CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
VASOMEDICAL, INC.
and
JNC OPPORTUNITY FUND LTD.
------------------------------
Dated as of April 30, 1998
------------------------------
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of April 30, 1998
(this "Agreement"), between Vasomedical, Inc., a Delaware corporation (the
"Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the
"Purchaser").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to acquire shares of the Company's 5% Series C Convertible Preferred Stock, $.01
par value per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
ARTICLE I CERTAIN DEFINITIONS
-----------------------------
Section 1.1. Certain Definitions. As used in this Agreement, unless the
context requires a different meaning, the following terms have the meanings
indicated in this Section 1.1:
"Affiliate" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the recitals hereto.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a Federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government actions
to close.
"Certificate of Designation" shall have the meaning set forth in Section
2.1(a).
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.001 per share.
"Company" shall have the meaning set forth in the recitals hereto.
"Conversion Ratio" shall have the meaning set forth in the Certificate of
Designation.
"Disclosure Materials" means, collectively, the SEC Documents, the
disclosure package delivered to the Purchaser in connection with the offering by
the Company of the Shares and the Schedules to this Agreement furnished by or on
behalf of the Company pursuant to Section 3.1.
"Escrow Agent" means Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP.
"Escrow Agreement" means the escrow agreement, dated as of the date hereof,
by and among the Company, the Purchaser and the Escrow Agent, in the form of
Exhibit E, as the same may be amended, supplemented or otherwise modified in
accordance with its terms.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, right
of first refusal, charge, security interest or encumbrance of any kind in or on
such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"Original Issue Date" shall mean the first issuance of any Shares,
regardless of the number of transfers of any particular Share and regardless of
the number of certificates which may be issued to evidence any particular Share.
"Per Share Market Value" shall have the meaning set forth in the
Certificate of Designation.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the recitals hereto.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Purchaser" shall have the meaning set forth in the recitals hereto.
"Registration Rights Agreement" means the registration rights agreement,
dated as of the date hereof, between the Company and the Purchaser, in the form
of Exhibit B, as the same may be amended, supplemented or otherwise modified in
accordance with its terms. "Required Approvals" shall have the meaning set forth
in Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section 3.1(l).
"Securities" means, collectively, the Shares, the Warrant and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock to be purchased pursuant to
this Agreement.
"Stated Value" shall have the meaning set forth in Section 2.1(a).
"Subsequent Financing" shall have the meaning set forth in Section 4.9.
"Subsequent Financing Notice" shall have the meaning set forth in Section
4.9.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Trading Day" shall have the meaning set forth in the Certificate of
Designation.
"Transaction Documents" shall have the meaning set forth in Section 3.1(b).
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Shares and as payment of dividends thereon in accordance with the
terms of the Certificate of Designation, and upon exercise of the Warrant in
accordance with the terms thereof.
"Underlying Shares Registration Statement" shall have the meaning set forth
in Section 3.1(f).
"Warrant" means the Common Stock purchase warrant, to be issued to the
Purchaser on the date hereof, in the form of Exhibit C, entitling the Purchaser
to purchase up to 413,712 shares of Common Stock in accordance with the terms
thereof.
ARTICLE II
PURCHASE OF SHARES
------------------
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions set forth in this Agreement, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company on the Closing Date 175,000 Shares, which shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation"), at a price per Share of $20 (the "Stated Value").
The aggregate "Purchase Price" for the Shares is $3,500,000.
(b) The closing of the purchase and sale of the Shares and the Warrant (the
"Closing") shall take place at the offices of the Escrow Agent, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately following the execution
hereof, or at such other time and/or place as the Purchaser and the Company may
agree. The date of the Closing is referred to herein as the "Closing Date".
