EQUITY EXCHANGE AGREEMENT
THIS
EQUITY EXCHANGE AGREEMENT (this “Agreement”) is made and entered into as of
January 28, 2005, by and between Chembio Diagnostics, Inc., a Nevada corporation
(the “Company”), and Xxxxxxx Partners, LP (the “Stockholder”).
Recitals
A. The
Stockholder holds shares of the Company’s Series A Preferred Stock, par value
$0.01 per share (the “Series A Preferred Stock”), and warrants (the “Series A
Warrants”, and collectively with the Series A Preferred Stock, the “Series A
Securities”), to purchase shares of the Company’s common stock, par value $0.01
per share (the “Common Stock”).
B. The
Stockholder desires to exchange (the “Exchange”), pursuant to this Agreement and
Section 3.12(c) of the Series A Convertible Preferred Stock and Warrant Purchase
Agreement dated May 5, 2005 by and among the Company, the Stockholder, and the
other individuals set forth therein (the “Series A Purchase Agreement”), .66666
shares of Series A Preferred Stock (representing 33,3333 shares of underlying
common stock) and 40,000 Series A Warrants (collectively, the “Exchanged Series
A Securities”), for 2/5th of one
share of the Company’s 9% Series B Convertible Preferred Stock, par value $0.01
per share and 31,146 Series B-1 Common Stock purchase warrants, in substantially
the form attached hereto as Exhibit
A
(collectively, the “Received Series B Securities”), to purchase shares of the
Company’s Common Stock.
C. In
connection with the Exchange, the Stockholder desires to become a party to, and
be bound by the terms and conditions of, the Securities Purchase Agreement dated
January 26, 2005, by and among the Company and the purchasers identified
therein, a copy of which is attached hereto as Exhibit
B (the
“Series B Purchase Agreement”), and the Registration Rights Agreement dated
January 28, 2005, by and among the Company and the purchasers identified
therein, a copy of which is attached hereto as Exhibit
C (the
“Series B Rights Agreement,” and collectively with the Series B Purchase
Agreement and the Series B Warrants, the “Series B Transaction
Documents”).
Agreement
In
consideration of the premises, mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE
I
EXCHANGE
OF THE SECURITIES
1.1 Exchange
. On the
terms and subject to the conditions of this Agreement:
(a) At the
time of execution of this Agreement, which shall be on or before February 28,
2005, the Stockholder shall surrender the certificates evidencing the Exchanged
Series A Securities, duly endorsed to the Company or delivered with duly
executed stock powers.
(b) Within
five business days after receipt of the Stockholder’s certificates evidencing
the Exchanged Series A Securities pursuant to Section 1.1(a) of this Agreement
and executed copies of the Series B Transaction Documents signed by the
Stockholder pursuant to Section 1.3 of this Agreement, the Company shall issue
to the Stockholder certificates evidencing the Received Series B Securities, in
exchange for the Exchanged Series A Securities, duly registered in the name of
the Stockholder.
1.2 Effects
of Exchange
.
Immediately upon the consummation of the Exchange, each of the Exchanged Series
A Securities shall be deemed cancelled, any and all rights of the Stockholder to
receive accrued but unpaid dividends on the Exchanged Series A Securities shall
be deemed waived, and the Stockholder shall have no further rights as holder of
the Series A Preferred Stock exchanged hereunder or otherwise with respect to
any of the Exchanged Series A Securities.
1.3 Series
B Transaction Documents.
Concurrent with the Stockholder returning a signed copy of this Agreement, the
Stockholder shall return to the Company signed copies of each of the Series B
Transaction Documents.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF STOCKHOLDER
As a
material inducement to the Company to enter into this Agreement, the Stockholder
hereby represents and warrants to the Company that:
2.1 Authorization
. The
Stockholder has full power and authority to enter into this Agreement, and this
Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms.
