Exhibit 4.7
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BETWEEN
MOLECULAR DIAGNOSTICS, INC.
AND
SEASIDE INVESTMENTS PLC
------------------------
OCTOBER 5, 2004
------------------------
--------------------------------------------------------------------------------
Marked to show changes from7/14/04 draft
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS..........................................1
1.1 Certain Definitions..........................................1
ARTICLE II PURCHASE AND SALE OF SHARES..................................4
2.1 Purchase and Sale; Purchase Price............................4
2.2 Execution and Delivery of Documents; The Closing.............4
ARTICLE III REPRESENTATIONS AND WARRANTIES...............................6
3.1 Representations, Warranties and Agreements of the Target
Company......................................................6
3.2 Representations and Warranties of Seaside....................9
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES.............................12
4.1 Manner of Offering..........................................12
4.2 Notice of Certain Events....................................12
4.3 Blue Sky Laws...............................................12
4.4 Integration.................................................13
4.5 Furnishing of Rule 144(c) Materials.........................13
4.6 Solicitation Materials......................................13
4.7 Listing of Common Stock.....................................13
4.8 Indemnification.............................................13
4.9 Sale of Seaside Shares......................................15
4.10 Lock Up by Seaside..........................................15
4.11 Short Sales.................................................15
4.12 Liquidation of Consideration Stock..........................16
4.13 Definitive Certificates.....................................16
4.14 London Stock Exchange.......................................16
4.15 Liquidation of Seaside Consideration Shares.................16
ARTICLE V MISCELLANEOUS...............................................16
5.1 Fees and Expenses...........................................16
5.2 Entire Agreement............................................17
5.3 Notices.....................................................17
5.4 Amendments; Waivers.........................................18
5.5 Headings....................................................18
5.6 Successors and Assigns......................................18
5.7 No Third Party Beneficiaries................................18
5.8 Governing Law; Venue; Service of Process....................18
5.9 Survival....................................................18
5.10 Counterpart Signatures......................................18
5.11 Publicity...................................................19
5.12 Severability................................................19
5.13 Limitation of Remedies......................................19
ii
LIST OF SCHEDULES:
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization and Registration Rights
Schedule 3.1(d) Equity and Equity Equivalent Securities
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Defaults and Violations
LIST OF EXHIBITS:
Exhibit A Escrow Agreement
Exhibit B Officer's Certificate
Exhibit C Registration Rights Agreement
iii
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 5, 2004, between Molecular Diagnostics, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Target
Company"), and Seaside Investments PLC, a corporation organized under the laws
of England and Wales with its offices at 00 Xxxxxxxxxx Xxxxxx, Xxxxxx XX0X 0XX (
"Seaside").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Target Company desires to issue and sell to Seaside and Seaside
desires to acquire from the Target Company 11,000,000 shares of the Target
Company's common stock, par value $.001 (the "Common Stock") for the Total
Purchase Price set forth in Section 2.1(b) below. The consideration to be paid
by Seaside for the Common Stock shall be subject to certain downside price
protection (the "Downside Price Protection") provided in Section 2 of the Escrow
Agreement.
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Target Company and Seaside agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Business Day" means any day except Saturday, Sunday, any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government actions to close.
"Closing" shall have the meaning set forth in Section 2.2(a) hereof.
"Closing Bid Price" shall mean the closing bid price for a share of
Common Stock on such date on the OTCBB (or such other exchange, market, or other
system that the Common Stock is then traded on), as reported on Bloomberg, L.P.
(or similar organization or agency succeeding to its functions of reporting
prices).
1
"Closing Date" shall have the meaning set forth in Section 2.2(a)
hereof.
"Closing Price" shall be the Closing Bid Price of the Common Stock on
the day of Closing.
"Common Stock" shall have the meaning in the recital.
"Consideration Stock" shall have the meaning set forth in Section
2.1(a) hereof.
"Control Person" shall have the meaning set forth in Section 4.8(a)
hereof.
"Disclosure Documents" means the Target Company's reports filed under
the Exchange Act with the SEC.
"Downside Price Protection" shall have the meaning in the recital.
"Escrow Agent" means Gottbetter & Partners, LLP, 000 Xxxxxxx Xxxxxx, 00
Xxxxx, Xxx Xxxx, XX 00000; Tel: 000-000-0000; Fax: 000-000-0000.
"Escrow Agreement" means the escrow agreement, dated the date hereof,
by and among the Target Company, Seaside and the Escrow Agent annexed hereto as
EXHIBIT A.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"G&P" means Gottbetter & Partners, LLP.
"HW" means Xxxxxx Xxxx Financial Group, LLC, and/or Xxxxxx Xxxx
Securities, LLC, a NASD registered Broker/Dealer, 0000 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, XX 00000; Tel: 000-000-0000; Fax: 000-000-0000, a non-exclusive
corporate finance advisor to the Target Company.
"Indemnified Party" shall have the meaning set forth in Section 4.8(b)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 4.8(b)
hereof.
"Losses" shall have the meaning set forth in Section 4.8(a) hereof.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a) hereof.
"Material" shall mean having a financial consequence in excess of
$25,000.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R)
"OTCBB" shall mean the NASD over-the counter Bulletin Board(R).
2
"p" shall mean xxxxx or 1/100th of a British Pound Sterling.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Private Placement Memorandum" shall have the meaning set forth in
Section 3.1(l) hereof.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form of EXHIBIT C annexed hereto.
"Seaside" shall have the meaning in the introductory paragraph.
"Seaside Consideration Shares" shall have the meaning in Section 2.1(c)
hereof.
"Seaside Escrow Shares" means the Seaside Consideration Shares
deposited into escrow by the Target Company under the terms of the Escrow
Agreement in EXHIBIT A.
"Seaside Protection Shares" means the Seaside Escrow Shares that the
Target Company is required to sell to Seaside under the terms of the Escrow
Agreement in EXHIBIT A.
"Seaside Shares" shall mean ordinary shares of 1.0p each in Seaside.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Short Sales" shall have the meaning set forth in Section 4.12 hereof.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a)
hereof.
"Target Company" shall have the meaning set forth in the introductory
paragraph.
"Total Purchase Price" shall have the meaning set forth in Section
2.1(b) hereof.
"Trading Day" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or
any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the Pinksheets LLC (or any similar
organization or agency succeeding its functions of reporting prices).
3
"Transaction Documents" means this Agreement and all exhibits and
schedules hereto and all other documents, instruments and writings required
pursuant to this Agreement.
"U.S." means the United States.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale; Purchase Price.
(a) Subject to the terms and conditions set forth herein, the
Target Company shall issue and sell and Seaside shall purchase eleven million
(11,000,000) shares of the Target Company's Common Stock (the "Consideration
Stock").
(b) The total purchase price (the "Total Purchase Price")
shall be the number of shares of Consideration Stock multiplied by the average
of the Closing Bid Price per share of Common Stock during the ten (10) Trading
Days immediately preceding July 30, 2004, or the ten (10) Trading Days
immediately preceding September 30, 2004, whichever is less.
(c) The Total Purchase Price shall be paid by delivery to the
Target Company of the number of Seaside Shares (the "Seaside Consideration
Shares") equal to the Total Purchase Price divided by the conversion rate of the
British Pound Sterling to purchase US Dollars as determined below on the July
30, 2004. The Seaside Shares shall have a value of (pound)1 per share. The
number of Seaside Shares to be issued will be based on the conversion rate of
the British Pound Sterling to the US Dollar in effect as of the close of
business on the day preceding the Closing Date, as quoted by Xxxxxx & Co. as the
commercial rate it gives to purchase US Dollars. For example, if the effective
conversion rate is $1.80/(pound) 1 and the Total Purchase Price is $8,000,000,
then the number of Seaside Shares the Target Company will receive shall equal
the $8,000,000/$1.80, or 4,444,444 Seaside Shares. The Seaside Consideration
Shares shall be subject to the "Downside Price Protection" provided in Section 2
of the Escrow Agreement.