(c) At the Closing, the Escrow Agent, in accordance with and subject to the
terms and conditions of the Escrow Agreement, shall deliver (i) to the
Purchaser, (A) one or more stock certificates representing the Shares purchased
hereunder, registered in the name of the Purchaser, (B) the Warrant, and (C) the
legal opinion addressed to the Purchaser and dated the Closing Date, of Blau,
Kramer, Wactlar & Xxxxxxxxx, P.C., counsel for the Company, substantially in the
form of Exhibit D; (ii) to the Company, the Purchase Price, less the amounts to
be deducted in accordance with the Escrow Agreement, in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company prior to the Closing; and (iii) to the party entitled thereto all
documents, instruments and writings required to have been delivered at or prior
to Closing by either the Company or the Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in the SEC Documents or in Schedule 3.1(a) (collectively, the "Subsidiaries").
Each of the Subsidiaries is a corporation, duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of this Agreement, the
Certificate of Designation, the Warrant or the Registration Rights Agreement
(collectively, the "Transaction Documents"), (y) have a material adverse effect
on the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole or (z) adversely impair in any
material respect with the Company's ability to perform fully on a timely basis
its obligations under the Transaction Documents or the Securities (a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and to otherwise carry out its
obligations under the Transaction Documents. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company, including, without limitation, approval
thereof by the Company's Board of Directors. Each of the Transaction Documents
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents, which could adversely affect the execution, delivery and timely
performance of the Transaction Documents.
(c) Capitalization Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and the Warrant hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company without independent investigation, except as
specifically disclosed in the SEC Documents or Schedule 3.1(c), no Person
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of in excess of 5% of the Common
Stock.
(d) Issuance of Shares, Warrant and Underlying Shares. The Shares and the
Warrant have been duly authorized and, when paid for in accordance with the
terms hereof, shall be validly issued, fully paid and nonassessable, free and
clear of any Liens. The Company has and at all times while any Shares are or the
Warrant is outstanding will maintain a reserve of shares of Common Stock to
enable it to perform its conversion and other obligations under this Agreement,
the Certificate of Designation and Warrant, which reserve shall be no less than
7,724,826 shares of Common Stock (such sum, the "Initial Reserve"). If at any
time the sum of the number of shares of Common Stock issuable (a) upon
conversion in full of the then outstanding Shares, (b) as the payment of
dividends on account of the Shares and (c) upon exercise in full of the Warrant
exceeds the Initial Reserve, then the Company shall duly reserve twice the
number of shares of Common Stock equal to such excess to fulfill such
obligations. When issued in accordance with the terms hereof, the Certificate of
Designation and the Warrant (as the case may be), the Underlying Shares will
have been duly authorized, validly issued, fully paid and nonassessable, and
free and clear of any Liens.
(e) No Conflicts No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation or bylaws (each as
amended through the date hereof), 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, loans or credit agreement or other
instrument to which the Company is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or United States governmental authority to which the
Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for possible violations which either individually or in the
aggregate would not have or reasonably be expected to result in a Material
Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, or make any
filing or registration with, any court or other Federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, except for
(i) the filing of the Certificate of Designation with respect to the Shares with
the Secretary of State of Delaware, which filing shall be effected on or prior
to the Closing Date, (ii) the filing of the registration statement covering the
Underlying Shares (the "Underlying Shares Registration Statement") with the
Commission and the making of the applicable blue-sky filings under state
securities laws, each as contemplated by the Registration Rights Agreement, and
(iii) other than, in all other cases, where the failure to obtain such consent,
waiver, authorization or order, or to give or make such notice or filing, would
not, individually or in the aggregate, have or would reasonably be expected to
result in a Material Adverse Effect (the "Required Approvals").
(g) Litigation; Proceedings. Except as set forth in the SEC Documents,
there is no action, suit, notice of violation, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which relates to
or challenges the legality, validity or enforceability of the Transaction
Documents or the Securities or which would, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary (i) is
in default under or in violation (or has received notice of a claim that it is
in default under or in violation) of any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound, (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is in violation of any statute, rule
or regulation of any governmental authority, except as would not, in any case of
(i) and (iii) above, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(i) Certain Fees. Except for fees payable to Xxxxxxx Capital Partners, Ltd.
no fees or commissions will be payable by the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates (as such term
is defined under Rule 405 promulgated under the Securities Act), from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, except to the extent such fees or claims result from a written
agreement executed by the Purchaser and such claimant in connection with the
transactions contemplated hereby.
