EXHIBIT 10.18
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
DATED AS OF JUNE 7, 2006
AMONG
STATSURE DIAGNOSTIC SYSTEMS, INC.
AND
THE PURCHASERS LISTED ON EXHIBIT A
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TABLE OF CONTENTS
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PAGE
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ARTICLE I Purchase and Sale of Preferred Stock....................................................................1
Section 1.1 Purchase and Sale of Stock.............................................................1
Section 1.2 Warrants...............................................................................1
Section 1.3 Conversion Shares......................................................................1
Section 1.4 Purchase Price and Closing.............................................................2
ARTICLE II Representations and Warranties.........................................................................2
Section 2.1 Representations and Warranties of the Company..........................................2
Section 2.2 Representations and Warranties of the Purchasers......................................12
ARTICLE III Covenants............................................................................................15
Section 3.1 Securities Compliance.................................................................15
Section 3.2 Registration and Listing..............................................................15
Section 3.3 Inspection Rights.....................................................................15
Section 3.4 Compliance with Laws..................................................................16
Section 3.5 Keeping of Records and Books of Account...............................................16
Section 3.6 Reporting Requirements................................................................16
Section 3.7 Amendments............................................................................16
Section 3.8 Other Agreements......................................................................17
Section 3.9 Distributions.........................................................................17
Section 3.10 Status of Dividends...................................................................17
Section 3.11 Use of Proceeds.......................................................................18
Section 3.12 Reservation of Shares.................................................................18
Section 3.13 Transfer Agent Instructions...........................................................18
Section 3.14 Disposition of Assets.................................................................19
Section 3.15 Reporting Status......................................................................19
Section 3.16 Disclosure of Transaction ............................................................19
Section 3.17 Disclosure of Material Information....................................................19
Section 3.18 Pledge of Securities..................................................................19
Section 3.19 Form SB-2 Eligibility.................................................................20
Section 3.20 Intentionally Left Blank..............................................................20
Section 3.21 Subsequent Financings.................................................................20
ARTICLE IV Conditions............................................................................................21
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares..............21
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares.......22
ARTICLE V Stock Certificate Legend...............................................................................24
Section 5.1 Legend................................................................................24
ARTICLE VI Indemnification.......................................................................................25
Section 6.1 General Indemnity.....................................................................25
Section 6.2 Indemnification Procedure.............................................................25
ARTICLE VII Miscellaneous........................................................................................28
Section 7.1 Fees and Expenses.....................................................................28
Section 7.2 Specific Enforcement, Consent to Jurisdiction.........................................28
Section 7.3 Entire Agreement; Amendment...........................................................28
Section 7.4 Notices...............................................................................29
Section 7.5 Waivers...............................................................................30
Section 7.6 Headings..............................................................................30
Section 7.7 Successors and Assigns................................................................30
Section 7.8 No Third Party Beneficiaries..........................................................30
Section 7.9 Governing Law.........................................................................30
Section 7.10 Survival..............................................................................30
Section 7.11 Counterparts..........................................................................30
Section 7.12 Publicity.............................................................................31
Section 7.13 Severability..........................................................................31
Section 7.14 Further Assurances....................................................................31
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SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated June 7, 2006 by and among StatSure Diagnostic Systems,
Inc., a Delaware corporation (the "Company"), and each of the Purchasers of
shares of Series A Convertible Preferred Stock of the Company whose names are
set forth on Exhibit A hereto (individually, a "Purchaser" and collectively, the
"Purchasers").
The parties hereto agree as follows:
Purchase and Sale of Preferred Stock
Purchase and Sale of Stock. Upon the following terms and conditions,
the Company shall issue and sell to the Purchasers and each of the Purchasers
shall purchase from the Company, the number of shares of the Company's Series A
Convertible Preferred Stock, par value $0.001 per share (the "Preferred
Shares"), at a purchase price of $1,000.00 per share, convertible into shares of
the Company's common stock, par value $0.001 per share (the "Common Stock"), in
the amounts set forth opposite such Purchaser's name on Exhibit A hereto,
subject to adjustment as described in the Certificate of Designation (as defined
herein). The designation, rights, preferences and other terms and provisions of
the Series A Convertible Preferred Stock are set forth in the Certificate of
Designation of the Relative Rights and Preferences of the Series A Convertible
Preferred Stock attached hereto as Exhibit B (the "Certificate of Designation").
The Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act") or Section 4(2) of the
Securities Act.
Warrants. Upon the following terms and conditions, each Purchaser
shall be issued one Series A Warrant, in substantially the form attached hereto
as Exhibit C-1 (the "Warrants"), to purchase up to seventy-five percent (75%) of
the number of shares of Common Stock issuable upon exercise of the total number
of Preferred Shares purchased. The Warrants shall have a term of four and
one-half (4 1/2) years, beginning one hundred and eighty one (181) days after
the Closing, as defined below. The Warrants have an exercise price of $1.50 per
share (the "Warrant Price") and shall be exercisable as stated in the Warrant.
The number of shares of Common Stock issuable upon exercise of the Warrants
issuable to each Purchaser is set forth opposite such Purchaser's name on
Exhibit A attached hereto.
Conversion Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a number of shares of Common Stock equal to
one hundred and ten percent (110%) of the number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares and exercise of the Warrants then outstanding. Any shares of
Common Stock issuable upon conversion of the Preferred Shares and exercise of
the Warrants (and such shares when issued) are herein referred to as the
"Conversion Shares" and the "Warrant Shares", respectively. The Preferred
Shares, the Conversion Shares and the Warrant Shares are sometimes collectively
referred to as the "Shares".
Purchase Price and Closing. Subject to the terms and conditions
hereof, the Company agrees to issue and sell to the Purchasers and, in
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Purchasers, severally but
not jointly, agree to purchase the Preferred Shares and the Warrants for an
aggregate purchase price of Two Million Three Hundred Thousand Dollars
($2,300,000) (the "Purchase Price"). The closing of the purchase and sale of the
Preferred Shares and the Warrants to be acquired by the Purchasers from the
Company under this Agreement shall take place at the offices of Law Offices of
Xxxxx X. Xxxxxxx, PC, 00 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000 (the
"Closing") at 10:00 a.m., New York time (i) on or before May 31, 2006; provided,
that all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith, or (ii) at
such other time and place or on such date as the Purchasers and the Company may
agree upon (the "Closing Date"). Subject to the terms and conditions of this
Agreement, at the Closing the Company shall deliver or cause to be delivered to
each Purchaser (x) a certificate for the number of Preferred Shares set forth
opposite the name of such Purchaser on Exhibit A hereto, (y) its Warrants to
purchase such number of shares of Common Stock as is set forth opposite the name
of such Purchaser on Exhibit A attached hereto and (z) any other documents
required to be delivered pursuant to Article IV hereof. At the Closing, each
Purchaser shall deliver its Purchase Price by wire transfer to an account
designated by the Company.
Representations and Warranties
Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, as of the date hereof and the Closing
Date (except as set forth on the Schedule of Exceptions attached hereto with
each numbered Schedule corresponding to the section number herein), as follows:
Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any subsidiaries except as set forth in the
Company's Form 10-KSB for the year ended December 31, 2005, including the
accompanying financial statements (the "Form 10-KSB"), or in the Company's Form
10-QSB for the fiscal quarter ended March 31, 2006 (the "Form 10-QSB"),
(collectively the "SEC Documents"). The Company and each such subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect (as defined in Section 2.1(c) hereof) on the
Company's financial condition.