2.2 Execution and Delivery of Documents; The Closing.
(a) The Closing of the purchase and sale of the shares of
Consideration Stock (the "Closing") shall take place within sixty (60) days from
the date hereof (the "Closing Date"). On the Closing Date,
(i) the Target Company shall execute and deliver to
the Escrow Agent a certificate in the name of Seaside representing the shares of
Consideration Stock;
(ii) the Target Company shall execute and deliver to
Seaside a certificate of its President, in the form of EXHIBIT B annexed hereto,
certifying that attached thereto is a copy of resolutions duly adopted by the
4
Board of Directors of the Target Company authorizing the Target Company to
execute and deliver the Transaction Documents and to enter into the transactions
contemplated thereby, provided that the Target Company may execute such
certificate upon the execution of this Agreement, in which case it will be held
in escrow by the Escrow Agent and delivered at Closing;
(iii) Seaside shall execute and deliver to the Escrow
Agent a certificate in the name of the Target Company or a provisional letter of
allotment for a trading account in the name of the Escrow Agent representing the
Seaside Escrow Shares and a certificate in the name of the Target Company or a
provisional letter of allotment for a trading account in the name of Escrow
Agent (to be held for the benefit of the Target Company) representing the
balance of the Seaside Consideration Shares;
(iv) the Target Company and Seaside shall execute and
deliver to each other an executed Registration Rights Agreement in the form
annexed hereto as EXHIBIT C, provided that the Target Company and Seaside may
execute the Registration Rights Agreement upon the execution of this Agreement,
in which case it will be held in escrow by the Escrow Agent and delivered at
Closing;
(v) the Target Company, Seaside and the Escrow Agent
shall execute and deliver to each other an executed Escrow Agreement in the form
annexed hereto as EXHIBIT A, provided that the Target Company, Seaside and
Escrow Agent may execute the Escrow Agreement upon the execution of this
Agreement, in which case it will be held in escrow by the Escrow Agent and
delivered at Closing;
(vi) the Target Company shall execute and deliver to
HW or its assigns certificates or access to a trading account in the name of HW
representing the Consideration Stock and the Seaside Shares owed to HW pursuant
to a separate advisory agreement between HW and the Target Company;
(vii) Seaside shall execute and deliver to the Escrow
Agent a stock power endorsed in blank relating to the Consideration Stock; and
(viii) the Target Company shall wire the monies owed
to G&P pursuant to Section 5.1 hereof for legal fees with the following wire
instructions:
Citibank, N.A.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX ABA Routing No.: 000000000
Account Name: Gottbetter & Partners, LLP
Account No. 00000000
Reference: Molecular Diagnostics, Inc.
5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations, Warranties and Agreements of the Target Company.
The Target Company hereby makes the following representations and warranties to
Seaside, all of which shall survive the Closing:
(a) Organization and Qualification. The Target Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its formation, with the requisite corporate power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Target Company has no subsidiaries other
than as set forth on SCHEDULE 3.1(A) attached hereto (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Target Company and the Subsidiaries is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, have
a material adverse effect on the results of operations, assets, prospects, or
financial condition of the Target Company and the Subsidiaries, taken as a whole
(a "Material Adverse Effect").
(b) Authorization, Enforcement. The Target Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and by each other Transaction Document and to
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and each of the other Transaction Documents by
the Target Company and the consummation by it of the transactions contemplated
hereby and thereby has been duly authorized by all necessary action on the part
of the Target Company. Each of this Agreement and each of the other Transaction
Documents has been or will be duly executed by the Target Company and when
delivered in accordance with the terms hereof or thereof will constitute the
valid and binding obligation of the Target Company enforceable against the
Target Company in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth on SCHEDULE 3.1(C). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Target Company by virtue of this Agreement.
Except as disclosed in SCHEDULE 3.1(C), there are no outstanding options,
warrants, script, rights to subscribe to, registration rights, calls or
commitments of any character whatsoever relating to securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
6
commitments, understandings, or arrangements by which the Target Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Target Company nor any Subsidiary is in violation of any of the
provisions of its Certificate of Incorporation, bylaws or other charter
documents.
(d) Issuance of Securities. The shares of Consideration Stock
have been duly and validly authorized for issuance, offer and sale pursuant to
this Agreement and, when issued and delivered as provided hereunder against
payment in accordance with the terms hereof, shall be valid and binding
obligations of the Target Company enforceable in accordance with their
respective terms.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Target Company and the
consummation by the Target Company of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of its
Certificate of Incorporation or bylaws (each as amended through the date hereof)
or (ii) be subject to obtaining any consents except those referred to in Section
3.1(f), 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 to which the Target Company is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Target Company or its Subsidiaries is subject (including, but not
limited to, those of other countries and the federal and state securities laws
and regulations), or by which any property or asset of the Target Company or its
Subsidiaries is bound or affected, except in the case of clause (ii), 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 Target Company and its Subsidiaries is not
being conducted in violation of any law, ordinance or regulation of any
governmental authority.
(f) Consents and Approvals. Except as specifically set forth
in SCHEDULE 3.1(F), neither the Target Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Target Company of this Agreement and each of the
other Transaction Documents.
(g) Litigation; Proceedings. Except as specifically disclosed
in SCHEDULE 3.1(G), there is no Proceeding threatened against or affecting the
Target Company or any of its Subsidiaries or any of their respective properties
before or by any court, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) which (i) relates to or
challenges the legality, validity or enforceability of any of the Transaction
7
Documents or the shares of Consideration Stock, (ii) could, individually or in
the aggregate, have a Material Adverse Effect or (iii) could, individually or in
the aggregate, materially impair the ability of the Target Company to perform
fully on a timely basis its obligations under the Transaction Documents.
(h) No Default or Violation. Except as set forth in SCHEDULE
3.1(H) hereto, neither the Target Company nor any Subsidiary (i) is in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, except such conflicts or defaults as do not have a Material
Adverse Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) is in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (a)
adversely affect the legality, validity or enforceability of this Agreement, (b)
have a Material Adverse Effect or (c) adversely impair the Target Company's
ability or obligation to perform fully on a timely basis its obligations under
this Agreement.
(i) Disclosure Documents. The Disclosure Documents are
accurate in all material respects and do not contain any untrue statement of
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) Non-Registered Offering. Neither the Target Company nor
any Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Target Company under
circumstances which would require the integration of such offering with the
offering of the Consideration Stock under the Securities Act) which might
subject the offering, issuance or sale of the Consideration Stock to the
registration requirements of Section 5 of the Securities Act.
(k) Placing Agent. The Target Company accepts and agrees that
Dungarvon Associates, Inc. ("Dungarvon") is acting for Seaside and does not
regard any person other than Seaside as its customer in relation to this
Agreement, and that it has not made any recommendation to the Target Company, in
relation to this Agreement and is not advising the Target Company, with regard
to the suitability or merits of the Seaside Shares and in particular Dungarvon
has no duties or responsibilities to the Target Company for the best execution
of the transaction contemplated by this Agreement.