(j) Disclosure Materials. Except as disclosed in the SEC Documents, the
Disclosure Materials do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(k) Private Offering. Neither the Company nor any Person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of securities of the Company under circumstances which would require
the integration of such offering with the offering of the Shares or the
Underlying Shares under the Securities Act) which might subject the offering,
issuance or sale of the Shares or the Underlying Shares to the registration
requirements of Section 5 of the Securities Act.
(l) SEC Documents. The Company has filed all reports required to be filed
by it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the one year preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC Documents") on a timely basis,
or has received a valid extension of such time of filing (in which case it has
made all such filings in the time required by such extension). As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the published rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specifically indicated in such financial statements or the notes
thereto or, in the case of unaudited interim statements, to the extent they may
include footnotes or may be condensed as summary statements, and 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 year-end audit adjustments. The Company last
filed audited financial statements with the Commission in its Annual Report on
Form 10-K for the year ended May 31, 1997 and the Company has not received any
comments from the Commission in respect of such audited financial statements.
Since the date of the financial statements included in the Annual Report on Form
10-K for the year ended May 31, 1997, there has been no event, occurrence or
development that has had, would have or could reasonably be expected to result
in a Material Adverse Effect which is not specifically disclosed in the
Disclosure Materials.
(m) Seniority. No class of equity securities of the Company is senior to
the Shares in right of payment, whether upon liquidation, dissolution or
otherwise.
(n) Form S-3 Eligibility. The Company is, and at the Closing Date will be,
eligible to register securities for resale with the Commission under Form S-3
promulgated under the Securities Act.
(o) Investment Company. The Company is not and is not an Affiliate of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(p) Exclusivity. The Company shall not issue and sell Preferred Stock to
any Person other than the Purchaser other than with the specific prior written
consent of the Purchaser.
(q) Listing and Maintenance Requirements Compliance. The Company has not in
the two years prior to the date hereof received written notice from any stock
exchange or market on which the Common Stock is or has been listed (or on which
it is or has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange or market.
(r) Use of Proceeds. The Company shall use all of the proceeds from the
placement of the securities offered hereby for working capital purposes and not
for the satisfaction of any portion of Company debt or to redeem any Company
equity or equity-equivalent securities. Pending their permitted application, the
Company will invest such proceeds in interest bearing accounts and short-term,
interest bearing securities.
(s) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and rights (collectively, the "Intellectual
Property Rights") which are necessary for use in connection with its business
and which the failure to so have would have a Material Adverse Effect. Except as
disclosed in Schedule 3.1(s), to the best knowledge of the Company, there is no
existing infringement by another Person of any of the Intellectual Property
Rights which are necessary for use in connection with its business.
Section 3.2. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly and
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Purchaser has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated hereby and by the
Registration Rights Agreement, the Escrow Agreement and the Warrant and
otherwise to carry out its obligations hereunder and thereunder. The purchase of
the Securities by the Purchaser hereunder has been duly authorized by all
necessary action on the part of the Purchaser. Each of this Agreement, the
Registration Rights Agreement and the Escrow Agreement has been duly executed
and delivered by or on behalf of the Purchaser and constitutes the valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its 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.
(b) Investment Intent. The Purchaser is acquiring the Securities for its
own account (and/or on behalf of managed accounts who are purchasing solely for
their own accounts for investment) for investment purposes only and not with a
view to or for distributing or reselling the Securities or any part thereof or
interest therein, without prejudice, however, to the Purchaser's right, subject
to the provisions of the Transaction Documents, at all times to sell or
otherwise dispose of all or any part of the Securities under an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption or exclusion from such
registration.