2.2 Ownership
of Shares; Title
. The
Stockholder is the sole record and beneficial owner of the Exchanged Series A
Securities, free and clear of all liens, claims, security interests,
encumbrances and transfer restrictions, other than transfer restrictions under
any agreement between the Stockholder and the Company imposing restrictions on
transfer, including without limitation, and any transfer restrictions imposed
under federal and state securities laws. The Stockholder will transfer and
deliver to the Company good and valid title to all of the Exchanged Series A
Securities, free and clear of all liens, claims, security interests and rights
of third parties.
2.3 Purchase
Entirely for Own Account
. The
Received Series B Securities will be acquired for investment for the
Stockholder’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof. The Stockholder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Stockholder does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Received Series B
Securities.
ARTICLE
III
CERTAIN
WAIVERS
3.1 The
Stockholder Waivers
. The
Stockholder hereby irrevocably waives (i) any preemptive, first refusal right or
other similar rights under the Series A Purchase Agreement or any other
agreement between the Company and the Stockholder in connection with the
Exchanged Series A Securities, and (ii) any breach by the Company under any
agreement between the Company and the Stockholder in connection with the
Company’s consummation of the transactions contemplated hereby.
3.2 Limitation
on Waivers
. The
foregoing waivers are specific as to content and shall not be deemed to waive or
modify any provisions of the referenced agreements, other than as specifically
provided herein.
ARTICLE
IV
MISCELLANEOUS
4.1 Amendment
and Waiver
. This
Agreement may be amended and any provision of this Agreement may be waived only
if such amendment or waiver is set forth in writing and executed by each of the
Company and the Stockholder. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify, amend
or discharge any part of this Agreement or any rights or obligations of any
party under or by reason of this Agreement.
4.2 Transfer
Restrictions.
(a) The
Received Series B Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Received Series
B Securities other than pursuant to an effective registration statement or Rule
144, the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Received Series B Securities under the
Securities Act of 1933, as amended. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this
Agreement.
(b) The
Stockholder agrees to the imprinting, so long as is required by this Section
4.2(b), of a legend on any of the Received Series B Securities in the following
form:
NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
OR CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
4.3 Binding
Agreement; Assignment
. The
provisions of this Agreement shall inure to the benefit of and be binding upon
the Company, the Stockholder and their respective successors and assigns,
whether or not any such person shall have become a party to this Agreement;
provided, however, that neither party may assign its rights or delegate its
duties hereunder without the prior written consent of the other party hereto.
Any purported assignment in violation of this Section 4.3 shall be void and of
no force or effect.
4.4 Severability
.
Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.
4.5 No
Strict Construction
. The
language used in this Agreement will be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any person.
4.6 Headings;
Interpretation
. The
headings used in this Agreement are for convenience of reference only and do not
constitute a part of this Agreement and will not be deemed to limit,
characterize or in any way affect any provision of this Agreement, and all
provisions of this Agreement will be enforced and construed as if no caption had
been used in this Agreement. Whenever the term “including” is used in this
Agreement (whether or not that term is followed by the phrase “but not limited
to” or “without limitation” or words of similar effect) in connection with a
listing of one or more items or matters, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing of, such items or matters.
4.7 Entire
Agreement
. This
Agreement and the documents referred to herein contain the entire agreement
between the parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
4.8 Counterparts
. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which taken together will constitute one and the
same instrument.
4.9 Governing
Law
. THIS
AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE.
4.10 Parties
in Interest
. Nothing
in this Agreement, express or implied, is intended to confer on any person other
than the parties and their respective successors and assigns any rights or
remedies under or by virtue of this Agreement.
[Signature
page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
CHEMBIO
DIAGNOSTICS, INC.
/s/
Xxxxxxxx X. Xxxxxxx
Xxxxxxxx
X. Xxxxxxx
President
[THE
STOCKHOLDER]
By:
/s/
Xxxxx X. Xxxxxxx
(Signature)
Printed
Name: Xxxxx
X. Xxxxxxx
Title:
General
Partner, Xxxxxxx Partners, LP
