaction, and no action
taken by any Investor, shall be deemed to constitute the Investors as, or
to create any presumption that the Investors are in any way acting in
concert or as, a group with respect to the obligations or transaction
hereunder. Each Investor shall be entitled to independently protect and
enforce its rights hereunder.
3. Registration.
(a) As soon as practicable, but in no event later than the Filing Date
Deadline, the Company shall prepare and file with the SEC a registration
statement on Form S-3 for the purpose of registering under the Securities
Act all of the Registrable Shares for resale by, and for the account of,
the Investors as selling stockholders thereunder
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(the "Registration Statement", which term, for purposes of Section 5
hereof, shall include each Piggyback Registration Statement (as defined
below)). The Registration Statement shall permit the Investors to offer and
sell, on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, any or all of the Registrable Shares. The Company shall use
all commercially reasonable efforts to cause the Registration Statement to
be declared effective as promptly as possible after filing, but in no event
later than the Effectiveness Deadline, and shall be required to keep the
Registration Statement effective until such date that is the earlier of (i)
the second anniversary of the effective date of such Registration
Statement; and (ii) the date on which the Shares can be sold by
non-affiliates of the Company without registration under Rule 144(k)
promulgated under the Securities Act (the "Mandatory Registration
Termination Date"). Thereafter, the Company shall be entitled to withdraw
the Registration Statement and the Investors shall have no further right to
offer or sell any of the Registrable Shares pursuant to the Registration
Statement (or any Prospectus relating thereto). The Company will timely
file a Form D in accordance with the provisions of Regulation D promulgated
by the SEC under the Securities Act with respect to the transactions
contemplated by Stock Purchase Agreement and this Agreement.
(b) Unless otherwise agreed to by the Company and the Investors, the offer and
sale of the Registrable Shares pursuant to the Registration Statement shall
not be underwritten.
(c) The Company represents and warrants that, as of the date of this Agreement,
it meets the requirements for the use of Form S-3 for registration of the
resale by the Investors of the Registrable Shares, and it will use its
commercially reasonable efforts to continue to meet such requirements
during the period in which it takes to have the Registration Statement
declared effective.
(d) The Company shall cause all of the Registrable Shares to be listed on the
Nasdaq SmallCap Market.
(e) This Section 3(e) shall apply to the Company's obligation under Section
3(a) hereof to file the Registration Statement with the SEC and to cause
such Registration Statement to become effective. Subject to the provisions
below, the Company and Investors agree that the Investors will suffer
damages if the Registration Statement is not filed on or prior to the
Filing Date Deadline and not declared effective by the SEC, subject to
receipt of the necessary information from the Investors, on or prior to the
Effectiveness Deadline. The Company and the Investors further agree that it
would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if (i) the Registration Statement is not filed on
or prior to the Filing Date Deadline; or (ii) the Registration Statement is
not declared effective prior to the Effectiveness Deadline (unless, in each
case, an Event results, directly or indirectly, from any act of war or
terrorism) (each of the events listed in (i)-(ii) above being referred to
as an "Event"), then the Company shall pay to each Investor as liquidated
damages for any such failure and not as a penalty an amount equal to 1.0%
of the purchase price for the Shares purchased by such Investor pursuant to
the Stock Purchase Agreement for each full thirty (30) day period (pro rata
on a 360 day basis) following an Event until such Event has been cured.
Such Liquidated Damages (as defined below) shall be payable monthly, at the
election of the Company, in (x) cash by wire transfer of immediately
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available funds or (y) that number of shares of Common Stock equal to
(A) the amount owed to such Investor in Liquidated Damages pursuant to this
Section 3(f) divided by (B) $2.56 (rounding down to the nearest whole
share).