(c) Purchaser Status. At the time the Purchaser (and any account for which
it is purchasing) was offered the Shares and the Warrant, it (and any managed
account for which it is purchasing) was, and at the date hereof, it (and any
managed account for which it is purchasing) is, and at the Closing Date, it (and
any managed account for which it is purchasing) will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it or its representatives has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
merits and risks of an investment therein; (ii) access to information about the
Company and the Company's financial condition, results of operations, business,
properties and management sufficient to enable it to evaluate such investment;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
Securities.
(g) Manner of Sale. At no time was Purchaser presented with or solicited by
or through any leaflet, public promotional meeting, television advertisement or
any other form of general solicitation or advertising in connection with its
purchase of the Shares or the Warrant.
(h) Reliance. The Purchaser understands and acknowledges that (i) the
Shares and the Warrant are being offered and sold, and the Underlying Shares are
being offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
-------------------------------
4.1. Transfer Restrictions. (a) If the Purchaser should decide to dispose
of any of the Shares or any portion of the Warrant (and upon conversion or
exercise thereof, as the case may be, any Underlying Shares), the Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements thereof. In connection
with any transfer of any of the Securities other than pursuant to an effective
registration statement or to the Company, the Company may require the transferor
of such Securities to provide to the Company an opinion of counsel experienced
in the area of United States securities laws selected by the transferor, 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
Securities under the Securities Act.
(b) The Purchaser agrees to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on certificates representing the
Securities:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [CONVERTIBLE] [EXERCISABLE]] [THE SECURITIES REPRESENTED HEREBY] HAVE
[NOT] 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 THEREUNDER AND IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN A CONVERTIBLE
PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF APRIL 30, 1998, BETWEEN
VASOMEDICAL, INC. (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF
THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
The Underlying Shares issuable upon conversion of Shares or exercise of the
Warrant, as the case may be, shall not contain the legend set forth above if the
conversion of Shares or exercise of the Warrant occurs at any time while an
Underlying Shares Registration Statement is effective under the Securities Act,
or in the event there is not an effective Underlying Shares Registration
Statement at such time, if in the opinion of counsel to the Company experienced
in the area of United States securities laws such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide the Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from such
legend at such time as such legend is no longer required hereunder.
Section 4.2. Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in Section 4.1(b)
above.
Section 4.3. Furnishing of Information. For so long as the Purchaser owns
Shares or Underlying Shares, the Company covenants to timely file (or obtain
valid extensions in respect thereof) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and, if requested, to promptly furnish the Purchaser with true and complete
copies of all such filings. Until such time as all Underlying Shares may be
resold under Rule 144(k) promulgated under the Securities Act, if the Company is
not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act.
Section 4.4. Use of Disclosure Materials. The Company consents to the use
of the SEC Documents, and any amendments and supplements thereto, by the
Purchaser in connection with resales of Securities other than pursuant to an
effective registration statement.
Section 4.5. Increase in Authorized Shares. At any such time as the Company
would be, if (with respect to the Shares) a notice of conversion or (with
respect to the Warrant) form of election to purchase were to be delivered on
such date, precluded from converting at least 135% of the full number of Shares
that remain unconverted or from exercising the entire Warrant at such date (the
"Overflow Date"), as the case may be, due to the unavailability of authorized
but unissued or re-acquired Common Stock the Board of Directors of the Company
shall promptly (and in any case within 14 Business Days from such date) cause to
be prepared and filed with the SEC and mailed to the shareholders of the Company
within seven (7) Business Days after clearance by the SEC or 15 days after
filing with the SEC in the event the SEC has not commented on such filing, proxy
materials requesting authorization to amend the Company's certificate of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue at least to such number of shares of Common Stock as
would be necessary or to promptly effect a reverse stock split so that it can
satisfy its conversion and exercise obligations in accordance with the
Certificate of Designation and Warrant. In connection with an increase in the
number of Shares, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval to carry out such resolutions
(and hold a special meeting of the shareholders no later than the 40th day after
mailing of the proxy materials relating to such meeting) and (c) within 5
Business Days of obtaining such shareholder authorization, file an appropriate
amendment to the Company's certificate of incorporation to evidence such
increase.