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Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Registration
Rights Agreement in the form attached hereto as Exhibit D (the "Registration
Rights Agreement"), the Irrevocable Transfer Agent Instructions (as defined in
Section 3.12), the Certificate of Designation, and the Warrants (collectively,
the "Transaction Documents") and to issue and sell the Shares and the Warrants
in accordance with the terms hereof. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
The other Transaction Documents will have been duly executed and delivered by
the Company at the Closing. Each of the Transaction Documents constitutes, or
shall constitute when executed and delivered, a 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, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding as of the date hereof are set
forth in the SEC Documents hereto. All of the outstanding shares of the Common
Stock and the Preferred Shares have been duly and validly authorized. Except as
set forth in Schedule 2.1(c) hereto, no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. There are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
The Company is not a party to any agreement granting registration or
anti-dilution rights to any person with respect to any of its equity or debt
securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable Federal and state securities laws, and no stockholder has a
right of rescission or claim for damages with respect thereto which would have a
Material Adverse Effect (as defined below). The Company has furnished or made
available to the Purchasers true and correct copies of the Company's Articles of
Incorporation as in effect on the date hereof (the "Articles"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws"). For the
purposes of this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, operations, properties, or financial condition of the
Company and its subsidiaries and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its obligations under this Agreement in any material
respect.
Issuance of Shares. The Preferred Shares and the Warrants to be
issued at the Closing have been duly authorized by all necessary corporate
action and the Preferred Shares, when paid for or issued in accordance with the
terms hereof, shall be validly issued and outstanding, fully paid and
nonassessable and entitled to the rights and preferences set forth in the
Certificate of Designation. When the Conversion Shares and the Warrant Shares
are issued in accordance with the terms of the Certificate of Designation and
the Warrants, respectively, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, and the holders shall be entitled to all rights accorded to a
holder of Common Stock.
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No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designation and the consummation by the
Company of the transactions contemplated herein and therein do not and will not
(i) violate any provision of the Company's Articles or Bylaws, (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, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which it or its properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of the Company under any agreement or
any commitment to which the Company is a party or by which the Company is bound
or by which any of its respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries are bound
or affected, except, in all cases other than violations pursuant to clauses (i)
and (iv) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under Federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents, or issue and sell the Preferred Shares, the Warrants, the Conversion
Shares and the Warrant Shares in accordance with the terms hereof or thereof
(other than any filings which may be required to be made by the Company with the
Commission or state securities administrators subsequent to the Closing, any
registration statement which may be filed pursuant hereto, and the Certificate
of Designation); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchasers herein.
Commission Documents, Financial Statements. The Company is required
to file periodic and other reports pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d) of the Exchange Act (all of the foregoing including filings
incorporated by reference therein are also included when referring to the SEC
Documents). The Company has delivered or made available to each of the
Purchasers true and complete copies of the SEC Documents. The Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, was required
to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. At the times of their respective filings, the Form 10-KSB and the
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Form 10-QSB complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Form 10-KSB and the Form 10-QSB 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 as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of 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).
Subsidiaries. The SEC Documents set forth each subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership. For the purposes of this
Agreement, "subsidiary" shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
No Material Adverse Change. Since March 30, 2006, the Company has
not experienced or suffered any Material Adverse Effect expect as disclosed in
the SEC Documents.
No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary course of the Company's
or its subsidiaries respective businesses since March 31, 2006 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
5
No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
Indebtedness. The SEC Documents set forth as of a recent date all
outstanding secured and unsecured Indebtedness of the Company or any subsidiary,
or for which the Company or any subsidiary has commitments. For the purposes of
this Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money
or amounts owed in excess of $100,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of $25,000
due under leases required to be capitalized in accordance with GAAP. Except as
set forth in the SEC Documents, neither the Company nor any subsidiary is in
default with respect to any Indebtedness.
Title to Assets. Each of the Company and the subsidiaries has good
and marketable title to all of its real and personal property reflected in the
Form 10-KSB, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those disclosed in the Form 10-KSB
or such that, individually or in the aggregate, do not cause a Material Adverse
Effect. All leases of the Company and each of its subsidiaries are valid and
subsisting and in full force and effect.
Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any subsidiary which questions the validity of this Agreement or any of the
other Transaction Documents or the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the SEC Documents, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any subsidiary or any officers or directors of the Company or subsidiary in
their capacities as such.
Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except for such noncompliance that, individually or in the
aggregate, would not cause a Material Adverse Effect. The Company and each of
its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
6
Taxes. Except as set forth on Schedule 2.1 (o) the Company and each
of the subsidiaries has accurately prepared and filed all federal, state and
other tax returns required by law to be filed by it, has paid or made provisions
for the payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of
the Company and the subsidiaries for all current taxes and other charges to
which the Company or any subsidiary is subject and which are not currently due
and payable. None of the federal income tax returns of the Company or any
subsidiary have been audited by the Internal Revenue Service. The Company has no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether pending or
threatened against the Company or any subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
Certain Fees. Except as set forth in Exhibit 2.1 (p) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary or any Purchaser with respect to the transactions
contemplated by this Agreement.
Disclosure. Neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to the Purchasers by or
on behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
Operation of Business. The Company and each of the subsidiaries owns
or possesses all patents, trademarks, domain names (whether or not registered)
and any patentable improvements or copyrightable derivative works thereof,
websites and intellectual property rights relating thereto, service marks, trade
names, copyrights, licenses and authorizations as set forth in the Form 10-KSB,
and all rights with respect to the foregoing, which are necessary for the
conduct of its business as now conducted without any conflict with the rights of
others.
Environmental Compliance. The Company and each of its subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. The Form 10-KSB or Form 10-QSB describes all material permits, licenses
and other authorizations issued under any Environmental Laws to the Company or
its subsidiaries. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
7
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. The Company has all necessary governmental approvals required
under all Environmental Laws and used in its business or in the business of any
of its subsidiaries. The Company and each of its subsidiaries are also in
compliance with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its subsidiaries that violate or may
violate any Environmental Law after the Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
Books and Record Internal Accounting Controls. The books and records
of the Company and its subsidiaries accurately reflect in all material respects
the information relating to the business of the Company and the subsidiaries,
the location and collection of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company or any
subsidiary. The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the Company, to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions is taken
with respect to any differences.
Material Agreements. Except for certain Distribution Agreements
which contain conditions precedent to their effectiveness, neither the Company
nor any subsidiary is a party to any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, a copy of which would be
required to be filed with the Commission as an exhibit to a registration
statement on Form S-3 or applicable form (collectively, "Material Agreements")
if the Company or any subsidiary were registering securities under the
Securities Act. The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and are not
in default under any Material Agreement now in effect, the result of which could
cause a Material Adverse Effect. No written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement of the Company or of any
subsidiary limits or shall limit the payment of dividends on the Company's
Preferred Shares, other preferred stock, if any, or its Common Stock.
8
Transactions with Affiliates. Except as set forth in the Commission
Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company or any subsidiary on the one hand, and (b)
on the other hand, any officer, employee, consultant or director of the Company,
or any of its subsidiaries, or any person owning any capital stock of the
Company or any subsidiary or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares and the Warrants hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to bring the issuance and
sale of any of the Shares and the Warrants under the registration provisions of
the Securities Act and applicable state securities laws, and neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of any of the Shares and the Warrants.
Governmental Approvals. Except for the filing of any notice prior or
subsequent to the Closing Date that may be required under applicable state
and/or Federal securities laws (which if required, shall be filed on a timely
basis), including the filing of a Form D and a registration statement or
statements pursuant to the Registration Rights Agreement, and the filing of the
Certificate of Designation with the Secretary of State for the State of
Delaware, no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Preferred Shares
and the Warrants, or for the performance by the Company of its obligations under
the Transaction Documents.
Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Neither the
Company nor any subsidiary has any employment contract, agreement regarding
proprietary information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. No officer, consultant or
key employee of the Company or any subsidiary whose termination, either
individually or in the aggregate, could have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
subsidiary.
Absence of Certain Developments. Except as set forth in the SEC
Documents, since March 31, 2006, neither the Company nor any subsidiary has:
9
issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
entered into any other transaction other than in the ordinary
course of business, or entered into any other material transaction, whether or
not in the ordinary course of business;
made charitable contributions or pledges in excess of $25,000;
suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
experienced any material problems with labor or management in
connection with the terms and conditions of their employment;
10
effected any two or more events of the foregoing kind which in
the aggregate would be material to the Company or its subsidiaries; or
entered into an agreement, written or otherwise, to take any
of the foregoing actions.
Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan (as defined below) by the Company or any
of its subsidiaries which is or would be materially adverse to the Company and
its subsidiaries. The execution and delivery of this Agreement and the issuance
and sale of the Preferred Shares will not involve any transaction which is
subject to the prohibitions of Section 406 of ERISA or in connection with which
a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of
1986, as amended, provided that, if any of the Purchasers, or any person or
entity that owns a beneficial interest in any of the Purchasers, is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a "party in interest" (within the meaning of Section
3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.
Dilutive Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Designation and its
obligations to issue the Warrant Shares upon the exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of the Company.
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the Shares
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from selling
the Shares pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Shares to be integrated with other offerings. The Company does
not have any registration statement pending before the Commission or currently
under the Commission's review and since September 1, 2005, the Company has not
offered or sold any of its equity securities or debt securities convertible into
shares of Common Xxxxx.
00
Xxxxxxxx-Xxxxx Xxx. The Company is in compliance with the provisions
of the Xxxxxxxx-Xxxxx Act of 2002 applicable to it (the "Xxxxxxxx-Xxxxx Act"),
and the rules and regulations promulgated thereunder, that are effective, and
intends to comply with other applicable provisions of the Xxxxxxxx-Xxxxx Act,
and the rules and regulations promulgated thereunder, upon the effectiveness of
such provisions to the Company.
Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase securities pursuant to this Agreement has
been made by such Purchaser independently of any other purchase and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers
and such counsel does not represent all of the Purchasers but only such
Purchaser and the other Purchasers have retained their own individual counsel
with respect to the transactions contemplated hereby. The Company acknowledges
that it has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers. The Company acknowledges that
such procedure with respect to the Transaction Documents in no way creates a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
Transfer Agent. The name, address, telephone number, fax number,
contact person and email address of the Company's transfer agent is American
Stock Transfer and Trust Company, 00 xxxxxx Xxxx, XXX 00000, 718 921 8200.
Representations and Warranties of the Purchasers. Each of the
Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
12
Organization and Standing of the Purchasers. If the Purchaser is an
entity, such Purchaser is a corporation or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
Authorization and Power. Each Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Preferred
Shares and Warrants being sold to it hereunder. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement by such
Purchaser and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of such Purchaser or its Board
of Directors, stockholders, or partners, as the case may be, is required. Each
of this Agreement and the Registration Rights Agreement has been duly
authorized, executed and delivered by such Purchaser and constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with the terms
thereof.
No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or other organizational documents or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Purchaser is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Purchaser). Such Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to purchase the Preferred Shares or acquire the
Warrants in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
Acquisition for Investment. Each Purchaser is acquiring the
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Each Purchaser does not have a present intention to sell the Preferred Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity; provided, however, that by making the
representations herein and subject to Section 2.2(h) below, such Purchaser does
not agree to hold the Shares or the Warrants for any minimum or other specific
term and reserves the right to dispose of the Shares or the Warrants at any time
in accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Preferred Shares and the Warrants and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries and
received such information as it has deemed necessary or appropriate to conduct
its due diligence investigation and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company.
13
Status of Purchasers. Such Purchaser is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act. Such Purchaser is
not required to be registered as a broker-dealer under Section 15 of the
Exchange Act and such Purchaser is not a broker-dealer.
Opportunities for Additional Information. Each Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of such Purchaser's
personal knowledge of the Company's affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.
No General Solicitation. Each Purchaser acknowledges that the
Preferred Shares and the Warrants were not offered to such Purchaser by means of
any form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
Rule 144. Such Purchaser understands that the Shares must be held
indefinitely unless such Shares are registered under the Securities Act or an
exemption from registration is available. Such Purchaser acknowledges that such
Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
General. Such Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares.
Independent Investment. Except as may be disclosed in any filings
with the Commission by the Purchasers under Section 13 and/or Section 16 of the
Exchange Act, no Purchaser has agreed to act with any other Purchaser for the
purpose of acquiring, holding, voting or disposing of the Shares purchased
hereunder for purposes of Section 13(d) under the Exchange Act, and each
Purchaser is acting independently with respect to its investment in the Shares.
14
Trading Activities. Each Purchaser's trading activities, including
hedging transactions, short sales and other derivative transactions with respect
to the Shares shall be in compliance with all applicable federal and state
securities laws and applicable regulations, including Regulation M.
Covenants
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Securities Compliance. The Company shall notify the Commission in
accordance with their rules and regulations, of the transactions contemplated by
any of the Transaction Documents, including filing a Form D with respect to the
Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required
under Regulation D, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Preferred Shares, the Warrants, the Conversion
Shares and the Warrant Shares to the Purchasers or subsequent holders.
Registration and Listing. The Company shall cause its Common Stock
to be registered under Sections 12(b) or 12(g) of the Exchange Act at or prior
to the effective date of the Registration Statement (as defined in the
Registration Rights Agreement), to comply in all respects with its reporting and
filing obligations under the Exchange Act, to comply with all requirements
related to any registration statement filed pursuant to this Agreement, and to
not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the listing or trading of its
Common Stock on the OTC Bulletin Board or other exchange or market on which the
Common Stock is trading. Subject to the terms of the Transaction Documents, the
Company further covenants that it will take such further action as the
Purchasers may reasonably request, all to the extent required from time to time
to enable the Purchasers to sell the Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act. Upon the request of the Purchasers, the
Company shall deliver to the Purchasers a written certification of a duly
authorized officer as to whether it has complied with such requirements.
Inspection Rights. The Company shall permit, during normal business
hours and upon reasonable request and reasonable notice, each Purchaser or any
employees, agents or representatives thereof, so long as such Purchaser shall be
obligated hereunder to purchase the Preferred Shares or shall beneficially own
any Preferred Shares, or shall own Conversion Shares which, in the aggregate,
represent more than 10% of the total combined voting power of all voting
securities then outstanding, for purposes reasonably related to such Purchaser's
interests as a stockholder to examine and make reasonable copies of and extracts
from the records and books of account of, and visit and inspect the properties,
assets, operations and business of the Company and any subsidiary, and to
discuss the affairs, finances and accounts of the Company and any subsidiary
with any of its officers, consultants, directors, and key employees.
15
Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.
Keeping of Records and Books of Account. The Company shall keep and
cause each subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
Reporting Requirements. If the Commission ceases making periodic
reports filed under the Exchange Act available via the Internet, then at a
Purchaser's request the Company shall furnish the following to such Purchaser so
long as such Purchaser shall be obligated hereunder to purchase the Preferred
Shares or shall beneficially own any Shares:
Quarterly Reports filed with the Commission on Form 10-QSB as soon
as practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission;
Annual Reports filed with the Commission on Form 10-KSB as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission; and
Copies of all notices and information, including without limitation
notices and proxy statements in connection with any meetings, that are provided
to holders of shares of Common Stock, contemporaneously with the delivery of
such notices or information to such holders of Common Stock.
Amendments. The Company shall not amend or waive any provision of
the Articles or Bylaws of the Company in any way that would adversely affect the
liquidation preferences, dividends rights, conversion rights, voting rights or
redemption rights of the Preferred Shares; provided, however, that any creation
and issuance of another series of Junior Stock (as defined in the Certificate of
Designation) or any other class or series of equity securities which by its
terms shall rank on parity with the Preferred Shares shall not be deemed to
materially and adversely affect such rights, preferences or privileges.
Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
to perform of the Company or any subsidiary under any Transaction Document.
