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EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between ESCALON MEDICAL
CORP., a California corporation, with headquarters currently located at 000
Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000 (as of January 1, 1998: 000 Xxxx Xxxxxxxxx
Xxxx, Xxxxx, XX 19087) (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of the Series A 6% Convertible
Preferred Stock, no par value (the "Convertible Preferred Stock"), of the
Company which which will be convertible into shares of Common Stock, no par
value per share. of the Company (the "Common Stock"), upon the terms and subject
to the conditions of the such Convertible Preferred Stock, together with the
Warrants (as defined below) exercisable for the purchase of shares of Common
Stock (the "Warrant Shares"), and subject to acceptance of this Agreement by the
Company;
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 parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE; CERTAIN DEFINITIONS. (i) The undersigned hereby agrees
to purchase from the Company shares of the Convertible Preferred Stock in the
amount set forth on the signature page of this Agreement (the "Preferred
Stock"), out of a total offering of $1,350,000 of such Convertible Preferred
Stock, and having the terms and conditions set forth in the Certificate of
Determination of Series A 6% Convertible Preferred Stock of the Company attached
hereto as ANNEX I (the "Certificate of Designations"). Without limiting the
terms provided in the Certificate of Designations, the Convertible Preferred
Stock shall provide that any outstanding shares of such Convertible Preferred
Stock shall automatically convert into Common Stock on the second anniversary of
the Closing Date (as defined below) on the terms provided in the Certificate of
Designations for a voluntary conversion (a "Mandatory Conversion"). The purchase
price for the
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Preferred Stock shall be as set forth on the signature page hereto (the
"Purchase Price") and shall be payable in United States Dollars.
(ii) As used herein, the term "Preferred Stock" means the Preferred
Stock, together with all shares, if any, of the securities of the Company issued
as dividends thereon, unless the context otherwise requires.
(iii) As used herein, the term "Securities" means the Preferred
Stock, the Warrants and the Common Stock issuable upon conversion of the
Preferred Stock or the exercise of the Warrants.
b. FORM OF PAYMENT. The Buyer shall pay the Purchase Price by
delivering immediately available good funds in United States Dollars to the
escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions
attached hereto as ANNEX II (the "Joint Escrow Instructions"). No later than the
Closing Date (as defined below), but in any event promptly following payment by
the Buyer to the Escrow Agent of such amount of the Purchase Price, the Company
shall deliver the Preferred Stock duly executed on behalf of the Company to the
Escrow Agent. By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
c. METHOD OF PAYMENT. Payment into escrow on account of the
Purchase Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, Esqs.
Account No.: -
Not later than 1:00 p.m., New York time, on the date which is two (2) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the Purchase Price for
the Preferred Stock, in currently available funds. Time is of the essence with
respect to such payment, and failure by the Buyer to make such payment, shall
allow the Company to cancel this Agreement.
d. ESCROW PROPERTY. Funds deposited on account of the Purchase Price
and certificates representing the Preferred Stock delivered to the Escrow Agent
as contemplated by Sections 1(b) and (c) hereof are referred to as the "Escrow
Property."
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2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting the Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and the Warrants and will be acquiring the shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Converted Shares")
and the Warrant Shares for its own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Preferred Stock and the
shares of Common Stock representing the Converted Shares and the Warrant Shares
(such Common Stock sometimes referred to as the "Shares") by the Buyer shall be
made pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration.
d. The Buyer understands that the Preferred Stock is being offered
and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the offer of
the Shares which have been requested by the Buyer, including ANNEX V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has had the opportunity to obtain and review the Company's (1) Annual Report on
Form 10-K for the fiscal year ended June 30, 1997, (2) Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1997, (3) Form 8-K , dated
November 25, 1997, and (4) Form S-3, file August 26, 1996 (the "Company's SEC
Documents").
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f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof or of the Preferred Stock,
in no event (except (i) with respect to a Mandatory Conversion or (ii) if the
Company is in default under any provision of the Certificate of Designations or
of any of the Transaction Agreements, as defined below) shall the holder be
entitled to convert any Preferred Stock or exercise any Warrants to the extent
that, after such conversion or exercise, the sum of (1) the number of shares of
Common Stock beneficially owned by the Buyer and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Preferred Stock), and (2) the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Buyer and its affiliates of more than
4.99% of the outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that, except as
provided in ANNEX V hereto:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The Preferred
Stock has been duly authorized, and when issued, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Preferred
Stock, the Warrants or the Shares.