(f) Subject to the provisions below, and except as provided in Section 11
hereof, should the effectiveness of the Registration Statement or the
Prospectus included therein (the "Prospectus") lapse for any reason while
the Company has any obligation to maintain such Registration Statement and
Prospectus or the Registration Statement or Prospectus ceases to be usable
for any reason, and the Company does not cure such lapse in effectiveness
or other reason, within 15 business days (the "Cure Period") by a
post-effective amendment to the Registration Statement, a supplement to the
Prospectus or a report filed pursuant to the Exchange Act that cures such
lapse, the Company shall pay each Investor damages from the period from and
including the first day following the expiration of the Cure Period until,
but excluding, the earlier of (1) the date in which such failure is cured
and (2) the date which is fifteen (15) months following the Closing Date,
at a rate equal to 1% per annum (pro rata on a 360 day basis) of the total
purchase price for the Purchased Shares purchased by each Investor pursuant
to the Stock Purchase Agreement. Such Liquidated Damages (as defined below)
shall be payable monthly, at the election of the Company, in (x) cash by
wire transfer of immediately available funds or (y) that number of shares
of Common Stock equal to (A) the amount owed to such Investor in Liquidated
Damages pursuant to this Section 3(f) divided by (B) $2.56 (rounding down
to the nearest whole share).
(g) For purposes of Section 3(e) and Section 3(f), the amounts payable by the
Company under this Agreement are referred to collectively herein as
"Liquidated Damages". In any event, no Liquidated Damages shall accrue
after the fifteen (15) month anniversary of the Closing Date. The parties
agree that the Liquidated Damages represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of
damages that may be incurred by the Investors if the Registration Statement
is not filed on or prior to the Filing Date Deadline or has not been
declared effective by the SEC on or prior to the Effectiveness Deadline or
if there is a lapse in the effectiveness of the Registration Statement or
Prospectus or if the Registration Statement or Prospectus ceases to be
usable.
4. "Piggyback" Registration Rights.
(a) If, at any time after the Mandatory Registration Termination Date, the
Company proposes to register any of its Common Stock under the Securities
Act, whether as a result of a primary or secondary offering of Common Stock
or pursuant to registration rights granted to holders of other securities
of the Company (but excluding in all cases any registrations to be effected
on Forms S-4 or S-8 or other applicable successor forms), the Company
shall, each such time, give to the Investors holding Registrable Shares
written notice of its intent to do so. Upon the written request of any such
Investor given within 20 days after the giving of any such notice by the
Company, the Company shall use reasonable efforts to cause to be included
in such registration the Registrable Shares of such Investor, to the extent
requested to be registered; provided that (1) the number of Registrable
Shares proposed to be sold by such Investor is equal to at least
twenty-five percent (25%) of the total number of Registrable Shares then
held by such participating Investor, (ii) such Investor agrees to sell
those of its Registrable Shares to be included in such registration in the
same manner and on the same terms and conditions as the other shares of
Common Stock which the Company proposes to register and
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(iii) if the registration is to include shares of Common Stock to be sold
for the account of the Company or any party exercising demand registration
rights pursuant to any other agreement with the Company in an underwritten
offering, the proposed managing underwriter does not advise the Company
that in its opinion the inclusion of such Investor's Registrable Shares
(without any reduction in the number of shares to be sold for the account
of the Company or such party exercising demand registration rights) is
likely to materially and adversely affect the success of the offering or
the price that would be received for any shares of Common Stock offered, in
which case the rights of such Investor shall be as provided in Section 4(b)
hereof.
(b) If a registration pursuant to Section 4(a) hereof involves an underwritten
offering and the managing underwriter shall advise the Company in writing
that, in its opinion, the number of shares of Common Stock requested by the
Investors to be included in such registration is likely to materially and
adversely affect the success of the offering or the price that would be
received for any shares of Common Stock offered in such offering, then,
notwithstanding anything in Section 4(a) to the contrary, the Company shall
only be required to include in such registration, to the extent of the
number of shares of Common Stock which the Company is so advised can be
sold in such offering, (i) first, the number of shares of Common Stock
proposed to be included in such registration for the account of the Company
and/or any stockholders of the Company (other than the Investors) that have
exercised demand registration rights, in accordance with the priorities, if
any, then existing among the Company and/or such stockholders of the
Company with registration rights (other than the Investors), and (ii)
second, the shares of Common Stock requested to be included in such
registration by all other stockholders of the Company who have piggyback
registration rights (including, without limitation, the Investors), pro
rata among such other stockholders (including, without limitation, the
Investors) on the basis of the number of shares of Common Stock that each
of them requested to be included in such registration.
(c) In connection with any offering involving an underwriting of shares under
this Section 4, the Company shall not be required under this Section 4 or
otherwise to include the Registrable Shares of any Investor therein unless
such Investor accepts and agrees to the terms of the underwriting, which
shall be reasonable and customary, as agreed upon between the Company and
the underwriters selected by the Company.