16
Status of Dividends. The Company covenants and agrees that (i) no
Federal income tax return or claim for refund of Federal income tax or other
submission to the Internal Revenue Service (the "Service") will adversely affect
the Preferred Shares, any other series of its Preferred Stock, or the Common
Stock, and no deduction shall operate to jeopardize the availability to
Purchasers of the dividends received deduction provided by Section 243(a)(1) of
the Code or any successor provision, (ii) in no report to shareholders or to any
governmental body having jurisdiction over the Company or otherwise will it
treat the Preferred Shares other than as equity capital or the dividends paid
thereon other than as dividends paid on equity capital unless required to do so
by a governmental body having jurisdiction over the accounts of the Company or
by a change in generally accepted accounting principles required as a result of
action by an authoritative accounting standards setting body, and (iii) it will
take no action which would result in the dividends paid by the Company on the
Preferred Shares out of the Company's current or accumulated earnings and
profits being ineligible for the dividends received deduction provided by
Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to
prevent the Company from designating the Preferred Stock as "Convertible
Preferred Stock" in its annual and quarterly financial statements in accordance
with its prior practice concerning other series of preferred stock of the
Company. In the event that the Purchasers have reasonable cause to believe that
dividends paid by the Company on the Preferred Shares out of the Company's
current or accumulated earnings and profits will not be treated as eligible for
the dividends received deduction provided by Section 243(a)(1) of the Code, or
any successor provision, the Company will, at the reasonable request of the
Purchasers of 51% of the outstanding Preferred Shares, join with the Purchasers
in the submission to the Service of a request for a ruling that dividends paid
on the Shares will be so eligible for Federal income tax purposes, at the
Purchasers expense. In addition, the Company will reasonably cooperate with the
Purchasers (at Purchasers' expense) in any litigation, appeal or other
proceeding challenging or contesting any ruling, technical advice, finding or
determination that earnings and profits are not eligible for the dividends
received deduction provided by Section 243(a)(1) of the Code, or any successor
provision to the extent that the position to be taken in any such litigation,
appeal, or other proceeding is not contrary to any provision of the Code.
Notwithstanding the foregoing, nothing herein contained shall be deemed to
preclude the Company from claiming a deduction with respect to such dividends if
(i) the Code shall hereafter be amended, or final Treasury regulations
thereunder are issued or modified, to provide that dividends on the Preferred
Shares or Conversion Shares should not be treated as dividends for Federal
income tax purposes or that a deduction with respect to all or a portion of the
dividends on the Shares is allowable for Federal income tax purposes, or (ii) in
the absence of such an amendment, issuance or modification and after a
submission of a request for ruling or technical advice, the Service shall issue
a published ruling or advise that dividends on the Shares should not be treated
as dividends for Federal income tax purposes. If the Service specifically
determines that the Preferred Shares or Conversion Shares constitute debt, the
Company may file protective claims for refund.
Use of Proceeds. The net proceeds from the sale of the Shares
hereunder shall be used by the Company for working capital and general corporate
purposes, and not to redeem any Common Stock or securities convertible,
exercisable or exchangeable into Common Stock or to settle any outstanding
litigation except for patent litigation as disclosed in the SEC Documents.
17
Reservation of Shares. So long as any of the Preferred Shares or
Warrants remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than one hundred ten percent (110%) the aggregate number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares and the
Warrant Shares and that number of additional shares as is necessary to issue
dividends in shares of common stock.
Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of each Purchaser or its respective
nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as
specified from time to time by each Purchaser to the Company upon conversion of
the Preferred Shares or exercise of the Warrants in the form of Exhibit E
attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12 will be given by the Company to its transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If a Purchaser provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of the Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Shares can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.12 will
cause irreparable harm to the Purchasers by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.12 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.12, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
Disposition of Assets. So long as the Preferred Shares remain
outstanding, neither the Company nor any Subsidiary shall sell, transfer or
otherwise dispose of any of its properties, assets and rights including, without
limitation, its software and intellectual property, to any person except for
sales to customers in the ordinary course of business or with the prior written
consent of the holders of a majority of the Preferred Shares then outstanding.
Reporting Status. So long as a Purchaser beneficially owns any of
the Shares, the Company shall timely file all reports required to be filed with
the Commission pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
18
Disclosure of Transaction. The Company shall issue a press release
describing the material terms of the transactions contemplated hereby (the
"Press Release") as soon as practicable after the Closing but in no event later
than 9:00 A.M. Eastern Time on the first Trading Day following the Closing Date.
The Company shall also file with the Commission a Current Report on Form 8-K
(the "Form 8-K") describing the material terms of the transactions contemplated
hereby (and attaching the Press Release as an exhibit thereto) as soon as
practicable following the Closing Date but in no event more than two (2) Trading
Days following the Closing Date, which Press Release and Form 8-K shall be
subject to prior review and comment by the Purchasers. As soon as feasible after
the public announcement of the transaction the Company completed with Inverness
Medical Innovations, Inc. and Chembio Diagnostics, Inc., the Company shall file
a Form 8-K/A (and attaching as exhibits thereto this Agreement, the Registration
Rights Agreement, the Certificate of Designation, and the form of the Series A
Warrant. "Trading Day" means any day during which the OTC Bulletin Board (or
other principal exchange on which the Common Stock is traded) shall be open for
trading.
Disclosure of Material Information. The Company covenants and agrees
that neither it nor any other person acting on its behalf has provided or will
provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
Pledge of Securities. The Company acknowledges and agrees that the
Shares may be pledged by a Purchaser in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the Common
Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale or
assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of
Common Stock shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document; provided that a Purchaser and its pledgee shall be
required to comply with the provisions of Article V hereof in order to effect a
sale, transfer or assignment of Common Stock to such pledgee. At the Purchasers'
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Common Stock may reasonably request in connection with a pledge
of the Common Stock to such pledgee by a Purchaser.
Form SB-2 Eligibility. The Company currently meets the "registrant
eligibility" and transaction requirements set forth in the general instructions
to Form SB-2 applicable to "resale" registrations on Form SB-2 and the Company
shall file all reports required to be filed by the Company with the Commission
in a timely manner.
Intentionally Left Blank.
Subsequent Financings.
(a) For a period of one (1) year following the following the
effective date of the registration statement providing for the resale of
the Conversion Shares and the Warrant Shares, the Company covenants and
agrees to promptly notify (in no event later than five (5) days after
making or receiving an applicable offer) in writing (a "Rights Notice")
the Purchasers of the terms and conditions of any proposed offer or sale
19
to, or exchange with (or other type of distribution to) any third party (a
"Subsequent Financing"), of Common Stock or any debt or equity securities
convertible, exercisable or exchangeable into Common Stock. The Rights
Notice shall describe, in reasonable detail, the proposed Subsequent
Financing, the names and investment amounts of all investors participating
in the Subsequent Financing, the proposed closing date of the Subsequent
Financing, which shall be within twenty (20) calendar days from the date
of the Rights Notice, and all of the terms and conditions thereof and
proposed definitive documentation to be entered into in connection
therewith. The Rights Notice shall provide each Purchaser an option (the
"Rights Option") during the ten (10) Trading Days following delivery of
the Rights Notice (the "Option Period") to inform the Company whether such
Purchaser will purchase that number of shares equal to such Purchaser's
pro rata portion of the Company's Common Stock then outstanding on an as
converted basis on the same, absolute terms and conditions as contemplated
by such Subsequent Financing. If any Purchaser elects not to participate
in such Subsequent Financing, the other Purchasers may participate on a
pro-rata basis so long as such participation in the aggregate does not
exceed the total Purchase Price hereunder. For purposes of this Section,
all references to "pro rata" means, for any Purchaser electing to
participate in such Subsequent Financing, the percentage obtained by
dividing (x) the number of Conversion Shares plus the number of Warrant
Shares held by such Purchaser on the date of the Rights Notice by (y) the
total number of the Company's Common Stock outstanding, fully diluted on
that same date. Delivery of any Rights Notice constitutes a representation
and warranty by the Company that there are no other material terms and
conditions, arrangements, agreements or otherwise except for those
disclosed in the Rights Notice, to provide additional compensation to any
party participating in any proposed Subsequent Financing, including, but
not limited to, additional compensation based on changes in the Purchase
Price or any type of reset or adjustment of a purchase or conversion price
or to issue additional securities at any time after the closing date of a
Subsequent Financing. If the Company does not receive notice of exercise
of the Rights Option from the Purchasers within the Option Period, the
Company shall have the right to close the Subsequent Financing on the
scheduled closing date with a third party; provided that all of the
material terms and conditions of the closing are the same as those
provided to the Purchasers in the Rights Notice. If the closing of the
proposed Subsequent Financing does not occur on that date, any closing of
the contemplated Subsequent Financing or any other Subsequent Financing
shall be subject to all of the provisions of this Section 3.20(a),
including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section 3.20(a) shall not apply to issuances of
securities in a Permitted Financing.
(b) For purposes of this Agreement, a Permitted Financing (as
defined hereinafter) shall not be considered a Subsequent Financing. A
"Permitted Financing" shall mean (i) securities issued (other than for cash) in
connection with a merger, acquisition, or consolidation, (ii) securities issued
pursuant to the conversion or exercise of convertible or exercisable securities
issued or outstanding on or prior to the date of this Agreement or issued
pursuant to this Agreement (so long as the conversion or exercise price in such
securities are not amended to lower such price and/or adversely affect the
Purchasers), (iii) securities issued in connection with bona fide strategic
license agreements or other partnering arrangements so long as such issuances
are not primarily for the purpose of raising capital (iv) Common Stock issued or
the issuance or grants of options to purchase Common Stock pursuant to the
Company's stock option plans and employee stock purchase plans outstanding as
they exist on the date of this Agreement, and (v) Common Stock issued as payment
of dividends on the Series A Preferred Stock, and (vi) any warrants issued to
the placement agent and its designees for the transactions contemplated by the
Purchase Agreement
20
(c) For a period of one (1) year following the Closing Date, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a "Variable Rate Transaction". The
term "Variable Rate Transaction" shall mean a transaction in which the Company
issues or sells (i) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price. Notwithstanding the
foregoing, except for any equity line of credit or similar agreement referred to
in subclause (ii) of this Section 3.20(c), the prohibition against Variable Rate
Transactions shall not apply in connection with a transaction that contains a
definite minimum price of $1.00 upon conversion or issuance below which such
securities cannot be converted or issued.
(d) For the period commencing on the Closing Date and ending on the
date that is one hundred eighty (180) days following the effective date of the
Registration Statement (as defined in the Registration Rights Agreement), the
Company shall not file any registration statement under the Securities Act,
except to cover the shares issued in a Permitted Financing without the prior
written consent of the Purchasers.
CONDITIONS
Conditions Precedent to the Obligation of the Company to Sell the
Shares. The obligation hereunder of the Company to issue and sell the Preferred
Shares and the Warrants to the Purchasers is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion.
21
Accuracy of Each Purchaser's Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing.
No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Delivery of Purchase Price. The Purchase Price for the Preferred
Shares and Warrants has been delivered to the Company at the Closing Date.
Delivery of Transaction Documents. The Transaction Documents have
been duly executed and delivered by the Purchasers to the Company.
Conditions Precedent to the Obligation of the Purchasers to Purchase
the Shares. The obligation hereunder of each Purchaser to acquire and pay for
the Preferred Shares and the Warrants is subject to the satisfaction or waiver,
at or before the Closing, of each of the conditions set forth below. These
conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all respects as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that are expressly made as of a
particular date), which shall be true and correct in all respects as of such
date.
Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
22
No Suspension, Etc. Trading in the Company's Common Stock shall not
have been suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the applicable Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg Financial Markets ("Bloomberg") shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by Bloomberg, or on the New York Stock Exchange, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Preferred Shares.
No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
Certificate of Designation of Rights and Preferences. Prior to the
Closing, the Certificate of Designation in the form of Exhibit B attached hereto
shall have been filed with the Secretary of State of Delaware.
Opinion of Counsel, Etc. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of the Closing, in
the form of Exhibit G hereto, and such other certificates and documents as the
Purchasers or its counsel shall reasonably require incident to the Closing.
Registration Rights Agreement. At the Closing, the Company shall
have executed and delivered the Registration Rights Agreement to each Purchaser.
Certificates. The Company shall have executed and delivered to the
Purchasers the certificates (in such denominations as such Purchaser shall
request) for the Preferred Shares and the Warrants being acquired by such
Purchaser at the Closing (in such denominations as such Purchaser shall
request).
Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to such Purchaser (the "Resolutions").
23
Reservation of Shares. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and the exercise of
the Warrants, a number of shares of Common Stock equal to one hundred and ten
percent (110%) of the aggregate number of Conversion Shares issuable upon
conversion of the Preferred Shares outstanding on the Closing Date and the
number of Warrant Shares issuable upon exercise of the number of Warrants
assuming such Warrants were granted on the Closing Date. The Company shall also
have reserved that number of authorized and unissued shares of Common Stock
necessary to issue dividends to the Series A Preferred shareholders in shares of
Common Stock.
Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
Intentionally Left Blank.
Secretary's Certificate. The Company shall have delivered to such
Purchaser a secretary's certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate of
Designation, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
Officer's Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company's representations,
warranties and covenants as of such Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.
Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
Stock Certificate Legend
Legend. Each certificate representing the Preferred Shares and the
Warrants, and, if appropriate, securities issued upon conversion thereof, shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or "blue
sky" laws):
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR STATSURE DIAGNOSTIC SYSTEMS, INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
24
The Company agrees to reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above if
at such time, prior to making any transfer of any such securities, such holder
thereof shall give written notice to the Company describing the manner and terms
of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal will not be effected until: (a) either (i) the
Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Conversion Shares or the
Warrant Shares under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, (iii) the Company
has received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Company. The restrictions on
transfer contained in this Section 5.1 shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Conversion
Shares or Warrant Shares is required to be issued to a Purchaser without a
legend, in lieu of delivering physical certificates representing the Conversion
Shares or Warrant Shares (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Shares and Conversion
Shares is then in effect and such request is in connection with a sale), the
Company shall cause its transfer agent to electronically transmit the Conversion
Shares or Warrant Shares to a Purchaser by crediting the account of such
Purchaser's Prime Broker with the Depository Trust Company ("DTC") through its
Deposit Withdrawal Agent Commission ("DWAC") system (to the extent not
inconsistent with any provisions of this Agreement) provided that the Company
and the Company's transfer agent are participating in DTC through the DWAC
system.
Indemnification
General Indemnity. The Company agrees to indemnify and hold harmless
the Purchasers (and their respective directors, officers, managers, partners,
members, shareholders, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by the Purchasers as a result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Company
herein. Each Purchaser severally but not jointly agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
25
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations, warranties or covenants made
by such Purchaser herein. The maximum aggregate liability of each Purchaser
pursuant to its indemnification obligations under this Article VI shall not
exceed the portion of the Purchase Price paid by such Purchaser hereunder.
Indemnification Procedure. Any party entitled to indemnification
under this Article VI (an "indemnified party") will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VI except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect of such action, proceeding or claim, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VI shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
26
Miscellaneous
Fees and Expenses. Except as otherwise set forth in this Agreement
and the other Transaction Documents, each party shall pay the fees and expenses
of its advisors, 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, provided that the Company
shall pay all actual attorneys' fees and expenses (including disbursements and
out-of-pocket expenses) incurred by the Purchasers in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at Closing and shall not exceed $10,000, (ii) the filing
and declaration of effectiveness by the Commission of the Registration Statement
(as defined in the Registration Rights Agreement) and (iii) any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents. The Company shall also pay all reasonable fees and expenses incurred
by the Purchasers in connection with the enforcement of this Agreement or any of
the other Transaction Documents, including, without limitation, all reasonable
attorneys' fees and expenses.
Specific Enforcement, Consent to Jurisdiction.
The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the Registration Rights
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
District of Massachusetts and the courts of the State of Massachusetts located
in Middlesex County for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Transaction Documents
or the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law.
27
Entire Agreement; Amendment. This Agreement and the Transaction
Documents contains the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein or in the Transaction Documents, neither the Company nor any of the
Purchasers makes any representations, warranty, covenant or undertaking with
respect to such matters and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least seventy-five
percent (75%) of the Preferred Shares then outstanding, and no provision hereof
may be waived other than by an a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the Preferred Shares then outstanding. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents or holders of
Preferred Shares, as the case may be.
Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: StatSure Diagnostic Systems, Inc.
0 Xxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention:
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies to: XXXXXX X. XXXXXXX,ESQ.
Xxxxxxx & Prager LLP
00 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement, with copies
to Purchaser's counsel as set forth on
Exhibit A or as specified in writing by such
Purchaser with copies to (which copies
shall not constitute notice) :
Chardan Capital Markets, LLC
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel. No.: (000) 000 000 0000
Fax: (212) 785 -1535
28
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Waivers. No waiver by either party 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 provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns.
No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.
Survival. The representations and warranties of the Company and the
Purchasers shall survive the execution and delivery hereof and the Closing until
the second anniversary of the Closing Date, except the agreements and covenants
set forth in Articles I, III, V, VI and VII of this Agreement shall survive the
execution and delivery hereof and the Closing hereunder.
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other parties hereto, it being understood that all parties need
not sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid 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 were the original
thereof.
29
Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchasers without the
consent of the Purchasers unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Severability. The provisions of this Agreement and the Transaction
Documents are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement or the Transaction Documents shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement or the Transaction Documents
and such provision shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.
Further Assurances. From and after the date of this Agreement, upon
the request of any Purchaser or the Company, each of the Company and the
Purchasers shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the Preferred
Shares, the Conversion Shares, the Warrants, the Warrant Shares, the Certificate
of Designation, and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
STATSURE DIAGNOSTIC SYSTEMS, INC.
By:______________________________
Name:
Title:
PURCHASER
By:______________________________
Name:
Title:
EXHIBIT A TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
STATSURE DIAGNOSTIC SYSTEMS, INC.
NAMES AND ADDRESSES NUMBER OF PREFERRED SHARES DOLLAR AMOUNT OF
OF PURCHASERS & WARRANTS PURCHASED INVESTMENT
------------- -------------------- ----------
Preferred Shares: $
Series A Warrants:
EXHIBIT B TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
STATSURE DIAGNOSTIC SYSTEMS, INC.
FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT C-1 TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
STATSURE DIAGNOSTIC SYSTMES, INC.
FORM OF SERIES A WARRANT
EXHIBIT D TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
STATSURE DIAGNOSTIC SYSTEMS, INC.
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 31, 2006, (this
"Agreement"), is made by and between STATSURE DIAGNOSTIC SYSTEMS, INC., a
Delaware corporation (the "Company"), and each entity named on a signature page
hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Series A
Convertible Preferred Stock Purchase Agreement dated as of the date hereof among
the Company and the Purchasers (the "Securities Purchase Agreement").
In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchasers hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Securities Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
(a) "Closing Date" shall mean the Initial Closing Date.
(b) "Common Stock" means the Company's Common Stock, par value
$0.001 per share.
(c) "Conversion Shares" shall mean those shares of Common Stock
issuable upon conversion of the Company's Series A Convertible Preferred Stock.
(d) "Effective Date" means with respect to the Registration
Statement the earlier of (A) the one hundred twentieth (120th) day following the
Closing Date (or in the event the Registration Statement receives a "full
review" by the United States Securities and Exchange Commission (the "SEC"), the
one hundred fiftieth (150th) day following the Closing Date or (B) the date
which is within Five (5) Business Days after the date on which the SEC informs
the Company (i) that the SEC will not review the Registration Statement or (ii)
that the Company may request the acceleration of the effectiveness of the
Registration Statement and the Company makes such request; provided that, if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall be a
legal holiday or a day on which the SEC is authorized or required by law or
other government actions to close, the Effectiveness Date shall be the following
Business Day.
(e) "Effectiveness Period" shall have the meaning set forth in
Section 3.
(f) "Filing Date" means the thirtieth (30th) Business Day following
the Closing Date; provided that, if the Filing Date falls on a Saturday, Sunday
or any other day which shall be a legal holiday or a day on which the SEC is
authorized or required by law or other government actions to close, the Filing
Date shall be the following Business Day.
(g) "Initial Investor" and "Investor" means the holder or holders,
as the case may be, from time to time of Registrable Securities.
(h) "Payment Shares" means shares of Common Stock issued by the
Company as provided in Section 2(b) below.
(i) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time; in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
(j) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the SEC.
(k) "Registrable Securities" means, collectively, (i) the shares of
Common Stock issuable upon conversion of the Preferred Stock and any dividends
payable thereon (ii) the shares of Common Stock issuable upon exercise of the
Warrants and (iii) the Payment Shares.
(l) "Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
(m) "Warrant Shares" shall mean those shares of Common Stock
issuable upon exercise of the Warrants issued pursuant to the Securities
Purchase Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon as
practicable after the Closing Date but no later than the Filing Date, either a
Registration Statement or an amendment to an existing Registration Statement,
registering for resale by the Investor a sufficient number of shares of Common
Stock for the Initial Investors to sell the Registrable Securities, but in no
event less than the number of shares equal to one hundred ten percent (110%) of
the aggregate of (x) the number of Conversion Shares (assuming for such purposes
that all Preferred Stock had been issued and converted) and (y) the number of
Warrant Shares (assuming for such purposes that all Warrants had been issued and
exercised). Unless otherwise specifically agreed to in writing in advance by the
Initial Investor, the Registration Statement (W) shall include only the
Registrable Securities, and (X) shall also state that, in accordance with Rule
416 and 457 under the Securities Act, it also covers such indeterminate number
of additional shares of Common Stock as may become issuable upon conversion of
the Preferred Stock or exercise of the Warrants to prevent dilution resulting
from stock splits, or stock dividends. The Company will use its reasonable best
efforts to cause such Registration Statement to be declared effective on or
before the Effective Date.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by the Filing Date, the
Company will make pay the Periodic Amount (as defined below) payment to the
Initial Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Effective Date, then the Company
will make payments to the Initial Investor in such amounts and at such times as
shall be determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below) and such amount shall be equal to the Periodic Amount Percentage
(as defined below) of the Purchase Price for all Preferred Stock for the period
from the date following the relevant Filing Date or the Effective Date, as the
case may be, to the first relevant Computation Date, and thereafter to each
subsequent Computation Date. The "Periodic Amount Percentage" means (A) one
percent (1%) of the Purchase Price of all Preferred Stock for the first
Computation Date after the relevant Filing Date or Effective Date, as the case
may be: and (B) one percent (1%) of the Purchase Price of all Preferred Stock to
each Computation Date thereafter.
(iv) Each Periodic Amount will be payable by the Company,
except as provided in the other provisions of this subparagraph (iv), in cash or
other immediately available funds to the Investor (1) on the day after the
Filing Date or the Effective Date, as the case may be, and (2) on the earlier of
(A) each thirtieth day thereafter, (B) the third business day after the date the
Registration Statement is filed or is declared effective, or (C) the third
business day after the Registration Statement has its restrictions removed after
the relevant Effective Date, in each case without requiring demand therefor by
the Investor.
(vi) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed or declared
effective by the Filing Date or the Effective Date, including if the right to
sell Registrable Securities under a previously effective Registration Statement
is suspended or the shares of the Company's stock are not listed on the
Principal Trading Market, may be difficult to ascertain. The parties agree that
the amounts payable pursuant to the foregoing provisions of this Section 2(b)
represent a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of such damages.
(vii) Notwithstanding the foregoing, the amounts payable by
the Company pursuant to this provision shall not be payable to the extent any
delay in the filing or effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel.
(viii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date or any relevant
Required Effective Date, as the case may be, or (2) the date after the Required
Filing Date or Required Effective Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b) hereof) or
is declared effective or (B) each date which is the earlier of (1) thirty (30)
days after the previous Computation Date or (2) the date after the previous
Computation Date on which the Registration Statement is filed (with respect to
payments due as contemplated by Section 2(b) hereof) or is declared effective.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Filing Date a
Registration Statement covering not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement to become effective by the
Effective Date and to keep such Registration Statement continuously effective
under the Securities Act until such date as is the earlier of (x) the date when
all Registrable Securities covered by such Registration Statement have been sold
or (y) the date on which the Registrable Securities may be sold without any
restriction pursuant to Rule 144 as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
to such effect (the "Effectiveness Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(b) (i) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Effectiveness Period; (ii) respond as promptly as possible, but in no event
later than thirty (30) days, to any comments received from the SEC with respect
to the Registration Statement or any amendment thereto and as promptly as
possible provide the Investors true and complete copies of all correspondence
from and to the SEC relating to the Registration Statement; and, (iii) during
the Effectiveness Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement;
(c) Furnish to the Investors and their counsel, which shall
initially be The Law Offices of Xxxxx X. Xxxxxxx, P.C. ("Investor's Counsel"),
copies of all documents proposed to be filed, which documents will be subject to
the review of the Investors and Investor's Counsel, and (ii) cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of Investor's
Counsel , to conduct a reasonable review of such documents. The Company shall
not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Initial Investors holding a majority of the
Registrable Securities or Investor's Counsel shall reasonably object in writing
within three (3) Business Days of their receipt thereof;
(d) Notify each Investor and Investor's Counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than three
(3) business days prior to such filing) and (if requested by any such person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any 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 addition, the Company shall furnish Investor's Counsel
with copies of all intended written responses to the comments contemplated in
clause (C) of this Section 3(d) not later than one (1) business day in advance
of the filing of such responses with the SEC so that each Investor and
Investor's Counsel shall have the opportunity to comment thereon;
(e) Furnish to each Investor and Investor's Counsel, without charge,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor and subject to the provisions of Sections 3(i) and 4(b),
the Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto;
(f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time and use reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of, as promptly as possible, (i) any order
suspending the effectiveness of the Registration Statement or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction;
(h) Comply with Regulation FD or any similar rule or regulation
regarding the dissemination of information regarding the Company, and in
furtherance of the foregoing, and not in limitation thereof, not disclose to the
Investor any non-public material information regarding the Company;
(i) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to a Potential Material Event
or otherwise, the Investors shall not offer or sell any Registrable Securities,
or engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of such notice until such Investor
receives written notice from the Company that such the effectiveness of the
Registration Statement has been restored, whether because the Potential Material
Event has been disclosed to the public or it no longer constitutes a Potential
Material Event or otherwise; provided, however, that the Company may not so
suspend the right to such holders of Registrable Securities during the periods
the Registration Statement is required to be in effect other than during a
Permitted Suspension Period (and the applicable provisions of Section 2(b) shall
apply with respect to any such suspension other than during a Permitted
Suspension Period). The term "Permitted Suspension Period" means up to two such
suspension periods during any consecutive 12-month period, neither of which such
period shall (i) be for more than fifteen (15) days or (ii) begin less than ten
(10) business days after the last day of the preceding suspension (whether or
not such last day was during or after a Permitted Suspension Period);
(j) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the Principal Trading
Market;
(k) Provide a transfer agent ("Transfer Agent") and registrar, which
may be a single entity, for the Registrable Securities not later than the
Effective Date;
(l) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investors may
reasonably request, and, within five (5) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the Transfer Agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel, which shall
include, without limitation, directions to the Transfer Agent to issue
certificates of Registrable Securities(including certificates for Registrable
Securities to be issued after the Effective Date and replacement certificates
for Registrable Securities previously issued) without legends or other
restrictions;
(m) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Investors and
Investor's Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Initial Investor requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject; and,
(n) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(B) Each Investors agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(f) or 3(g), such Investor will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Investor's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(f) of 3(g), or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company, whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The Investors shall
bear their own counsel fees.
(B) Except as and to the extent specifically set forth in Schedule
5(b) attached hereto, neither the Company nor any of its subsidiaries has, as of
the date hereof, nor shall the Company nor any of its subsidiaries, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor
(each, an "Indemnified Party"), against any losses, claims, damages, liabilities
or expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively referred to as "Violations"). Subject to clause (b) of this Section
6, the Company shall reimburse the Investors, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
any Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Indemnified Party expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (II) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company or the amendment or supplement thereto
made available by the Company; (III) be available to the extent such Claim is
based on the delivery of a prospectus by the Investor after receiving notice
from the Company under Section 3(f), (g) or (h) hereof (other than a notice
regarding the effectiveness of the Registration Statement or any amendment or
supplement thereto), or (IV) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed. The Investor will
indemnify the Company and its officers, directors and agents (each, an
"Indemnified Party") against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement or the amendment
or supplement thereto, subject to such limitations and conditions as are
applicable to the indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9. Notwithstanding anything to the contrary contained herein, each Investor
shall be liable under this Section 6(a) for only that amount as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Party or the
Indemnified Party, as the case may be. In case any such action is brought
against any Indemnified Party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such Indemnified Party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such Indemnified Party under this Section 6 for any legal or other
reasonable out-of-pocket expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Party provided such counsel is of the opinion that all defenses available to the
Indemnified Party can be maintained without prejudicing the rights of the
indemnifying party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Party under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
The indemnity and contribution agreements contained in Sections 7 and 8 are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties pursuant to the law.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to
making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) if not available on the SEC's XXXXX system, a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Investor to sell such securities pursuant to
Rule 144 without Registration; and
(d) at the request of any Investor holding Registrable Securities (a
"Holder"), give its Transfer Agent instructions to the effect that, upon the
Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the provisions
of Rule 144) for the shares of Registrable Securities which the Holder
proposes to sell (the "Securities Being Sold") is not less than (1) year
and (B) as to such other matters as may be appropriate in accordance with
Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company that, based on the
Rule 144 Certificate, Securities Being Sold may be sold pursuant to the
provisions of Rule 144, even in the absence of an effective Registration
Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights of each
Investor hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Investor to any Person of all or a portion of
the Preferred Stock, the Common Shares or the Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement. The rights to assignment shall apply to the Investors (and to
subsequent) successors and assigns.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
holding sixty-six and two-thirds (66 2/3%) percent of the Registrable Securities
outstanding. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Securities Purchase Agreement, (i) if to
the Company or to the Initial Investor, to their respective address contemplated
by the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York, without giving effect to any of
the conflicts of law principles which would result in the application of the
substantive law of another jurisdiction. This Agreement shall not be interpreted
or construed with any presumption against the party causing this Agreement to be
drafted. The Company and the Investors agree that venue for any dispute arising
under this Agreement will lie exclusively in the state or federal courts located
in Middlex County, Massachusetts, and the parties irrevocably waive any right to
raise forum non conveniens or any other argument that Massachusetts is not the
proper venue. The Company and the Investors irrevocably consent to personal
jurisdiction in the state and federal courts of the state of Massachusetts. The
Company and the Investors consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 11(d) shall affect or limit any right to serve process in any other
manner permitted by law. The Company and the Investors hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Agreement or the Securities Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party. The
parties hereby waive all rights to a trial by jury
(e) If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission bearing the
signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 2 (a) (b) and Section 3(a) hereof, or any
delay in such performance could result in loss to the Investors, and the Company
agrees that, in addition to any other liability the Company may have by reason
of such failure or delay, the Company shall be liable for all direct damages
caused by any such failure or delay, unless the same is the result of force
majeure. Neither party shall be liable for consequential damages.
(k) If at any time when there is not an effective Registration
Statement covering (i) Conversion Shares or (ii) Warrant Shares, the Company
shall determine to prepare and file with the SEC a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such notice, or
within such shorter period of time as may be specified by the Company in such
written notice as may be necessary for the Company to comply with its
obligations with respect to the timing of the filing of such registration
statement, any such holder shall so request in writing, (which request shall
specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will cause the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 5 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 11(k) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 11(k) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the managing
underwriter should reasonably determine that the inclusion of such Registrable
Securities would materially adversely affect the offering contemplated in such
registration statement, and based on such determination recommends inclusion in
such registration statement of fewer or none of the Registrable Securities of
the Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y)
none of the Registrable Securities of the Holders shall be included in such
registration statement, if the Company after consultation with the
underwriter(s) recommends the inclusion of none of such Registrable Securities;
provided, however, that if securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not represent a
greater fraction of the number of Registrable securities intended to be offered
by the Holders than the fraction of similar reductions imposed on such other
persons or entities (other than the Company).
(l) This Agreement (including to the extent relevant the provisions
of other Transaction Agreements) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
STATSURE DIAGNOSTIC SYSTEMS, INC.
By:______________________________
Name:
Title:
_________________________________
_________________________________
[Print Name of Initial Investor]
By:
Name:
Title:___________________________
EXHIBIT F TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
STATSURE DIAGNOSTIC SYSTEMS, INC.
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
STATSURE DIAGNOSTIC SYSTEMS, INC.
As of June __, 2006
[Name and address of Transfer Agent]
Attn: _____________
LADIES AND GENTLEMEN:
Reference is made to that certain Series A Convertible Preferred Stock
Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of May 31, 2006, by and
among StatSure Diagnostic Systems, Inc., a Delaware corporation (the "COMPANY"),
and the purchasers named therein (collectively, the "PURCHASERS") pursuant to
which the Company is issuing to the Purchasers shares of its Series A
Convertible Preferred Stock, par value $0.001 per share, (the "PREFERRED
SHARES") and warrants (the "WARRANTS") to purchase shares of the Company's
common stock, par value $0.001 per share (the "COMMON STOCK"). This letter shall
serve as our irrevocable authorization and direction to you provided that you
are the transfer agent of the Company at such time) to issue shares of Common
Stock upon conversion of the Preferred Shares (the "CONVERSION SHARES") and
exercise of the Warrants (the "WARRANT SHARES") to or upon the order of a
Purchaser from time to time upon (i) surrender to you of a properly completed
and duly executed Conversion Notice or Exercise Notice, as the case may be, in
the form attached hereto as Exhibit I and Exhibit II, respectively, (ii) in the
case of the conversion of Preferred Shares, a copy of the certificates (with the
original certificates delivered to the Company) representing Preferred Shares
being converted or, in the case of Warrants being exercised, a copy of the
Warrants (with the original Warrants delivered to the Company) being exercised
(or, in each case, an indemnification undertaking with respect to such share
certificates or the warrants in the case of their loss, theft or destruction),
and (iii) delivery of a treasury order or other appropriate order duly executed
by a duly authorized officer of the Company. So long as you have previously
received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT"), and no subsequent notice by the Company or its counsel of the
suspension or termination of its effectiveness and (y) a copy of such
registration statement or an electronic link to the filed Rule 424 Prospectus,
and if the Purchaser or the Selling Broker represents in writing that the
Conversion Shares or the Warrant Shares, as the case may be, were sold pursuant
to the Registration Statement and that the Prospectus Delivery Requirements were
met, then certificates representing the Conversion Shares and the Warrant
Shares, as the case may be, shall not bear any legend restricting transfer of
the Conversion Shares and the Warrant Shares, as the case may be, thereby and
should not be subject to any stop-transfer restriction. Provided, however, that
if you have not previously received those items and representations listed
above, then the certificates for the Conversion Shares and the Warrant Shares
shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR STATSURE
DIAGNOSTIC SYSTEMS, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED."
and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.
Please be advised that the Purchasers are relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Purchaser
is a third party beneficiary to these xxxxxxxxxxxx.xxxxx execute this letter in
the space indicated to acknowledge your agreement to act in accordance with
these instructions. Should you have any questions concerning this matter, please
contact me at ___________.
Very truly yours,
STATSURE DIAGNOSTIC SYSTEMS, INC.
By:______________________________
Name:_________________________
Title:________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:_____________________
Name:___________________
Title:__________________
Date:___________________
EXHIBIT I
STATSURE DIAGNOSTIC SYSTEMS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series A Preferred Stock of StatSure Diagnostic Systems, Inc.
(the "Certificate of Designation"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $0.001 per share (the
"Preferred Shares"), of StatSure Diagnostic Systems, Inc., a Delaware
corporation (the "Company"), indicated below into shares of Common Stock, par
value $0.001 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.
Date of Conversion: _______________________________
Number of Preferred Shares to be converted:_____
Stock certificate no(s). of Preferred Shares to be converted:_____
The Common Stock have been sold pursuant to the Registration Statement (as
defined in the Registration Rights Agreement): YES ____ NO____
Please confirm the following information:
Conversion Price: _______________________________
Number of shares of Common Stock to be
issued: _______________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the
Holder on the Date of Conversion: _________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: _______________________________
_______________________________
Facsimile Number: _______________________________
Authorization: _______________________________
By:____________________________
Title:_________________________
EXHIBIT II
FORM OF EXERCISE NOTICE
EXERCISE FORM
STATSURE DIAGNOSTIC SYSTEMS, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of StatSure
Diagnostic Systems, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the
Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
Attn: _____________
Re: STATSURE DIAGNOSTIC SYSTEMS, INC.
Ladies and Gentlemen:
We are counsel to StatSure Diagnostic Systems, Inc., a Delaware
corporation (the "COMPANY"), and have represented the Company in connection with
that certain Series A Convertible Preferred Stock Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of May 31, 2006, by and among the Company and
the purchasers named therein (collectively, the "PURCHASERS") pursuant to which
the Company issued to the Purchasers shares of its Series A Convertible
Preferred Stock, par value $0.001 per share, (the "PREFERRED SHARES") and
warrants (the "WARRANTS") to purchase shares of the Company's common stock, par
value $0.001 per share (the "COMMON STOCK"). Pursuant to the Purchase Agreement,
the Company has also entered into a Registration Rights Agreement with the
Purchasers (the "REGISTRATION RIGHTS AGREEMENT"), dated as of May 31, 2006,
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Preferred
Shares and exercise of the Warrants, under the Securities Act of 1933, as
amended (the "1933 ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on ________________, 2006, the Company filed a
Registration Statement on Form SB-2 (File No. 333-________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the resale of the Registrable Securities which names each of the present
Purchasers as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:____________________
cc: [LIST NAMES OF PURCHASERS]
EXHIBIT G TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
STATSURE DIAGNOSTIC SYSTEMS, INC.
FORM OF OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of Delaware and has the
requisite corporate power to own, lease and operate its properties and assets,
and to carry on its business as presently conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Transaction Documents and to
issue the Preferred Stock, the Warrants and the Common Stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants. The execution,
delivery and performance of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action and no further consent
or authorization of the Company or its Board of Directors or stockholders is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Preferred Stock and the Warrants have been duly executed,
issued and delivered by the Company and each of the Transaction Documents
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms. The Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants are
not subject to any preemptive rights under the Articles of Incorporation or the
Bylaws.
3. The Preferred Stock and the Warrants have been duly authorized
and, when delivered against payment in full as provided in the Purchase
Agreement, will be validly issued, fully paid and nonassessable. The shares of
Common Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants, have been duly authorized and reserved for issuance, and, when
delivered upon conversion or against payment in full as provided in the
Certificate of Designation and the Warrants, as applicable, will be validly
issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with
the terms of the Transaction Documents and the issuance of the Preferred Stock,
the Warrants and the Common Stock issuable upon conversion of the Preferred
Stock and exercise of the Warrants do not (i) violate any provision of the
Articles of Incorporation or Bylaws, (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 material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except, in all cases other than violations
pursuant to clauses (i) and (iv) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required under Federal, state or local law, rule or regulation in connection
with the valid execution and delivery of the Transaction Documents, or the
offer, sale or issuance of the Preferred Stock, the Warrants or the Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
other than the Certificate of Designation and the Registration Statement.
6. There is no action, suit, claim, investigation or proceeding
pending or threatened against the Company which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be
taken pursuant hereto or thereto. There is no action, suit, claim, investigation
or proceeding pending, or to our knowledge, threatened, against or involving the
Company or any of its properties or assets and which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Preferred Stock and the
Warrants and the offer, issuance and sale of the shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants pursuant to
the Purchase Agreement, the Certificate of Designation and the Warrants, as
applicable, are exempt from the registration requirements of the Securities Act.
8. The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Very truly yours,