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not
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have a material adverse effect on the business, operations, prospects or
condition (financial or otherwise) of the Company. The Company has registered
its Common Stock pursuant to Section 12 of the 1934 Act, and the Common Stock is
listed and traded on The NASDAQ/National Market. The Company has received no
notice, either oral or written, with respect to the continued eligibility of the
Common Stock for such listing, and the Company has maintained all requirements
for the continuation of such listing.
c. AUTHORIZED SHARES. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock and to issue the Warrant Shares. The Converted Shares and the
Warrant Shares have been duly authorized and, when issued upon conversion of, or
as interest on, the Preferred Stock or upon exercise of the Warrants, each in
accordance with its respective terms, will be duly and validly issued, fully
paid and non-assessable and will not subject the holder thereof to personal
liability by reason of being such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT AND
STOCK. This Agreement and the Registration Rights Agreement, the form of which
is attached hereto as ANNEX IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Warrants and the Registration Rights Agreement, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally; and the Preferred Stock will be duly and validly authorized
and, when executed and delivered on behalf of the Company in accordance with
this Agreement, will be a valid and binding obligation of the Company in
accordance with its terms, subject to general principles of equity and to
bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except such conflict, breach or default which would not have a
material adverse effect on the Company or on the transactions contemplated
herein.
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f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the Stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. The Company has since October 1, 1996 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since July 1, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, except as disclosed in the Company's SEC Documents.
Since July 1, 1997, except as provided in the Company's SEC Documents, the
Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents), that has not been disclosed in writing to the
Buyer that (i) would reasonably be expected to have a material adverse effect on
the business or financial condition of the Company or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the agreements
contemplated hereby (collectively, including this Agreement, the "Transaction
Agreements").
j. ABSENCE OF LITIGATION. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, results of operation or prospects
of the
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Company and its subsidiaries taken as a whole or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
l. PRIOR ISSUES. During the twelve (12) months preceding the date
hereof, the Company has not issued any convertible securities.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. Except as set forth in
ANNEX V hereto, the Company has no liabilities or obligations other than those
disclosed in the Company's SEC Documents or those incurred in the ordinary
course of the Company's business since July 1, 1997, and which individually or
in the aggregate, do not or would not have a material adverse effect on the
properties, business, condition (financial or otherwise), results of operations,
or prospects of the Company. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, condition (financial or
otherwise), results of operations, or prospects, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
n. NO DEFAULT. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound.
o. NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since October 1, 1996, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. DILUTION. The number of Shares issuable upon conversion of the
Preferred Stock and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Preferred Stock. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect. The board
of directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Shares upon
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conversion of the Preferred Stock and upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock and the Warrants, and, until such time as the Common Stock has
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
d. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Preferred Stock to the Buyer under
any United States laws and
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regulations or by any domestic securities exchange or trading market, and to
provide a copy thereof to the Buyer promptly after such filing.
e. REPORTING STATUS. So long as the Buyer beneficially owns any
of the Preferred Stock, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. The Company will take all action under its control to
continue the listing and trading of its Common Stock on The NASDAQ/National
Market (or, if not so listed, to obtain and to continue the listing and trading
of its Common Stock on The NASDAQ/SmallCap Market) and will comply in all
respects with the Company's reporting, filing and other obligations under the
by-laws or rules of the National Association of Securities Dealers, Inc.
("NASD") or such NASDAQ Market.
f. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow fees in connection with the sale of the Preferred
Stock) for internal working capital purposes, and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person.
g. CERTAIN AGREEMENTS. (i) The Company covenants and agrees that
it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock (collectively, "New Common Stock") with any third party
pursuant to a transaction which in any manner permits the sale of the New Common
Stock on any date which is earlier than sixty (60) days after the Effective Date
(as defined below).
(ii) The provisions of subparagraph (g)(i) will not apply to (x)
the issuance of securities (other than for cash) in connection with an
acquisition, merger, consolidation, sale of assets, disposition, or (y) the
exchange of the capital stock for assets, stock or other joint venture
interests; provided, however, that any action contemplated under this
subparagraph (g)(ii) is subject to the condition that registration rights, if
any, in connection with such action shall not require the filing of a
Registration Statement in respect of such stock prior to sixty (60) days after
the Effective Date.