5. Obligations of the Company. In connection with the Company's obligation
under Sections 3 and 4, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all Registrable Shares covered by the Registration Statement; provided,
however, that before filing a registration statement or Prospectus or any
amendments or supplements thereto, or comparable statements under
securities or blue sky laws of any jurisdiction, the Company will furnish
to one counsel to be designated by Investors participating in the planned
offering and/or to one additional counsel designated by each Investor
(each, a "Designated Counsel"), copies of all such documents proposed to be
filed (including all exhibits thereto), which documents will be subject to
the reasonable review and reasonable comment of such counsel.
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(b) Furnish to the Investors such number of copies of the Prospectus, including
a preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents (including, without limitation,
Prospectus amendments and supplements as are prepared by the Company in
accordance with Section 5(a) above) as the Investors may reasonably request
in order to facilitate the disposition of such Investors' Registrable
Shares.
(c) Promptly notify the Investors, at any time when the Prospectus relating to
the Registration Statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the Prospectus
included in or relating to the Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and, thereafter, the Company will promptly prepare
(and, when completed, give notice to each Investor) a supplement or
amendment to such Prospectus so that, as thereafter delivered to the
purchasers of such Registrable Shares pursuant to the Registration
Statement, such Prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided that upon such notification by the Company of the
foregoing and instructing each Investor to cease to offer and sell
Registrable Shares, each Investor will use commercially reasonable efforts
to cease its offer and sale of Registrable Shares until the Company has
notified the Investors that it has prepared a supplement or amendment to
such Prospectus and delivered copies of such supplement or amendment to the
Investors (it being understood and agreed by the Company that the foregoing
proviso shall in no way diminish or otherwise impair the Company's
obligation to promptly prepare a Prospectus amendment or supplement as
above provided in this Section 5(c) and deliver copies of same as above
provided in Section 5(b) hereof).
(d) Use commercially reasonable efforts to register and qualify the Registrable
Shares covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably appropriate in
the opinion of the Company and the managing underwriters, if any, or if
reasonably requested by the Investors; provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions; and provided further that (notwithstanding
anything in this Agreement to the contrary with respect to the bearing of
expenses) if any jurisdiction in which any of such Registrable Shares shall
be qualified shall require that expenses incurred in connection with the
qualification therein of any such Registrable Shares be borne by the
Investors, then the Investors shall, to the extent required by such
jurisdiction, pay their pro rata share of such qualification expenses.
(e) Promptly notify (i) each Investor (A) any time when the Registration
Statement, the Prospectus or any Prospectus supplement related thereto or
post effective amendment has been filed, and with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective, (B) of the issuance of any stop order by the SEC
suspending the effectiveness of such Registration Statement or the
initiation of any proceedings by any person to such effect, and promptly
use all commercially reasonable efforts to obtain the release of such
suspension, (C) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Shares
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for sale under the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose, (D) when a Prospectus
relating to the registration of the Registrable Shares is required to be
delivered under the Securities Act, or (E) of the happening of any event as
a result of which the Prospectus included, as then in effect, includes any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; and (ii)
Designated Counsel of any request by the SEC for amendments or supplements
to the Registration Statement or Prospectus or for additional information.
If the notification relates to an event described in Section 5(c), the
Company shall in accordance with Section 5(a), promptly prepare and furnish
to each Investor, if any, selling Registrable Shares covered by such
registration statement, a reasonable number of copies of a Prospectus
supplemented or amended so that, as thereafter delivered to the purchasers
of such Registrable Shares, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein in the light
of the circumstances under which they were made not misleading.
(f) Cause all such Registrable Shares registered pursuant to this Agreement to
be listed on each securities exchange on which similar securities issued by
the Company are then listed, if the listing of such Registrable Shares is
then permitted under the rules of such exchange, or if no similar
securities are then so listed, to either cause all such Registrable Shares
to be listed on a national securities exchange or to secure designation of
all such Registrable Shares as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Exchange Act, or failing that,
secure NASDAQ authorization for such Registrable Shares.
(g) Provide a transfer agent and registrar for all Registrable Shares
registered pursuant to this Agreement and a CUSIP number for all such
Registrable Shares, in each case not later than the effective date of
registration and, at the time of the sale of the Registrable Shares
pursuant to an effective Registration Statement or in accordance with
Section 6.3 of the Stock Purchase Agreement, use commercially reasonable
efforts to cause the transfer agent to remove restrictive legends on the
securities covered by such Registration Statement.
(h) Promptly deliver to Designated Counsel copies of all correspondence between
the SEC and the Company, its counsel or auditors and all memoranda relating
to discussions with the SEC or its staff with respect to the registration
statement, other than those portions of any such memoranda that contain
information subject to attorney client privilege with respect to the
Company, and, upon receipt of such confidentiality agreements as the
Company may reasonably request, make reasonably available for inspection by
Designated Counsel participating in any disposition to be effected pursuant
to the Registration Statement, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all
of the Company's officers, directors and employees to supply all
information reasonably requested by Designated Counsel in connection with
such Registration Statement.
(i) Use commercially reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement.
(j) Upon written request, furnish to each Investor participating in the
offering, without charge, at least one (1) conformed copy of the
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Registration Statement and any post-effective amendments thereto, including
financial statements, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference).
(k) Comply with all applicable rules and regulations of the SEC, and make
generally available to its security holders, as soon as reasonably
practicable after the effective date of the Registration Statement (and in
any event within sixteen (16) months thereafter), an earnings statement
(which need not be audited) covering the period of at least twelve (12)
consecutive months beginning with the first day of the Company's first
calendar quarter after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement
(including, without limitation, to maintain the accuracy of any information
previously furnished by Investors for use in the Registration Statement) that
the Investors shall furnish to the Company such information regarding them and
the securities held by them as the Company shall reasonably request and as shall
be required by applicable securities laws in order to effect any registration by
the Company pursuant to this Agreement.
7. Expenses of Registration. All of the expenses incurred by the Company in
connection with the registration of the Registrable Shares pursuant to this
Agreement (excluding underwriting, brokerage and other selling commissions and
discounts), including without limitation, all registration, qualification and
filing fees, printing fees and fees and disbursements of its counsel and one
counsel to the Investors, shall be borne by the Company, whether or not such
Registration Statement becomes effective or remains effective for the period
contemplated hereby.
8. Delay of Registration. No Investor shall take any action to restrain,
enjoin or otherwise delay any registration as the result of any controversy
which might arise with respect to the interpretation or implementation of this
Agreement.
9. Indemnification. For the purposes of this Section 9 and Section 11, the
term "Registration Statement" shall include any preliminary or final Prospectus,
exhibit, supplement or amendment included in or relating to, as the case may be,
the Registration Statement referred to in Section 3(a).
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor, its directors, officers, employees, fiduciaries,
members, managers, or general or limited partners (and the directors, officers,
employees and stockholders thereof), any broker/dealer acting on behalf of any
Investor and each officer and director of such Investor or broker/dealer and
each Person, if any, who controls such Investor or broker/dealer within the
meaning of the Securities Act (each, an "Investor Indemnified Person"), against
any losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable counsel fees and disbursements, any amounts paid in any
settlement effected with the Company's prior written consent) to which they may
become subject under the Securities Act, the Exchange Act, state securities laws
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
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or alleged untrue statement of any material fact contained in the Registration
Statement or in any amendments or supplements to the Registration Statement or
any registration statement pursuant to which Registrable Shares are registered
pursuant to Section 4 hereof (including any preliminary prospectus or final
prospectus relating thereto, any amendments or supplements thereto and any
exhibits thereto, a "Piggyback Registration Statement") 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 in
light of the circumstance under which they were made not misleading or any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, state securities laws or any rule or regulation promulgated under
the Securities Act, the Exchange Act, state securities laws or NASDAQ or (ii)
any failure of the Company to fulfill any undertaking included in the
Registration Statement, or any Piggyback Registration Statement; and will
reimburse such Investor Indemnified Person for any expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action (including reasonable expenses of legal counsel);
provided, however, that the indemnity agreement contained in this Section 9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, damage, liability or
action to the extent that it arises out of or is based upon an untrue statement
or alleged untrue statement or omission made in connection with the Registration
Statement or any Piggyback Registration Statement in reliance upon and in
conformity with written information furnished expressly for use in connection
with the Registration Statement or any Piggyback Registration Statement by the
Investors. Such indemnity and reimbursement of expenses shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Investor Indemnified Person and shall survive the sale of such Registrable
Shares by such Investor.
(b) To the extent permitted by law, each Investor will severally, and not
jointly, indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the Registration Statement, or any Piggyback
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, or any broker/dealer acting on behalf of the
Company (a "Company Indemnified Person") against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person, or broker/dealer may become subject to, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement or any
Piggyback Registration Statement 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, in light of the
circumstances under which they were made, not misleading, in each case to the
extent and only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration Statement
or any Piggyback Registration Statement, in reliance upon and in conformity with
written information furnished by such Investor expressly for use in connection
with the Registration Statement or any Piggyback Registration Statement; and
such Investor will reimburse any expenses reasonably incurred by a Company
Indemnified Person in connection with investigating or defending any such loss,
claim, damage, liability or action (including reasonable counsel fees and
disbursements); provided, however, that the liability of each Investor hereunder
shall be limited to the proceeds (net of underwriting discounts and commissions,
if any)
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received by such Investor from the sale of Registrable Shares covered by
the Registration Statement or Piggyback Registration Statement; as the case may
be; and provided, further, however, that the indemnity agreement contained in
this Section 9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of those Investor(s) against which the request for indemnity is
being made (which consent shall not be unreasonably withheld). Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such Company Indemnified Person
and, as relevant, shall survive the sale of such Registrable Shares by any
Investor.
(c) Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other indemnifying party
similarly noticed, to assume at its expense the defense thereof with counsel
mutually satisfactory to the indemnifying parties with the consent of the
indemnified party (which consent will not be unreasonably withheld, conditioned
or delayed). In the event that the indemnifying party assumes any such defense,
the indemnified party may participate in such defense with its own counsel and
at its own expense; provided, however, that the counsel for the indemnifying
party shall act as lead counsel in all matters pertaining to such defense or
settlement of such claim and the indemnifying party shall only pay for such
indemnified party's expenses for the period prior to the date of its
participation on such defense.
(d) If the indemnification provided for in this Section 9 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions that resulted in such loss, claim, damage, liability or expense as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. If, however, the allocation provided in the
first sentence of this paragraph is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 9(d) were to be determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 9(d). The
amount paid or payable in respect of any claim shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending such loss, claim, damage or
10
liability. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything in this Section 9(d) to the contrary, no Investor shall
be required pursuant to this Section 9(d) to contribute any amount in excess of
the net proceeds received by such Investor from the sale of Registrable Shares
in the offering to which the loss, claims, damage or liability relates, less the
amount of any indemnification payment previously made by such indemnifying party
pursuant to Section 9(b).
(e) The obligations of the Company and the Investors under this Section 9
shall survive the completion of any offering of Registrable Shares pursuant to a
Registration Statement or any Piggyback Registration Statement.
(f) Notwithstanding anything to the contrary herein, the indemnifying party
shall not be entitled to settle any claim, suit or proceeding unless in
connection with such settlement the indemnified party receives an unconditional
release with respect to the subject matter of such claim, suit or proceeding and
such settlement does not contain any admission of fault by the indemnified
party.
10. Reports under the Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit the Investors to sell the Purchased Shares to the
public without registration, the Company agrees to use commercially reasonable
efforts: (i) to make and keep public information available, as those terms are
understood and defined in the General Instructions to Form S-3, or any successor
or substitute form, and in Rule 144; (ii) to file with the SEC in a timely
manner all reports and other documents required to be filed by an issuer of
securities registered under the Securities Act or the Exchange Act; (iii) as
long as any Investor owns any Purchased Shares, to furnish in writing upon such
Investor's request a written statement by the Company that it has complied with
the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, and to furnish to such Investor a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested in availing such Investor of
any rule or regulation of the SEC permitting the selling of any such Purchased
Shares without registration; and (iv) undertake any additional actions
reasonably necessary to maintain the availability of the Registration Statement
or the use of Rule 144.
11. Deferral and Lock-up. Notwithstanding anything in this Agreement to the
contrary, if the Company shall furnish to the Investors a certificate signed by
the President or Chief Executive Officer of the Company stating that the Board
of Directors of the Company has made the good faith determination (i) that
continued use by the Investors of the Registration Statement, or any Piggyback
Registration Statement, for purposes of effecting offers or sales of Registrable
Shares pursuant thereto would require, under the Securities Act, premature
disclosure in the Registration Statement, or any Piggyback Registration
Statement of material, nonpublic information concerning the Company, its
business or prospects or any proposed material transaction involving the
Company, (ii) that such premature disclosure would be materially adverse to the
Company, its business or prospects or any such proposed material transaction or
would make the successful consummation by the Company of any such material
11
transaction significantly less likely and (iii) that it is therefore essential
to suspend the use by the Investors of such Registration Statement, or any
Piggyback Registration Statement for purposes of effecting offers or sales of
Registrable Shares pursuant thereto, then the right of the Investors to use the
Registration Statement, or any Piggyback Registration Statement for purposes of
effecting offers or sales of Registrable Shares pursuant thereto shall be
suspended for not more than thirty (30) days at one time and on no more than two
occasions in the aggregate (the "Suspension Period(s)") after delivery by the
Company of the certificate referred to above in this Section 11. Such 30-day
periods shall be at least two business days apart. In no event, however, will
any suspension be any longer than is reasonably necessary to avoid the adverse
effect. During any Suspension Period, none of the Investors shall offer or sell
any Registrable Shares publicly pursuant to or in reliance upon the Registration
Statement, or the Prospectus, or any Piggyback Registration Statement (or the
prospectus relating thereto).
12. Transfer of Registration Rights. None of the rights of any Investor
under this Agreement shall be transferred or assigned to any person unless (i)
such person is a Qualifying Holder (as defined below), and (ii) such person
agrees to become a party to, and bound by, all of the terms and conditions of,
this Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit B hereto. For purposes of this Section
12, the term "Qualifying Holder" shall mean, with respect to any Investor, (i)
any Affiliate of an Investor, or (ii) any other direct transferee from an
Investor of at least 250,000 Purchased Shares that are held on the date hereof
by such Investor. None of the rights of any Investor under this Agreement shall
be transferred or assigned to any person (including, without limitation, a
Qualifying Holder) that acquires Registrable Shares in the event that and to the
extent that such person is eligible to resell such Registrable Shares pursuant
to Rule 144(k) of the Securities Act or may otherwise resell such Registrable
Shares pursuant to an exemption from the registration provisions of the
Securities Act.
13. Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Majority Holders, enter into any agreement with any holder or prospective
holder of any securities of the Company that would allow such holder or
prospective holder to include such securities in any Piggyback Registration
Statement unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of the securities of such holder or prospective holder will
not reduce the amount of the Registrable Shares which the Investors wish to
include in such Registration Statement.
14. No Required Sale. Nothing in this Agreement shall be deemed to create
an independent obligation on the part of any Investor to sell any Registrable
Shares pursuant to any effective registration statement.
15. Nominees for Beneficial Owners. If Registrable Shares are held by a
nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its option, be treated as the holder of such Registrable Shares for purposes of
any request or other action by any Investor pursuant to this Agreement (or any
determination of any number or percentage of shares constituting Registrable
Shares held by any Investor contemplated by this Agreement); provided that the
Company shall have received assurances reasonably satisfactory to it of such
beneficial ownership.
12
16. Entire Agreement. This Agreement and exhibits attached hereto and
incorporated herewith constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes any and all prior negotiations, correspondence, agreements or
understandings with respect to the subject matter hereof and supercedes all
prior agreements, negotiations, understandings, representations and statements
respecting the subject matter hereof, whether oral or written.
17. Agreement with Respect to Sales of Common Stock. Each Investor will
not, and will cause each of its affiliates and any person acting on its or their
behalf not to, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the shares of Common Stock, except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder.
18. Miscellaneous.
(a) Amendment. No amendment, modification, alteration, waiver or change in
any of the terms of this Agreement shall be valid or binding upon the parties
hereto unless made in writing and duly executed by the Company and the holders
of at least 66 2/3% of the Registrable Shares held by all of the Investors;
provided, however, that in each case, no such amendment shall increase the
obligations of any Investor without such Investor's written consent.
(b) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to any conflicts of laws concepts that would apply the laws of another
jurisdiction.
(c) Assignment. The rights and obligations of the parties hereto shall
inure to the benefit of, and shall be binding upon the authorized successors and
permitted assigns of each party; provided that the terms and conditions of
Section 12 hereof are satisfied. This Agreement shall also be binding upon and
inure to the benefit of any transferee 'of any of the Purchased Shares; provided
the terms and conditions of Section 12 hereof are satisfied. Notwithstanding
anything in this Agreement to the contrary, if at any time any Investor shall
cease to own any Registrable Shares, all of such Investor's rights under this
Agreement shall immediately terminate; provided, however, that if such Investor
ceases to own Registrable Shares because all or a portion of such shares were
sold pursuant to the Registration Statement or a Piggyback Registration
Statement, then such Investor shall continue to have the rights and obligations
set forth in Section 9 hereof, as provided in Section 9(e) hereof. In the event
of any assignment by an Investor in accordance with the terms of this Agreement,
the assignee shall specifically assume and be bound by the provisions of the
Agreement by executing the Instrument of Adherence attached hereto as Exhibit B.
(d) Specific Performance. Each of the parties hereto acknowledges and
agrees that damages will not be an adequate remedy for any material breach or
violation of this Agreement if such material breach or violation would cause
immediate and irreparable harm (an "Irreparable Breach"). Accordingly, in the
event of a threatened or ongoing Irreparable Breach, each party hereto shall be
entitled to seek, in any state or federal court in the State of New York,
13
equitable relief of a kind appropriate in light of the nature of the ongoing or
threatened Irreparable Breach, which relief may include, without limitation,
specific performance or injunctive relief; provided, however, that if the party
bringing such action is unsuccessful in obtaining the relief sought, the moving
party shall pay the non-moving party's costs, including actual attorney's fees,
incurred in connection with defending such action. Such remedies shall not be
the parties' exclusive remedies, but shall be in addition to all other remedies
provided in this Agreement.
(e) Notice. Any notices, reports or other correspondence (hereinafter
collectively referred to as "Correspondence") required or permitted to be given
hereunder shall be sent by courier (overnight or same day) or facsimile or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
(i) All Correspondence to the Company shall be addressed as follows:
EP MedSystems, Inc.
000 Xxxxx 00 Xxxxx
Xxxxxxxx X
Xxxx Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: President and Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(ii) All Correspondence to any Investor shall be sent to such Investor at
the address set forth in Exhibit A.
(iii)Any Person may change the address to which correspondence to it is to
be addressed by notification as provided for herein.
(f) Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(The remainder of this page has been intentionally left blank; signature
page follows)
14
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first above written.
EP MEDSYSTEMS, INC.
By: /s/ Xxxxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxx
President and Chief Executive Officer
THE INVESTOR'S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED EVEN DATE
HEREWITH SHALL CONSTITUTE THE INVESTOR'S SIGNATURE TO THIS REGISTRATION
RIGHTS AGREEMENT.
15
Exhibit A
Investors
---------------------------------------------------------------------------------------------------------
INVESTOR ADDRESS NUMBER
OF SHARES PURCHASED
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
SF Capital Partners Ltd. c/o STARO Asset Management, LLC 1,000,000
0000 Xxxxx Xxxx Xx.
Xx. Xxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Catalysis Partners, LLC 000 Xxxxxxxx Xxxx. 00,000
Xxxxx Xxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
TCMP3 Partners c/o Titan Capital Management 80,000
0 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
X.X. Xxxxxxxxx, Towbin Capital 000 Xxxxxxx Xxxxxx 250,000
Partners I, LP Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxxxx & Xxxxxxxx X. Xxxxxxxxx c/o X.X. Xxxxxxxxx, Towbin 50,000
Foundation Inc. 000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxx Xxxx c/o X.X. Xxxxxxxxx, Towbin 20,000
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxx Xxxx ACF c/o X.X. Xxxxxxxxx, Towbin 5,000
Xxxxx X. Xxxx UGMA 000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxx Xxxx ACF c/o X.X. Xxxxxxxxx, Towbin 5,000
Xxxxxxx Xxxx UGMA 000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxxxxx Xxxx 00 Xxxxxx Xxxxxx 20,000
Xxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxx SEP-XXX 000 Xxxxxxx Xxxxxxx 5,000
Xxxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxxxxx X. Xxxx 0000 Xxxxxx Xxxx 0,000
Xxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxxx X.X. Xxxx 00000 Xxxxxxxxxxx Xxxx 0,000
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 0000 Xxxxxxxx Xxxxx 00,000
Xxxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxx 00000 Xxxxxxxxxxx Xxxx 00,000
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx 0000 Xxxx Xxxxx 0,000
Xxxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxx X. Van Roijen 000 X. Xxxxxxx Xxxxxx 50,000
Xxxxx 000
Xxxxxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Patience Partners, LP 000 X. Xxxxxxx Xxxxxx 10,000
Xxxxx 000
Xxxxxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Oracle Offshore Ltd. c/o Ironshore Corp. Services, Ltd. 13,000
Queensgate House
So. Church Street, PO Box 1234
Georgetown, Grand Cayman,
Grand Cayman Islands
16
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxx Oracle Investments, Inc. 000 Xxxxxxxxx Xxxxxx 31,000
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Oracle Partners, LP 000 Xxxxxxxxx Xxxxxx 000,000
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Oracle Institutional Partners LP 000 Xxxxxxxxx Xxxxxx 90,000
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Blaze Corporation c/o Xxxxxxx Xxxxx 15,000