(l) Private Placement Representations. The Target Company (i)
has received and carefully reviewed such information and documentation relating
to Seaside that the Target Company has requested, including, without limitation,
Seaside's Confidential Private Offering Memorandum, dated June 14, 2004 (the
"Private Placement Memorandum"); (ii) has had a reasonable opportunity to ask
questions of and receive answers from Seaside concerning the Seaside Shares, and
all such questions, if any, have been answered to the full satisfaction of the
Target Company; (iii) has such knowledge and expertise in financial and business
matters that it is capable of evaluating the merits and risks involved in an
investment in the Seaside Shares; (iii) understands that Seaside has determined
that the exemption from the registration provisions of the Securities Act,
provided by Section 4(2) of the Securities Act is applicable to the offer and
sale of the Seaside Shares, based, in part, upon the representations, warranties
8
and agreements made by the Target Company herein; and (iv) except as provided
herein and in the Private Placement Memorandum, no representations or warranties
have been made to the Target Company by Seaside or any agent, employee or
affiliate of Seaside and in entering into this transaction the Target Company is
not relying upon any information, other than the results of independent
investigation by the Target Company.
Seaside acknowledges and agrees that the Target Company makes no representation
or warranty with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.1 hereof.
3.2 Representations and Warranties of Seaside. Seaside hereby makes the
following representations and warranties to the Target Company, all of which
shall survive the Closing:
(a) Organization; Authority. Seaside is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation with the requisite power and authority to enter
into and to consummate the transactions contemplated hereby and by the other
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The acquisition of the shares of Consideration Stock to be purchased
by Seaside hereunder has been duly authorized by all necessary action on the
part of Seaside. This Agreement has been duly executed and delivered by Seaside
and constitutes the valid and legally binding obligation of Seaside, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to, or affecting generally the enforcement of, creditors
rights and remedies or by other general principles of equity.
(b) Investment Intent. Seaside is acquiring the shares of
Consideration Stock to be purchased by it hereunder, for its own account for
investment purposes only and not with a view to or for distributing or reselling
such shares of Consideration Stock, or any part thereof or interest therein,
without prejudice, however, to Seaside's right, subject to the provisions of
this Agreement, at all times to sell or otherwise dispose of all or any part of
such shares of Consideration Stock in compliance with applicable federal and
state securities laws.
(c) Experience of Seaside. Seaside, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the shares of Consideration Stock to be acquired by it
hereunder, and has so evaluated the merits and risks of such investment.
(d) Ability of Seaside to Bear Risk of Investment. Seaside is
able to bear the economic risk of an investment in the Consideration Stock to be
acquired by it hereunder and, at the present time, is able to afford a complete
loss of such investment.
(e) Access to Information. Seaside acknowledges that it has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Target Company
concerning the terms and conditions of the Consideration Stock offered hereunder
9
and the merits and risks of investing in such securities; (ii) access to
information about the Target Company and the Target Company's financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment in the Consideration Stock;
and (iii) the opportunity to obtain such additional information which the Target
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information that it has
received about the Target Company.
(f) Reliance. Seaside understands and acknowledges that (i)
the shares of Consideration Stock being offered and sold to it hereunder are
being offered and sold without registration under the Securities Act in a
private placement that is exempt from the registration provisions of the
Securities Act under Section 4(2) of the Securities Act and (ii) the
availability of such exemption depends in part on, and that the Target Company
will rely upon the accuracy and truthfulness of, the foregoing representations
and Seaside hereby consents to such reliance.
(g) Regulation S. Seaside understands and acknowledges that
(A) the shares of Consideration Stock have not been registered under the
Securities Act, are being sold in reliance upon an exemption from registration
afforded by Regulation S; and that such shares of Consideration Stock have not
been registered with any state securities commission or authority; (B) pursuant
to the requirements of Regulation S, the shares of Consideration Stock may not
be transferred, sold or otherwise exchanged unless in compliance with the
provisions of Regulation S and/or pursuant to registration under the Securities
Act, or pursuant to an available exemption hereunder; and (C) the Target Company
is under no obligation to register the shares of Consideration Stock under the
Securities Act or any state securities law, or to take any action to make any
exemption from any such registration provisions available.
Seaside is not a U.S. Person and is not acquiring the shares of
Consideration Stock for the account of any U.S. Person; (B) no director or
executive officer of Seaside is a national or citizen of the United States; and
(C) it is not otherwise deemed to be a "U.S. Person" within the meaning of
Regulation S.
Seaside was not formed specifically for the purpose of acquiring the
shares of Consideration Stock purchased pursuant to this Agreement.
Seaside is purchasing the shares of Consideration Stock for its own
account and risk and not for the account or benefit of a U.S. Person as defined
in Regulation S and no other person has any interest in or participation in the
shares of Consideration Stock or any right, option, security interest, pledge or
other interest in or to the shares of Consideration Stock. Seaside understands,
acknowledges and agrees that it must bear the economic risk of its investment in
the shares of Consideration Stock for an indefinite period of time and that
prior to any such offer or sale, the Target Company may require, as a condition
to effecting a transfer of the shares of Consideration Stock, an opinion of
counsel, acceptable to the Target Company, as to the registration or exemption
therefrom under the Securities Act and any state securities acts, if applicable.
10
Seaside will, after the expiration of the Restricted Period, as set
forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or
otherwise transfer the shares of Consideration Stock only in accordance with
Regulation S, or pursuant to an available exemption under the Securities Act
and, in any case, in accordance with applicable state securities laws. The
transactions contemplated by this Agreement have neither been pre-arranged with
a purchaser who is in the U.S. or who is a U.S. Person, nor are they part of a
plan or scheme to evade the registration provisions of the United States federal
securities laws.
The offer leading to the sale evidenced hereby was made in an "offshore
transaction." For purposes of Regulation S, Seaside understands that an
"offshore transaction" as defined under Regulation S is any offer or sale not
made to a person in the United States and either (A) at the time the buy order
is originated, the purchaser is outside the United States, or the seller or any
person acting on his behalf reasonably believes that the purchaser is outside
the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the
transaction is executed in, or on or through a physical trading floor of an
established foreign exchange that is located outside the United States or (2)
Rule 904 of Regulation S, the transaction is executed in, on or through the
facilities of a designated offshore securities market, and neither the seller
nor any person acting on its behalf knows that the transaction has been
prearranged with a buyer in the U.S.
Neither Seaside nor any Affiliate or any Person acting on Seaside's
behalf, has made or is aware of any "directed selling efforts" in the United
States, which is defined in Regulation S to be any activity undertaken for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the shares of
Consideration Stock being purchased hereby.
Seaside understands that the Target Company is the seller of the shares
of Consideration Stock which are the subject of this Agreement, and that, for
purpose of Regulation S, a "distributor" is any underwriter, dealer or other
person who participates, pursuant to a contractual arrangement, in the
distribution of securities offered or sold in reliance on Regulation S and that
an "affiliate" is any partner, officer, director or any person directly or
indirectly controlling, controlled by or under common control with any person in
question. Seaside agrees that Seaside will not, during the Restricted Period set
forth under Rule 903(b)(iii)(A), act as a distributor, either directly or though
any affiliate, nor shall it sell, transfer, hypothecate or otherwise convey the
shares of Consideration Stock other than to a non-U.S. Person.
Seaside acknowledges that the shares of Consideration Stock will bear a
legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN
"OFFSHORE TRANSACTION" IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION. ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH
REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO
11
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING
TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE
SECURITIES ACT.
THE SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED PURSUANT TO
THE TERMS OF A STOCK PURCHASE AGREEMENT, DATED OCTOBER 5, 2004, BETWEEN THE
COMPANY AND SEASIDE INVESTMENTS PLC, A COPY OF WHICH IS AVAILABLE UPON REQUEST.