Section 4.6. Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as the Purchaser may reasonably request
and continue such qualification at all times until the Purchaser notifies the
Company in writing that it no longer owns Shares, the Warrant or Underlying
Shares; provided, however, that neither the Company nor its Subsidiaries shall
be required in connection therewith to qualify as a foreign corporation where
they are not now so qualified.
Section 4.7. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Shares, the Warrant or the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares, the Warrant or
Underlying Shares to the Purchaser.
Section 4.8. Solicitation Materials. The Company shall not (i) distribute
any offering materials in connection with the offering and sale of the Shares,
the Warrant or Underlying Shares other than the Disclosure Materials and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares, the Warrant or Underlying Shares by
means of any form of general solicitation or advertising.
Section 4.9. Right of First Refusal; Subsequent Registrations; Certain
Corporate Actions. (a) The Company shall not, directly or indirectly, without
the prior written consent of the Purchaser, offer, sell, grant any option to
purchase, or otherwise dispose (or announce any offer, sale, grant or any option
to purchase or other disposition) of any of its or its Affiliates equity or
equity-equivalent securities at a price which is on the face thereof or implied
therein, less than either the market price or fair market value for such
securities (a "Subsequent Financing") for a period of 180 days after Closing
Date, except (i) the granting of options or warrants to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock in each case
disclosed in Schedule 3.1(c), and (iii) shares of Common Stock issued upon
conversion of Shares in accordance with the terms of the Certificate of
Designation, unless (A) the Company delivers to the Purchaser a written notice
(the "Subsequent Financing Notice") of its intention to effect such Subsequent
Financing, which Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing shall be
affected, and a term sheet or similar document relating thereto shall be
attached to such Subsequent Financing Notice and (B) the Purchaser shall not
have notified the Company by 5:00 p.m. (Eastern Time) on the fifth Business Day
after its receipt of the Subsequent Financing Notice of its willingness to
provide (or to cause its sole designee to provide), subject to completion of
mutually acceptable documentation, financing to the Company on substantially the
terms set forth in the Subsequent Financing Notice. If the Purchaser shall fail
to notify the Company of its intention to enter into such negotiations within
such time period, the Company may effect the Subsequent Financing substantially
upon the terms and to the Persons (or Affiliates of such Persons) set forth in
the Subsequent Financing Notice; provided, that the Company shall provide the
Purchaser with a second Subsequent Financing Notice, and the Purchaser shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Financing Notice within 60 Business Days after the date of the
initial Subsequent Financing Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Financing Notice.
(b) Except Underlying Shares and other "Registrable Securities" (as such
term is defined in the Registration Rights Agreement) to be registered in
accordance with the Registration Rights Agreement, other than Company securities
to be registered under post effective amendments of the Company's existing
registration statements on Forms X-0, X-0 or S-8 (each as promulgated under the
Act) and other than Company securities to be registered for resale in connection
with financings permitted pursuant to Section 4.9(a)(i) through 4.9(a)(iii), the
Company shall not, without the prior written consent of the Purchaser, (i) issue
or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register for resale any securities of the Company for a period of not less
than 90 Trading Days after the date that the Underlying Shares Registration
Statement is declared effective by the Commission. Any days that the Purchaser
is unable to sell Underlying Shares under the Underlying Shares Registration
Statement shall be added to such 90 Trading Day period for the purposes of (i)
and (ii) above.
(c) As long as there are Shares outstanding, the Company shall not and
shall cause the Subsidiaries not to, without the consent of the holders of the
Preferred Stock, (i) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Purchaser, except
the Company is permitted to increase authorized stock and/or engage in a reverse
stock split; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock other than as to the Underlying Shares except
under Company option plans; or (iii) enter into any agreement with respect to
any of the foregoing.