Royal Management
000 Xxxx Xxx.
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 000 Xxxxx Xxxxxx 5,000
Xxx. 00X
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
J. Xxxxx Xxxxxxxxx 000 Xxxxxxx Xxxx Xxxx 10,000
Xxx. 00X
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Atlas Fund, LLC 000 X. Xxxxxxx, 00xx Xxxxx 1,000,000
Xxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx & Xxx X. Xxxxxx JTWROS 000 Xxxx Xxx Xxx., Xxx 00X 15,000
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxxx X. XxXxxx 00 Xxxx 00xx Xxxxxx, Xxx 0X 15,000
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxx X. XxXxxx 00 Xxxx 00xx Xxxxxx, Xxx 0X 15,000
Xxx Xxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx TEE FBO: SAS Trust c/o Sampson Investments 20,000
I U/A/D 7/30/93 000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx Money Purchase Plan 41 Winged Foot Drive 20,000
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------
17
Exhibit B
Instrument of Adherence
Reference is hereby made to that certain Registration Rights Agreement,
dated as of December 26, 2003, among EP MedSystems, Inc., a New Jersey
corporation (the "Company"), the Investors and the Investor Permitted
Transferees, as amended and in effect from time to time (the "Registration
Rights Agreement"). Capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Registration Rights Agreement.
The undersigned, in order to become the owner or holder of ___________
shares of Company common stock, no par value, $0.001 stated value per share (the
"Common Stock"), hereby agrees that, from and after the date hereof, the
undersigned has become a party to the Registration Rights Agreement in the
capacity of an Investor Permitted Transferee, and is entitled to all of the
benefits under, and is subject to all of the obligations, restrictions and
limitations set forth in, the Registration Rights Agreement that are applicable
to Investor Permitted Transferees. This Instrument of Adherence shall take
effect and shall become a part of the Registration Rights Agreement immediately
upon execution.
Executed under seal as of the date set forth below under the laws of the
State of New York.
Signature:
Name:
Title:
Accepted:
EP MedSystems, Inc.
By:
Name: ______________________________
Title:
Date:
18
Table of Contents
Page
-i-
1. Definitions. The following terms shall have the meanings provided therefor below or elsewhere
in this Agreement as described below:...................................................................1
2. Effectiveness; Termination..............................................................................2
3. Registration............................................................................................2
4. "Piggyback" Registration Rights.........................................................................4
5. Obligations of the Company..............................................................................5
6. Furnish Information.....................................................................................7
7. Expenses of Registration................................................................................7
8. Delay of Registration...................................................................................8
9. Indemnification.........................................................................................8
10. Reports under the Exchange Act.........................................................................11
11. Deferral and Lock-up...................................................................................11
12. Transfer of Registration Rights........................................................................12
13. Limitations on Subsequent Registration Rights..........................................................12
14. No Required Sale.......................................................................................12
15. Nominees for Beneficial Owners.........................................................................12
16. Entire Agreement.......................................................................................13
17. Agreement with Respect to Sales of Common Stock........................................................13
18. Miscellaneous..........................................................................................13
Exhibit A.......................................................................................................17
Exhibit B.......................................................................................................18
-i-