The Target Company acknowledges and agrees that Seaside makes no representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Manner of Offering. The Consideration Stock being issued pursuant
to section 4(2) of the Securities Act and Regulation S thereunder. The Seaside
Consideration Shares are being issued pursuant to section 4(2) of the Securities
Act.
4.2 Notice of Certain Events. The Target Company shall, on a continuing
basis, (i) advise Seaside promptly after obtaining knowledge of, and, if
requested by Seaside, confirm such advice in writing, of (A) the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of the shares of Consideration Stock, for offering
or sale in any jurisdiction, or the initiation of any proceeding for such
purpose by any state securities commission or other regulatory authority, or (B)
any event that makes any statement of a material fact made by the Target Company
in Section 3.1 or in the Disclosure Documents untrue or that requires the making
of any additions to or changes in Section 3.1 or in the Disclosure Documents in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, (ii) use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption
from qualification of the Consideration Stock under any state securities or Blue
Sky laws, and (iii) if at any time any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Consideration Stock under any such laws, and
use its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
4.3 Blue Sky Laws. The Target Company agrees that it will execute all
necessary documents and pay all necessary state filing or notice fees to enable
the Target Company to sell the shares of Consideration Stock to Seaside.
12
4.4 Integration. The Target Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
shares of Consideration Stock in a manner that would require the registration
under the Securities Act of the sale of the shares of Consideration Stock to
Seaside.
4.5 Furnishing of Rule 144(c) Materials. The Target Company shall, for
so long as any of the Consideration Stock remain outstanding and during any
period in which the Target Company is not subject to Section 13 or 15(d) of the
Exchange Act, make available to any registered holder of the Consideration Stock
in connection with any sale thereof and any prospective purchaser of such
Consideration Stock from such Person, such information in accordance with Rule
144(c) promulgated under the Securities Act as is required to sell the
Consideration Stock under Rule 144 promulgated under the Securities Act.
4.6 Solicitation Materials. The Target Company shall not (i) distribute
any offering materials in connection with the offering and sale of the shares of
Consideration Stock other than the Disclosure Documents and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit any offer to
buy or sell the shares of Consideration Stock by means of any form of general
solicitation or advertising.
Listing of Common Stock. If the Common Stock is or shall become listed
on the OTCBB or on another exchange, the Target Company shall (a) use its best
efforts to maintain the listing of its Common Stock on the OTCBB or such other
exchange on which the Common Stock is then listed until four (4) years from the
date hereof, and (b) shall provide to Seaside evidence of such listing.
Notwithstanding the foregoing, the Target Company may voluntarily cease to be
listed on the OTCBB at such time as the Target Company becomes listed on another
exchange.
4.7
4.8 Indemnification.
(a) Indemnification
(i) The Target Company shall, notwithstanding
termination of this Agreement and for a period of six (6) years, indemnify and
hold harmless Seaside and its officers, directors, agents, employees and
Affiliates, each Person who controls or Seaside (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) (each such Person, a
"Control Person") and the officers, directors, agents, employees and Affiliates
of each such Control Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys' fees) and
expenses (collectively, "Losses"), as incurred, arising out of, or relating to,
a breach or breaches of any representation, warranty, covenant or agreement by
the Target Company under this Agreement or any other Transaction Document.
(ii) Seaside shall, notwithstanding termination of
this Agreement and for a period of six (6) years, indemnify and hold harmless
the Target Company, its officers, directors, agents and employees, each Control
Person and the officers, directors, agents and employees of each Control Person,
13
to the fullest extent permitted by applicable law, from and against any and all
Losses, as incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by Seaside under this Agreement
or the other Transaction Documents, except for Losses solely arising out of
negligence, bad faith or breach of this Agreement by the Target Company.
(iii) The Target Company and Seaside acknowledge that
in the SEC's opinion, directors, officers and persons controlling a company
subject to the Securities Act can not be indemnified for liabilities arising
under the Securities Act by such company.
(b) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of the claim against the Indemnified Party but will
retain the right to control the overall Proceedings out of which the claim arose
and such counsel employed by the Indemnified Party shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
14
All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to
the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party.
No right of indemnification under this Section shall be
available as to a particular Indemnified Party if the Indemnifying Party obtains
a non-appealable final judicial determination that such Losses arise solely out
of the negligence, breach of agreement or bad faith of such Indemnified Party in
performing the obligations of such Indemnified Party under this Agreement or a
breach by such Indemnified Party of its obligations under this Agreement.
(c) Contribution. If a claim for indemnification under this
Section is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section would
apply by its terms (other than by reason of exceptions provided in this
Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses in such proportion as is appropriate to reflect the
relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other and the relative fault of the Indemnifying Party
and Indemnified Party in connection with the actions or omissions that resulted
in such Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether there was a judicial
determination that such Losses arise in part out of the negligence or bad faith
of the Indemnified Party in performing the obligations of such Indemnified Party
under this Agreement or the Indemnified Party's breach of its obligations under
this Agreement. The amount paid or payable by a party as a result of any Losses
shall be deemed to include any attorneys' or other fees or expenses incurred by
such party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party.
(d) Non-Exclusivity. The indemnity and contribution agreements
contained in this Section are in addition to any obligation or liability that
the Indemnifying Parties may have to the Indemnified Parties.
4.9 Sale of Seaside Consideration Shares. Seaside shall assist the
Target Company in setting up and maintaining a trading account at a registered
broker in the United Kingdom to facilitate the sale of the Seaside Consideration
Shares. Broker's commissions in the trading account shall not exceed one half
percent (0.5%).
4.10 Lock Up by Seaside. Seaside shall not sell, transfer or assign all
or any of the shares of Consideration Stock for a period of one (1) year
following the Closing, without the written consent of the Target Company, which
consent may be withheld in the Target Company's sole discretion.
15
4.11 Short Sales. Seaside agrees it will not enter into any Short Sales
(as hereinafter defined) until the date that Seaside no longer owns the shares
of Consideration Stock. For purpose hereof, a "Short Sale" shall mean a sale of
Common Stock by Seaside that is marked as a short sale and that is made at a
time when there is no equivalent offsetting long position in the Common Stock by
Seaside.
4.12 Liquidation of Consideration Stock. Commencing on the date
occurring one (1) year after the Closing, Seaside may sell its shares of
Consideration Stock at a monthly rate no greater than an amount equal to fifteen
percent (15%) of the Target Company's prior month's trading volume, provided,
however, that Seaside may execute block trades of 50,000 or more shares of
Consideration Stock and such sales shall not count toward the fifteen percent
(15%) limitation on the rate of liquidation. Seaside shall use the proceeds from
these liquidations to re-purchase Seaside Shares in the marketplace.
4.13 Definitive Certificates. The definitive certificates evidencing
the shares of Consideration Stock shall be held at the office of the Secretary
of Seaside if and when the Consideration Stock is received from the Escrow Agent
pursuant to the Escrow Agreement and shall remain with the Secretary until one
(1) year from the date hereof.
4.14 London Stock Exchange. Seaside shall register the Seaside
Consideration Shares for trading on the London Stock Exchange PLC by September
30, 2004.