Section 4.10. Purchaser Ownership of Common Stock. The Purchaser may not
use its ability to convert Shares hereunder or under the terms of the
Certificate of Designation to the extent that such conversion would result in
the Purchaser beneficially owning (for purposes of Rule 13d-3 under the Exchange
Act) more than 4.99% of the outstanding shares of the Common Stock; provided,
however, that if ten days shall have elapsed since the Purchaser has declared an
event of default under any Transaction Document and such event shall not have
been cured to the Purchaser's satisfaction prior to the expiration of such
ten-day period, the provisions of this Section 4.10 shall be null and void ab
initio.
Section 4.11. Listing of Underlying Shares. The Company shall (a) not later
than the tenth Business Day following the Closing Date, prepare and file with
The Nasdaq Sock Market, Inc. (and each other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application covering at least 7,724,826 Underlying Shares, (b) take all steps
necessary to cause such shares to be approved for listing on such exchanges and
markets as soon as possible thereafter, and (c) provide to the Purchaser
evidence of such filing and listing, and the Company shall maintain the listing
of its Common Stock on such exchange.
Section 4.12. Certain Redemption Events. (a) In the event that at any time
within the five-year period after the Closing Date trading in the shares of the
Common Stock is suspended on the Nasdaq SmallCap Market or any other principal
market or exchange for such shares (other than as a result of the suspension of
trading in securities on such market or exchange generally or temporary
suspensions pending the release of material information) for more than three
Trading Days or delisted from the Nasdaq SmallCap Market, unless immediately
therewith the Common Stock is listed for trading on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market, at the Purchaser's
option exercisable by five Business Days prior notice to the Company, the
Company shall redeem all Shares and
Underlying Shares then held by the Purchaser, at an aggregate purchase price
equal to the sum of (I) the number of Shares then held by the Purchaser
multiplied by the product of (A) the Per Share Market Value for the Trading Day
immediately preceding (1) the day of such notice or (2) the date of payment in
full of the redemption price calculated under this Section 4.12, whichever is
greater, multiplied by (B) the Conversion Ratio on the date of such notice, (II)
the number of Underlying Shares then held by the Purchaser multiplied by the Per
Share Market Value for the Trading Day immediately preceding (A) the date of the
notice or (B) the date of payment in full by the Company of the redemption price
calculated under this Section 4.12, whichever is greater, (III) the aggregate of
all accrued but unpaid dividends and other amounts than due and payable on
account of all Shares to be redeemed, and (IV) interest on the amounts set forth
in I - III above accruing from the 5th day after such notice until the
redemption price under this Section 4.12 is paid in full at the rate of 15% per
annum (the "Redemption Price").
(b) In the event the Underlying Shares Registration Statement shall not
have been declared effective by the Commission on or prior to the 180th day
after the Closing Date, then, at the Purchaser's option, exercisable by five
Business Days prior notice to the Company, the Company shall redeem all Shares
and Underlying Shares then held by the Purchaser at a price equal to the
Redemption Price.
(c) In the event that any conversion of Shares or exercise of the Warrant
would, if honored in full, result in the triggering of the Company's Shareholder
Rights Plan as then in effect, the Company shall (i) timely honor such
conversion and/or exercise (as the case may be) and issue Underlying Shares up
to the maximum number, and (ii) redeem all other Underlying Shares that are not
delivered in respect of such conversion or exercise at a price equal to the
Redemption Price. This provision shall apply to any subsequent conversions
and/or exercises.
Section 4.13. No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if any redemption of Securities otherwise
required under the Transaction Documents would be prohibited by the relevant
provisions of the Delaware General Corporation Law, such redemption shall be
effected as soon as it is permitted under such law; provided, however, that,
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.12 during any such period.
Section 4.14. Redemption Restrictions. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of Securities otherwise
required under this Agreement would be prohibited in the absence of consent from
any lender of the Company or of any Subsidiary, or by the holders of any class
of securities of the Company, the Company shall use its best efforts to obtain
such consent as promptly as practicable after the redemption is required.
Interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.12 until such consent is
obtained. Nothing contained in this Section shall be construed as a waiver by
the Purchaser of any rights it may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
Section 4.15. Notice of Breaches. Each of the Company and the Purchaser
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in the Transaction
Documents, as well as any events or occurrences arising after the date hereof
and prior to the Closing Date, which could reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may be,
contained therein to be incorrect or breached as of such Closing Date. However,
no disclosure by either party pursuant to this Section shall be deemed to cure
any breach of any such representation, warranty or other agreement. Neither the
Company, any Subsidiary nor the Purchaser will take, or agree to commit to take,
any action that is intended to make any representation or warranty of the
Company or the Purchaser, as the case may be, contained in the Transaction
Documents, inaccurate in any respect at the Closing Date.
Notwithstanding the generality of the foregoing, the Company shall promptly
notify the Purchaser of any notice or claim (written or oral) that it receives
from any lender of the Company to the effect that the consummation of the
transactions contemplated by any of the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares a copy of any written statement in support of or relating to such
claim or notice.
Section 4.16. Conversion Procedures. Exhibit F attached hereto sets forth
the procedures with respect to the conversion of the Shares, including the forms
of conversion notice to be provided upon conversion, instructions as to the
procedures for conversion, the form of legal opinion, if necessary, that shall
be rendered to the Transfer Agent and such other information and instructions as
may be reasonably necessary to enable the Purchaser to exercise its right of
conversion smoothly and expeditiously.
Section 4.17. Conversion and Exercise Obligations of the Company. The
Company covenants to honor conversions of Shares and to honor exercises under
the Warrant (as the case may be) to deliver Underlying Shares in accordance with
the terms and conditions and time periods set forth in each of the Certificate
of Designation and the Warrant.
Section 4.18. Transfer of Intellectual Property Rights. Except in
connection with the sale of all or substantially all of the assets of the
Company that are covered under Section 5 of the Certificate of Designation, the
Company shall not transfer, sell or otherwise dispose of, any Intellectual
Property Rights, or allow the Intellectual Property Rights to become subject to
any Liens, without the prior written consent of the Purchaser.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1. Fees and Expenses. Except as set forth in the Registration
Rights Agreement and except that the Company shall reimburse the Purchaser at
the Closing $15,000 for its legal fees and disbursements, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Shares (and upon conversion thereof, the Underlying
Shares) pursuant hereto.
Section 5.2. Entire Agreement; Amendments. This Agreement, together with
the Exhibits and Schedules hereto, the Certificate of Designation, the Warrant
and the Registration Rights Agreement (together with the respective Exhibits and
Schedules thereto) contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
Section 5.3. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
If to the Company: Vasomedical, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Attn: Chief Financial Officer
With copies to: Blau, Kramer, Wactlar & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxxxxxx
Xxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Attn: Xxxxx Xxxxxxxxx
If to the Purchaser:JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx, XX00
Xxxxxxx
Facsimile No.: (000) 000-0000
Attn: Director
With copies to: Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Managing Member
and
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
Section 5.4. Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 5.5. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section 5.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Purchaser may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other,
except that the Purchaser may assign its rights hereunder and under the Warrant
and the Registration Rights Agreement without the consent of the Company,
provided, that the Company shall have the right to require any such assignee to
execute a counterpart of this Agreement and any other Transaction Documents to
which the assignor was a party as a condition to such holders claim to any right
hereunder or thereunder. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 5.7. No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to permitted assignees under Section 5.6,
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
Section 5.8. 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 the principles of conflicts of law thereof.
Section 5.9. Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the agreements and covenants of
the parties contained in Article IV and this Article V shall survive the Closing
(or any earlier termination of this Agreement) and any conversion of Shares and
exercise of the Warrant.
Section 5.10. Counterpart Signatures. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
Section 5.11. Publicity. The Company and the Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement.
Section 5.12. Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 5.13. Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchaser hereunder with respect to the
subsequent transfer of Shares and the Underlying Shares. Each of the Company and
the Purchaser agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of any breach of its obligations described in
the foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first indicated above.
Company:
VASOMEDICAL, INC.
By:
Name:
Title:
Purchaser:
JNC OPPORTUNITY FUND LTD.
By:
Name:
Title:
