Exhibit 12(c)
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November 28, 2005
To DuraVest, Inc.
00 X. XxXxxxx Xxxxxx, 0xx xxxxx
Xxxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Subscription Agreement (the "Subscription
Agreement") between Bio-Magnetic Therapy Systems, Inc., a Virginia corporation
(the "Company") and DuraVest, Inc. (the "Subscriber"), pursuant to which the
Subscriber have subscribed to purchase shares of common stock ("Shares") of the
Company. As a material inducement of the Subscriber to enter into the
Subscription Agreement and subscribe for the Shares, the Company represents and
warrants to, and agrees with, the Subscriber as of the date hereof and as of the
closing under the Subscription Agreement as follows:
a. Incorporation and Standing. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Virginia, has full power to carry on its business as and where
such business is now being conducted and to own, lease and operate the
properties and assets now owned or operated by it and is duly qualified to
do business and is in good standing in each jurisdiction where the conduct
of its business or the ownership of its properties requires such
qualification.
b. Authority. The execution, delivery and performance of the
Subscription Agreement by the Company and the consummation by the Company
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action.
c. No Conflict. The execution, delivery and performance of the
Subscription Agreement by the Company and the consummation by the Company
of the transactions contemplated thereby do not (i) violate or conflict
with the certificate of incorporation or bylaws or any shareholder
agreement of the Company, (ii) conflict with or result (with the lapse of
time or giving of notice or both) in a breach or default under any material
agreement or instrument to which the Company is a party or by which the
Company is otherwise bound, (iii) violate any material order, judgment,
law, statute, rule or regulation applicable to the Company. The
Subscription Agreement, when executed and delivered by the Company, will be
a legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms (except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws and
equitable principles relating to or limiting creditors' rights generally).
d. Capitalization. All of the presently issued and outstanding shares
of capital stock in the Company have been duly authorized and validly
issued. The capitalization of the Company (including any and all
outstanding options, warrants, convertible securities or other rights to
acquire securities of the Company) is as set forth on Exhibit A hereto.
When issued and delivered as contemplated by the Subscription Agreement
(including, without limitation, the payment of the subscription price
provided for therein), the Shares shall be validly issued, fully paid and
non-assessable.
e. Litigation and Other Proceedings. There are no actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company at law or in equity before or by any court
or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which would,
if adversely decided, materially adversely affect the Company. The Company
is not subject to any continuing order, writ, injunction or decree of any
court or agency which would have a material adverse effect on the Company.
f. Use of Proceeds. The Company shall use the proceeds received from
the sale of the Shares for general working capital purposes and other
general company purposes and not for the repayment of debt or the
repurchase of any debt or equity securities of the Company, except the
payment of loans, advances, compensation (including, without limitation,
deferred compensation) and/or bonuses to Xx. Xxxxxxx Xxxxxx and/or
Xxxxxxxxx Xxxxxx-Xxxxxxx. A bonus of $50,000 for Xx. Xxxxxxx is noted for
payment for 2005 bonuses as per his employment agreement.
g. Consents/Approvals. No consents, filings (other than Federal and
state securities filings relating to the issuance of the Shares pursuant to
applicable exemptions from registration, which the Company hereby
undertakes to make in a timely fashion), authorizations or other actions of
any governmental authority are required to be obtained or made by the
Company for the Company's execution, delivery and performance of the
Subscription Agreement which have not already been obtained or made or will
be made in a timely manner following the Closing. Assuming the truth of the
representations and warranties of the Subscriber in the Subscription
Agreement, the offer, sale and issuance of the Shares as contemplated
hereby are exempt from the registrations requirements of the Securities Act
of 1933, as amended.
h. No Commissions. The Company has not incurred and will not have
incurred any obligation for any finder's, broker's or agent's fees or
commissions in connection with the transaction contemplated hereby, other
than that which may be payable to Xxxxxxxx XX and/or its affiliates,
subsidiaries, agents, representatives, or employees.
j. Financial Statements. The compiled consolidated balance sheet and
income statement of the Company and its subsidiaries for the year ended
December 31, 2004 and the unaudited interim balance sheet and income
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statement for the interim period ended August 31, 2005 previously delivered
to the Subscriber (the "Financial Statements") fairly present, in all
material respects, the financial position of the Company as of the dates
thereof and for the periods then ended and have been prepared in accordance
with generally accepted accounting principles, subject to year end
adjustments and the absence of footnote disclosures. Since August 31, 2005,
there has been no material adverse change in the assets, liabilities or
financial condition of the Company, other than decreases in working
capital.
k. Intellectual Property. The Company owns or possesses adequate
licenses or other rights to use all patents, patent applications,
trademarks, trademark applications, service marks, service xxxx
applications, trade names, copyrights, manufacturing processes, formulae,
trade secrets, customer lists and know how (collectively, "Intellectual
Property") necessary or desirable to the conduct of its business as
conducted and as proposed to be conducted, with such exceptions as would
not have, individually or in the aggregate, a material adverse effect on
the Company. No claim is pending or, to the Company's knowledge, threatened
to the effect that the operations of the Company infringe upon or conflict
with the asserted rights of any other person under any Intellectual
Property. No claim is pending or, to the Company's knowledge, threatened to
the effect that any such Intellectual Property owned or licensed by the
Company, or which the Company otherwise has the right to use, is invalid or
unenforceable by the Company.
l. Taxes. All of the tax returns and reports of the Company required
by law to be filed have been filed on a timely basis (or extensions
therefor have been obtained on a timely basis). All filed tax returns were
accurate in all material respects when filed, and all taxes shown due
thereon have been paid. There are in effect no waivers of the applicable
statute of limitations for any domestic or foreign taxes for any period. No
deficiency assessment or proposed adjustment of the Company's domestic or
foreign taxes is pending.
m. Indebtedness. Except as set forth on the Financial Statements, the
Company has no material indebtedness for borrowed money.
n. Related Party Transactions. Except as set forth in the Financial
Statements and the capitalization table of the Company, since the date of
the most recent Financial Statement there has not been any transaction
between the Company and its affiliates, officers or directors except in the
ordinary course of business (it being understood that employment
relationships are in the ordinary course of business).
The Company hereby agrees to indemnify and hold harmless the Subscriber and
its affiliates and each of their owners, officers, directors and agents against
loss or damage arising out of any breach of the foregoing representations and
warranties.
The foregoing representations and warranties are given on the date hereof
and on the closing of the purchase of shares of capital stock pursuant to the
Subscription Agreement. For the avoidance of doubt, all documents executed by
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any officer or director of the Subscriber or the Company with respect to the
transactions contemplated by or associated with the Subscription Agreement are
on behalf of the Subscriber or the Company, as applicable, and without personal
liability to such officer or director.
BIO-MAGNETIC THERAPY SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
Title: President
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EXHIBIT A - Capitalization
Common Stock, par value US$ 0.01 per share, 15,000,000 shares authorized as of
the date of this letter, and 9,276,549 shares issued and outstanding prior to
the issuance of the Shares to be issued pursuant to the Subscription Agreement.
The Company intends to amend its Charter in December 2005 or January 2006 to
increase the Common Stock, par value US$ 0.01 per share, from 15,000,000 shares
authorized to 25,000,000 shares authorized.
Preferred Stock , without par value, 5,000,000 shares authorized as of the date
of this letter, and no shares issued and outstanding.