4.15 Liquidation of Seaside Consideration Shares. Commencing with the
month during which Seaside Shares are accepted for trading on the London Stock
Exchange PLC, and during each calendar month thereafter, Target Company may
shall its shares of Seaside Consideration Shares at a monthly rate that is no
greater than ten percent (10%) of the total of the Seaside Consideration Shares
(the "Sales Allowance"). Any unused portion of the Sales Allowance during any
month may be carried over to subsequent months. The Seaside Escrow Shares, after
they have been distributed to the Target Company, may be sold without
restriction.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Except as set forth in this Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Target Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the shares of Consideration Stock
pursuant hereto. Seaside shall be responsible for any taxes payable by Seaside
that may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement or any other Transaction Document. The Target
Company agrees to pay $7,500 to G&P for legal fees associated with the
transactions contemplated by this Agreement at Closing. The Target Company shall
pay all fees owed to HW pursuant to a separate advisory agreement between Hunter
Wire and the Target Company. The Target Company shall pay all costs, expenses,
fees and all taxes incident to and in connection with: (A) the issuance and
16
delivery of the Consideration Stock, (B) the exemption from registration of the
Consideration Stock for offer and sale to Seaside under the securities or Blue
Sky laws of the applicable jurisdictions, and (C) the preparation of
certificates for the Consideration Stock (including, without limitation,
printing and engraving thereof), and (D) all fees and expenses of counsel and
accountants of the Target Company.
5.2 Entire Agreement This Agreement, together with all of the Exhibits
and Schedules annexed hereto, and any other Transaction Document contains the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters. This Agreement shall be deemed to have been drafted and
negotiated by both parties hereto and no presumptions as to interpretation,
construction or enforceability shall be made by or against either party in such
regard.
5.3 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given upon facsimile transmission (with written transmission confirmation
report) at the 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) whichever
shall first occur. The addresses for such communications shall be:
If to the Target Company: Molecular Diagnostics, Inc.
000 X. Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xx. Xxxxx X. X'Xxxxxxx, M.D.
President and CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Mr. Xxxxx Xxxxx
White, White & Van Etten
00 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Seaside: Seaside Investments PLC
00 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Attn: Xxxxx Xxxxx
Tel: 00.000.000.0000
Fax: 00.000.000.0000
17
With copies to: Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 5.3.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Target Company and Seaside, or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this Agreement.
5.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
5.8 Governing Law; Venue; Service of Process. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the
exhibits hereto bear a reasonable relation to the State of New York. The parties
hereto agree that the internal laws of the State of New York shall govern this
Agreement and the exhibits hereto, including, but not limited to, all issues
related to usury. Any action to enforce the terms of this Agreement or any of
its exhibits, or any other Transaction Document shall be brought exclusively in
the state and/or federal courts situated in the County and State of New York. If
and only if New York declines jurisdiction within the State of New York, such
action shall be brought in the State and County where the Target Company's
principal place of business is situated. Service of process in any action by
Seaside or the Target Company to enforce the terms of this Agreement may be made
by serving a copy of the summons and complaint, in addition to any other
relevant documents, by commercial overnight courier to the other party at its
principal address set forth in this Agreement.
18
5.9 Survival. The representations and warranties of the Target Company
and Seaside contained in Article III and the agreements and covenants of the
parties contained in Article IV and this Article V shall survive the Closing.
5.10 Counterpart Signatures. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Target Company and Seaside shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, unless counsel for the disclosing party deems such public
statement to be required by applicable federal and/or state securities laws.
Except as otherwise required by applicable law or regulation, the Target Company
will not disclose to any third party (excluding its legal counsel, accountants
and representatives) the name of Seaside.
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.13 Limitation of Remedies. With respect to claims by the Target
Company or any person acting by or through the Target Company, or by Seaside or
any person acting through Seaside, for remedies at law or at equity relating to
or arising out of a breach of this Agreement, liability, if any, shall, in no
event, include loss of profits or incidental, indirect, exemplary, punitive,
special or consequential damages of any kind.
[ SIGNATURE PAGE FOLLOWS ]
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Target Company:
Molecular Diagnostics, Inc.
By: _________________________
Xx. Xxxxx X. X'Xxxxxxx, M.D.
President and CEO
Seaside:
Dungarvon Associates, Inc. on behalf of
Seaside Investments Plc.
By: __________________________
Name: ________________________
Title: _______________________
20
EXHIBIT A
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of October 5, 2004, by and
between Molecular Diagnostics, Inc., a Delaware corporation with its principal
place of business at 000 X. Xxxxxxx, Xxxxx 000, Xxxxxxx, XX 60610(the "Target
Company"); Gottbetter & Partners, LLP with its principal place of business at
000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Escrow Agent"); and Seaside
Investments Plc, a corporation organized under the laws of England and Wales
with its offices at 00 Xxxxxxxxxx Xxxxxx, Xxxxxx XX0X 0XX ("Seaside").
RECITALS
A. Simultaneously with the execution of this Agreement, Seaside and
the Target Company entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated as of the date hereof and incorporated herein by reference,
pursuant to which the Target Company has agreed to issue to Seaside the
Consideration Stock in exchange for the Seaside Consideration Shares.
B. The parties have agreed that the Consideration Stock and Seaside
Consideration Shares shall be deposited into escrow pursuant to this Agreement,
including thirty percent (30%) of the Seaside Consideration Shares to be
deposited into escrow as Downside Price Protection (the "Seaside Escrow
Shares").
C. The Escrow Agent is willing to act as escrow agent pursuant to
the terms of this Agreement with respect to the purchase of the shares of
Consideration Stock.
D. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Stock Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. DEPOSIT INTO ESCROW. At Closing, the parties shall deposit into
escrow (i) the Seaside Consideration Shares, (ii) the Consideration Stock and
(iii) the stock power executed by Seaside. The deposit of the Seaside
Consideration Shares, at the election of Seaside, may be made as (i) a
certificate in the name of the Target Company or a provisional letter of
allotment for a trading account in the name of the Escrow Agent representing the
Seaside Escrow Shares and (ii) a certificate in the name of the Target Company
or a provisional letter of allotment for a trading account in the name of the
Escrow Agent (to be held for the benefit of the Target Company) representing the
balance of the Seaside Consideration Shares. The Escrow Agent shall hold the
Seaside Consideration Shares and the Consideration Stock in escrow when
delivered.
A-1
2. TERMS OF ESCROW. (a) If the Market Value of the Common Stock on
the date occurring one year after Closing (the "One Year Anniversary") is less
than the Closing Price, the Target Company shall sell to Seaside and Seaside
shall purchase the number of Seaside Escrow Shares (the "Seaside Protection
Shares") equal to (a) the Seaside Consideration Shares multiplied by (b) the
Percentage Decrease, at a purchase price of 1p per Seaside Consideration Share
(the "Escrow Purchase Price"). The "Percentage Decrease" shall be equal to 1 -
Market Value/the Closing Price. "Market Value" shall be the average of the ten
(10) closing bid prices per share of the Common Stock during the ten (10)
trading days immediately preceding the One Year Anniversary.
Within three (3) Business Days of the One Year Anniversary, Seaside
shall (i) send a notice ("Sale Notice") to the Target Company and the Escrow
Agent of the Seaside Protection Shares to be sold by the Target Company to
Seaside, if any, and (ii) deposit the Escrow Purchase Price with the Escrow
Agent, if necessary. Within fourteen (14) Business Days of the Target Company's
and the Escrow Agent's receipt of the Sale Notice and Escrow Agent's receipt of
the Escrow Purchase Price, the Escrow Agent is authorized and directed
simultaneously (i) to pay the Escrow Purchase Price, if any, to the Target
Company, (ii) to deliver the Seaside Protection Shares, if any, to Seaside and
(iii) to deliver the remaining Seaside Escrow Shares, if any, to the Target
Company.
(b) If at any time before September 30, 2004, the Escrow Agent
receives written notice (the "LSE Notice") from Seaside that the Seaside
Consideration Shares are listed on the London Stock Exchange plc (the "London
Exchange"), the Escrow Agent is authorized and directed to distribute, within
fourteen (14) Business Days of receipt of such LSE Notice, (i) the Consideration
Stock to Seaside and (ii) seventy percent (70%) of the Seaside Consideration
Shares to the Target Company. If the Escrow Agent does not receive such LSE
Notice by September 30, 2004, the Escrow Agent is authorized and directed to
distribute, no later than October 5, 2004, (i) the Consideration Stock and the
stock power executed by Seaside to the Target Company and (ii) the Seaside
Consideration Shares to Seaside; provided, however, that the Target Company
shall have the option to extend the September 30, 2004 deadline by providing
written notice to the Escrow Agent with a written acknowledgement from Seaside.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations of the
Escrow Agent shall be only those obligations herein specifically provided and no
other. The Escrow Agent's duties are those of a depositary only, and the Escrow
Agent shall incur no liability whatsoever, except as a direct result of its
willful misconduct or gross negligence in the performance of its duties
hereunder;
(b) The Escrow Agent may consult with counsel of its choice, and
shall not be liable for any action taken, suffered or omitted to be taken by it
in accordance with the advice of such counsel;
(c) The Escrow Agent shall not be bound in any way by the terms of
any other agreement to which Seaside and the Target Company are parties, whether
or not the Escrow Agent has knowledge thereof, and the Escrow Agent shall not in
any way be required to determine whether or not any other agreement has been
complied with by Seaside and the Target Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Agreement unless the same shall
be in writing and signed jointly by Seaside and the Target Company and agreed to
in writing by the Escrow Agent;
A-2
(d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, the
Escrow Agent shall be entitled to refrain from taking any action other than
keeping safely the Consideration (as defined below) or taking certain action
until the Escrow Agent is directed otherwise in writing jointly by Seaside and
the Target Company or by a final judgment of a court of competent jurisdiction;
(e) The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which the Escrow Agent, in good
faith, believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement;
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration;
(g) If the Escrow Agent at any time, in its sole discretion, deems
it necessary or advisable to relinquish custody of any of the securities (to the
extent delivered to the Escrow Agent pursuant hereto, the "Consideration"), it
may do so by delivering the same to another Person that agrees to act as escrow
agent hereunder and whose substitution for the Escrow Agent is agreed upon in
writing by Seaside and the Target Company; provided, however that such successor
Escrow Agent must be resident in the United States. If no such escrow agent is
selected within three (3) days after the Escrow Agent gives notice to Seaside
and the Target Company of the Escrow Agent's desire to so relinquish custody of
the Consideration and resign as Escrow Agent, then the Escrow Agent may do so by
delivering the Consideration to the clerk or other proper officer of a state or
federal court of competent jurisdiction situate in the state and county of New
York. The fee of any court officer shall be borne by the Target Company. Upon
such delivery, the Escrow Agent shall be discharged from any and all
responsibility or liability with respect to the Consideration and this Agreement
and each of the Target Company and Seaside shall promptly pay all monies it may
owe to the Escrow Agent for its services hereunder, including, but not limited
to, reimbursement of its out-of-pocket expenses pursuant to paragraph (i) below;
A-3
(h) This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to Seaside or the Target Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect to the Stock Purchase Agreement; provided, however,
that in the event of such dispute, the Escrow Agent shall have the right to
commence an interpleader action in any court of competent jurisdiction of the
state of New York or of the United States located in the county and state of New
York, deposit the Consideration with such court;
(i) The parties acknowledge and agree that the Escrow Agent is
counsel to Seaside. The parties agree to, and agree not to object to, the Escrow
Agent's engagement as Escrow Agent hereunder;
(j) Upon the full performance of this Agreement, the Escrow Agent
shall be deemed released and discharged of any further obligations hereunder.
4. INDEMNIFICATION.
(a) Seaside hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amounts paid in
settlement) resulting from claims asserted by the Target Company against the
Escrow Agent with respect to the performance of any of the provisions of this
Agreement;
(b) The Target Company hereby indemnifies and holds free and
harmless the Escrow Agent from any and all losses, expenses, liabilities and
damages (including but not limited to reasonable attorney's fees, and amount
paid in settlement) resulting from claims asserted by Seaside against the Escrow
Agent with respect to the performance of any of the provisions of this
Agreement;
(c) Seaside and the Target Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, the Stock Purchase Agreement and the securities, including, but
not limited to, all legal costs and expenses of the Escrow Agent incurred
defending itself against any claim or liability in connection with its
performance hereunder, provided that the Escrow Agent shall not be entitled to
any indemnity for any losses, damages, taxes, liabilities or expenses that
directly result from its willful misconduct or gross negligence in its
performance as Escrow Agent hereunder
(d) In the event of any legal action or Proceeding involving any of
the parties to this Agreement which is brought to enforce or otherwise
adjudicate any of the rights or obligations of the parties hereunder, the
non-prevailing party or parties shall pay the legal fees of the prevailing party
or parties and the legal fees, if any, of the Escrow Agent.
5. MISCELLANEOUS.
A-4
(a) All notices, including the Sale Notice, objections, requests,
demands and other communications sent to any party hereunder shall be deemed
duly given if (x) in writing and sent by facsimile transmission to the Person
for whom intended if addressed to such Person at its facsimile number set forth
below or such other facsimile number as such Person may designate by notice
given pursuant to the terms of this Section 5 and (y) the sender has
confirmation of transmission:
(i) If to the Target Company: Molecular Diagnostics, Inc.
Attn: Xx. Xxxxx X. X'Xxxxxxx, M.D.
President and CEO
000 X. Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(ii) If to Seaside: Seaside Investments PLC
00 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Attn: Xxxxx Xxxxx
Tel: 00.000.000.0000
Fax: 00.000.000.0000
(iii) If to the Escrow
Agent: Gottbetter
& Partners, LLP
000 Xxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx
00000 Attn: Xxxx
X. Xxxxxxxxxx,
Esq. Tel: (212)
000-0000 Fax:
(000) 000-0000
(b) This Agreement has been prepared, negotiated and delivered in
the state of New York and shall be governed by and construed and enforced in
accordance with the laws of the state of New York applicable to contracts
entered into and performed entirely within New York, without giving effect to
the principles of New York law relating to the conflict of laws.
(c) This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The assignment by a
party of this Agreement or any rights hereunder shall not affect the obligations
of such party under this Agreement.
A-5
6. TERMINATION OF ESCROW. The term of this Escrow Agreement shall begin
upon the date hereof and shall continue until terminated upon the earlier to
occur of (i) the Seaside Escrow Shares are fully distributed or (ii) the written
agreement of the parties to terminate this Agreement. Upon the termination of
this Escrow Agreement pursuant to subsection (ii), the Escrow Agent shall
distribute any of the Seaside Escrow Shares then held by it pursuant to the
terms of the written agreement of the parties.
[ SIGNATURE PAGE FOLLOWS ]
A-6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
The Target Company:
Molecular Diagnostics, Inc.
By:
-------------------------
Xx. Xxxxx X. X'Xxxxxxx, M.D.
President and CEO
Seaside:
Dungarvon Associates, Inc. on behalf of
Seaside Investments Plc.
By:
-------------------------
Name:
Title:
Escrow Agent:
Gottbetter & Partners, LLP
By:
-------------------------
Name: Xxxx X Xxxxxxxxxx
Title: Managing Partner
A-7
EXHIBIT B
MOLECULAR DIAGNOSTICS, INC.
OFFICER'S CERTIFICATE
I, Xx. Xxxxx X. X'Xxxxxxx, M.D., being the President and CEO of Molecular
Diagnostics, Inc., a Delaware corporation (the "Target Company"), pursuant to
Section 2.2(a)(ii) of that certain Stock Purchase Agreement (the "Purchase
Agreement"), dated as of October 5, 2004, by and between the Target Company and
Seaside Investments PLC, do hereby certify on behalf of the Target Company that
attached hereto is a copy of the resolutions duly adopted by the Board of
Directors of the Target Company authorizing the Target Company to execute and
deliver the Transaction Documents, as such term is defined in the Purchase
Agreement and to enter into the transactions contemplated thereby.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf
of the Target Company this 5th day of October, 2004.
Molecular Diagnostics, Inc.
By:
-------------------------
Xx. Xxxxx X. X'Xxxxxxx, M.D.
President and CEO
B-1
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October
4, 2004, by and among Molecular Diagnostics, Inc., a Delaware corporation, with
its principal office located at 000 X. Xxxxxxx, Xxxxx 000, Xxxxxxx, XX 00000
(the "Target Company"), and Seaside Investments Plc., a company incorporated in
England and Wales, with its principal place of business at 00 Xxxxxxxxxx Xxxxxx,
Xxxxxx XX0X 0XX ("Seaside").
Simultaneously with the execution and delivery of this Agreement, Seaside
and the Target Company have entered into a Stock Purchase Agreement, dated as of
the date hereof (the "Purchase Agreement"), which Purchase Agreement is
incorporated herein by reference, and pursuant to which the Purchaser has agreed
to purchase the Target Company's common stock, par value $.001 (the "Common
Stock"; and such shares of Common Stock purchased, the "Consideration Stock"),
all as more particularly provided therein.
NOW, THEREFORE, 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 Target Company and Seaside
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
(b) "Register," "registered," and "registration" refer to a registration
effected by preparing and filing one or more Registration Statements (as
defined below) in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities
on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United
States Securities and Exchange SEC (the "SEC").
(c) "Registrable Securities" means the shares of Consideration Stock.
(d) "Registration Statement" means a registration statement under the 1933
Act which covers the Registrable Securities.
2. REGISTRATION.
C-1
(a) Subject to the terms and conditions of this Agreement, the Target
Company shall prepare and file, no later than eight (8) months from the
date hereof, with the SEC a registration statement on Form S-1 or SB-2
(or, if the Target Company is then eligible, on Form S-3) under the 1933
Act (the "Initial Registration Statement") for the registration for the
resale by Seaside, who purchased shares of Common Stock pursuant to the
Purchase Agreement the shares of Consideration Stock. The Target Company
shall cause the Registration Statement to remain effective until all of
the Registrable Securities have been sold. Prior to the filing of the
Registration Statement with the SEC, the Target Company shall furnish a
copy of the Initial Registration Statement to Seaside and Gottbetter &
Partners LLP for their review and comment. Seaside and Gottbetter &
Partners LLP shall furnish comments on the Initial Registration Statement
to the Target Company within three (3) Business Days of the receipt
thereof from the Target Company.
(b) Effectiveness of the Initial Registration Statement. The Target
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than one year anniversary
from date hereof (the "Scheduled Effective Deadline") and (ii) to insure
that the Initial Registration Statement and any subsequent Registration
Statement remains in effect until the earlier of (A) all of the
Registrable Securities have been sold, subject to the terms and conditions
of this Agreement or (B) in the written opinion of counsel for the Target
Company all of the Registrable Securities are eligible for sale without an
effective Registration Statement under the 1933 Act.
(c) Failure to Obtain Effectiveness of the Registration Statement. In the
event the Registration Statement is not declared effective by the SEC on
or before the Scheduled Effective Deadline, sales cannot be made pursuant
to the Registration Statement whether because of a failure to keep the
Registration Statement effective, failure to disclose such information as
is necessary for sales to be made pursuant to the Registration Statement,
failure to register sufficient shares of Common Stock or otherwise then as
partial relief for the damages to any holder of Registrable Securities by
reason of any such delay in or reduction of its ability to sell the
underlying shares of Common Stock (which remedy shall not be exclusive of
any other remedies at law or in equity), the Target Company will pay as
liquidated damages (the "Liquidated Damages") to Seaside, at Seaside's
option, either a cash amount or shares of the Target Company's Common
Stock within three (3) business days, after demand therefore, equal to
three percent (3%) of the Per Share Market Value of the Common Stock
outstanding as Liquidated Damages.
(d) Liquidated Damages. The Target Company and Seaside hereto acknowledge
and agree that the sums payable under subsections 2(c) above shall
constitute liquidated damages and not penalties and are in addition to all
other rights of Seaside, including the right to call a default. The
parties further acknowledge that (i) the amount of loss or damages likely
to be incurred is incapable or is difficult to precisely estimate, (ii)
the amounts specified in such subsections bear a reasonable relationship
to, and are not plainly or grossly disproportionate to, the probable loss
likely to be incurred in connection with any failure by the Target Company
to obtain or maintain the effectiveness of a Registration Statement, (iii)
one of the reasons for the Target Company and Seaside reaching an
agreement as to such amounts was the uncertainty and cost of litigation
regarding the question of actual damages, and (iv) the Target Company and
Seaside are sophisticated business parties and have been represented by
sophisticated and able legal counsel and negotiated this Agreement at
arm's length.
C-2
3. RELATED OBLIGATIONS.
(a) The Target Company shall keep the Registration Statement effective
pursuant to Rule 415 at all times until the date on which Seaside shall
have sold all the Registrable Securities covered by such Registration
Statement (the "Registration 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) The Target Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities of the
Target Company covered by such Registration Statement until such time as
all of such Registrable Securities shall have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case
of amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Target Company's filing a report on
Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Target
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements
with the SEC on the same day on which the 1934 Act report is filed which
created the requirement for the Target Company to amend or supplement the
Registration Statement.
(c) The Target Company shall furnish to Seaside, without charge, (i) at
least one (1) copy of such Registration Statement as declared effective by
the SEC and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, all exhibits
and each preliminary prospectus, (ii) ten (10) copies of the final
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as Seaside may
reasonably request) and (iii) such other documents as Seaside may
reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by Seaside.
C-3
(d) The Target Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in
the United States as Seaside reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Target Company shall not be
required in connection therewith or as a condition thereto to (w) make any
change to its certificate of incorporation or by-laws, (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject itself to general taxation
in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Target Company shall promptly notify
Seaside of the receipt by the Target Company of any notification with
respect to the suspension of the registration or qualification of any of
the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event or
development, the Target Company shall notify Seaside in writing of the
happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission 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 (provided that in
no event shall such notice contain any material, nonpublic information),
and promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and deliver ten
(10) copies of such supplement or amendment to Seaside. The Target Company
shall also promptly notify Seaside in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when
a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to
Seaside by facsimile on the same day of such effectiveness), (ii) of any
request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the
Target Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate.
(f) The Target Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction within the United
States of America and, if such an order or suspension is issued, to obtain
the withdrawal of such order or suspension at the earliest possible moment
and to notify Seaside of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
C-4
(g) At the reasonable request of Seaside, the Target Company shall furnish
to Seaside, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as Seaside may reasonably
request (i) a letter, dated such date, from the Target Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and (ii) an opinion,
dated as of such date, of counsel representing the Target Company for
purposes of such Registration Statement, in form, scope and substance as
is customarily given in an underwritten public offering, addressed to
Seaside.
(h) The Target Company shall make available for inspection by (i) Seaside
and (ii) one (1) firm of accountants or other agents retained by Seaside
(collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of the Target
Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Target Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree,
and Seaside hereby agrees, to hold in strict confidence and shall not make
any disclosure (except to Seaside) or use any Record or other information
which the Target Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement or is otherwise required under
the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been
made generally available to the public other than by disclosure in
violation of this or any other agreement of which the Inspector and
Seaside has knowledge. Seaside agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to
the Target Company and allow the Target Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
(h) The Target Company shall hold in confidence and not make any
disclosure of information concerning Seaside provided to the Target
Company unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (iii) the release of such information is
ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement. The
Target Company agrees that it shall, upon learning that disclosure of such
information concerning Seaside is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to Seaside and allow Seaside, at Seaside's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
C-5
(i) The Target Company shall use its best efforts either to cause all the
Registrable Securities covered by a Registration Statement (i) to be
listed on each securities exchange on which securities of the same class
or series issued by the Target Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules
of such exchange or (ii) the inclusion for quotation on the National
Association of Securities Dealers, Inc. OTC Bulletin Board for such
Registrable Securities. The Target Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 3(i).
(j) The Target Company shall cooperate with Seaside and, to the extent
applicable, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as
the case may be, as Seaside may reasonably request and registered in such
names as Seaside may request.
(k) The Target Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
(l) The Target Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after
the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 0000 Xxx) covering a
twelve (12) month period beginning not later than the first day of the
Target Company's fiscal quarter next following the effective date of the
Registration Statement.
(m) The Target Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
(n) Within two (2) business days after a Registration Statement which
covers Registrable Securities is declared effective by the SEC, the Target
Company shall deliver, and shall cause legal counsel for the Target
Company to deliver, to the transfer agent for such Registrable Securities
(with copies to Seaside whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has
been declared effective by the SEC in the form attached hereto as Exhibit
A.
(o) The Target Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by Seaside of Registrable
Securities pursuant to a Registration Statement.
4. OBLIGATIONS OF SEASIDE.
C-6
Seaside agrees that, upon receipt of any notice from the Target Company of
the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), Seaside will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until Seaside's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 3(e) or receipt of notice that no
supplement or amendment is required. Notwithstanding anything to the contrary,
the Target Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of Seaside in accordance
with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which Seaside has entered into a
contract for sale prior to Seaside's receipt of a notice from the Target Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which Seaside has not yet settled. Seaside shall
furnish the Target Company with such information as the Target Company
reasonably requests for disclosure in the Registration Statement as required by
the rules and regulations of the SEC.
5. EXPENSES OF REGISTRATION.
All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Target Company, except that Seaside shall pay all
discounts and commission relating to the sale of Registrable Securities and the
fees of any attorneys or advisors retained by Seaside.
6. INDEMNIFICATION.
With respect to Registrable Securities which are included in a
Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Target Company will, and
hereby does, indemnify, hold harmless and defend Seaside, the directors,
officers, partners, employees, agents, representatives of, and each
Person, if any, who controls Seaside within the meaning of the 1933 Act or
the 1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys' fees, amounts paid in settlement or expenses, joint
or several (collectively, "Claims") incurred in investigating, preparing
or defending any action, claim, suit, inquiry, proceeding, investigation
or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether
pending or threatened, whether or not an indemnified party is or may be a
party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or any post-effective amendment thereto
or in any filing made in connection with the qualification of the offering
under the securities or other "blue sky" laws of any jurisdiction in which
Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged omission to state 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 any
final prospectus (as amended or supplemented, if the Target 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 Target Company of the 1933 Act, the 1934 Act, any
other law, including, without limitation, any state securities law, or any
rule or regulation there under relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters
in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Target Company shall reimburse Seaside and each such
controlling person promptly as such expenses are incurred and are due and
payable, for any legal fees or disbursements 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): (x) shall not
apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Target Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall
not be available to the extent such Claim is based on a failure of Seaside
to deliver or to cause to be delivered the prospectus made available by
the Target Company, if such prospectus was timely made available by the
Target Company pursuant to Section 3(c); and (z) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Target Company, which consent
shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by Seaside pursuant to Section 9 hereof.
C-7
(b) In connection with a Registration Statement, Seaside agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Target
Company, each of its directors, each of its officers, employees,
representatives, or agents and each Person, if any, who controls the
Target Company within the meaning of the 1933 Act or the 1934 Act (each an
"Indemnified Party"), against any Claim or Indemnified Damages to which
any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or is
based upon any Violation, in each case to the extent, and only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Target Company by Seaside expressly
for use in connection with such Registration Statement; and, subject to
Section 6(d), Seaside will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement contained
in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent
of Seaside, which consent shall not be unreasonably withheld; provided,
further, however, that Seaside shall be liable under this Section 6(b) for
only that amount of a Claim or Indemnified Damages as does not exceed the
net proceeds to Seaside as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of such Indemnified Party and shall survive the transfer of the
Registrable Securities by Seaside pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any prospectus shall not
inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the prospectus was corrected and
such new prospectus was delivered to Seaside prior to Seaside's use of the
prospectus to which the Claim relates.
C-8
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or 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 Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses of not more than one (1) counsel for such Indemnified
Person or Indemnified Party to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Indemnified Party or Indemnified Person 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 or Indemnified Person which relates to such action
or claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim
or proceeding effected without its prior written consent; provided,
however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such
claim or litigation. Following indemnification as provided for hereunder,
the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms or corporations relating to the matter for which indemnification has
been made. 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 Person
or Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
C-9
(d) 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 and when bills are received or Indemnified
Damages are incurred.
(e) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
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:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) 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.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to Seaside the benefits of Rule 144
promulgated under the 1933 Act or any similar rule or regulation of the SEC that
may at any time permit Seaside to sell securities of the Target Company to the
public without registration ("Rule 144") the Target Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Target Company under the 1933 Act and the 1934 Act so long
as the Target Company remains subject to such requirements (it being
understood that nothing herein shall limit the Target Company's
obligations under Section 4(c) of the Securities Purchase Agreement) and
the filing of such reports and other documents as are required by the
applicable provisions of Rule 144; and
(c) furnish to Seaside so long as Seaside owns Registrable Securities,
promptly upon request, (i) a written statement by the Target Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act
and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Target Company and such other reports and documents so filed
by the Target Company, and (iii) such other information as may be
reasonably requested to permit Seaside to sell such securities pursuant to
Rule 144 without registration.
C-10
9. AMENDMENT OF REGISTRATION RIGHTS.
Provisions 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 Target Company and
Seaside. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon Seaside and the Target Company. No such amendment shall be
effective to the extent that it applies to fewer than all of the holders of the
Registrable Securities. 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 this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
10. MISCELLANEOUS.
(a) A Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable
Securities. If the Target Company receives conflicting instructions,
notices or elections from two (2) or more Persons with respect to the same
Registrable Securities, the Target Company shall act upon the basis of
instructions, notice or election received from the registered owner of
such Registrable Securities.
(b) Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated
and kept on file by the sending party); or (iii) one (1) business day
after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Target Company, to: Molecular Diagnostics, Inc.
000 X. Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxx X. X'Xxxxxxx, M.D.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Seaside: Seaside Investments PLC
00 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Attention: Xxxxx Xxxxx
Telephone: 00.000.000.0000
Facsimile: 00.000.000.0000
C-11
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
(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) The laws of the State of Delaware shall govern all issues
concerning the relative rights of the Target Company and Seaside as its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the Courts of the State of New
York, sitting in New York County and federal courts for the District of New York
sitting New York, New York, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(e) This Agreement and the Purchase Agreement and related documents
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Purchase Agreement and related documents
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
(f) This Agreement shall inure to the benefit of and be binding upon
the permitted successors and assigns of each of the parties hereto.
C-12
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in identical 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 facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
(j) 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
C-13
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of day and year first above written.
TARGET COMPANY:
MOLECULAR DIAGNOSTICS, INC.
By:
--------------------------------
Name: Xx. Xxxxx X. X'Xxxxxxx, M.D.
Title: President and CEO
C-14