(iii) The provisions of subparagraph g(i) will also not apply to the
inclusion of certain securities of the Company, which are identified in ANNEX V
hereto and as to which the holders thereof have been granted certain
registration rights prior to the date hereof (the "Existing Securities"), in the
Registration Statement covering the Registrable Securities (as defined in the
Registration Rights Agreement) or in a separate registration statement filed by
the Company after February 15, 1998 for such shares. Any other provision in this
Agreement, the Registration Rights Agreement or any of the other Transaction
Agreements to the contrary notwithstanding, the Company hereby agrees that, from
the Closing Date through and including February 15, 1998,
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without the prior written consent of the Buyer, which consent may withheld in
the Buyer's sole and absolute discretion, the Company (x) will not file any
registration statement, other than the Registration Statement, seeking to
register for sale any shares of the Company's stock and (y) will not include in
the Registration Statement shares of the Company's stock other than the
Registrable Securities and the Existing Securities.
(iv) The term "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities.
h. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield one hundred fifty percent (150%) of the number
of shares of Common Stock issuable (i) at conversion as may be required to
satisfy the conversion rights of the Buyer pursuant to the terms and conditions
of the Preferred Stock (assuming for such purposes that all Preferred Stock is
currently eligible to be converted, whether or not such eligibility in fact
exists at any given time) and (ii) upon exercise as may be required to satisfy
the exercise rights of the Buyer pursuant to the terms and conditions of the
Warrants (assuming for such purposes that all Warrants are currently eligible to
be exercised, whether or not such eligibility in fact exists at any given time).
i. WARRANTS. The Company agrees to issue to the Buyer no later
than two days after the Closing Date transferable, divisible warrants with
cashless exercise rights(the "Warrants") for the purchase of 40,000 shares of
Common Stock. The Warrants shall bear an exercise price equal to a percentage of
the closing bid price of the Common Stock on the Closing Date in accordance with
the following schedule:
At Price (as Percentage of
Amount of Warrants Exercisable Closing Date Closing Bid Price)
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25% of the Warrants 100%
25% of the Warrants 115%
25% of the Warrants 120%
25% of the Warrants 135%
The Warrants shall be exercisable immediately and for a period of five (5) years
thereafter and shall be in the form annexed hereto as ANNEX VI, together with
registration rights as provided in the Registration Rights Agreement.
j. HEDGING TRANSACTIONS. The Company understands that the Buyer
may be a so-called "hedge" fund, and the Company hereby expressly agrees that
the Buyer shall not in any way be prohibited or restricted from any purchases or
sales of any securities or other instruments of, or related to, the Company or
any of its securities, including, but not necessarily limited to, puts, calls,
futures contracts, short sales and hedging and arbitrage transactions. The Buyer
acknowledges that such purchases, sales and other transactions may be subject to
various federal and state securities laws and agrees to comply with all such
applicable securities laws.
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5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the Closing Date, the Company will irrevocably
instruct its transfer agent to issue Common Stock from time to time upon
conversion of the Preferred Stock in such amounts as specified from time to time
by the Company to the transfer agent, bearing the restrictive legend specified
in Section 4(b) of this Agreement prior to registration of the Shares under the
1933 Act, registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Buyer in connection with each conversion of
the Preferred Stock. The Company warrants that no instruction other than such
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 4(a) hereof prior to registration and sale of the Shares
under the 1933 Act will be given by the Company to the transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement, the Registration
Rights Agreement, and applicable law. Nothing in this Section shall affect in
any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of
this Agreement) permit the transfer of the Securities and, in the case of the
Converted Shares or the Warrant Shares, as the case may be, promptly instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. Subject to the completeness and accuracy of the Buyer's
representations and warranties herein, upon the conversion of any Preferred
Stock by a person who is a non-U.S. Person, and following the expiration of any
applicable Restricted Period (as those terms are defined in Regulation S), the
Company, shall, at its expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue stock certificates without restrictive legend or stop orders in the
name of Buyer (or its nominee (being a non-U.S. Person) or such non-U.S. Persons
as may be designated by Buyer) and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion, as applicable. Nothing in this Section 5, however, shall affect in
any way Buyer's or such nominee's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
c. (i) The Company will permit the Buyer to exercise its right to
convert the Preferred Stock by (x) telecopying an executed and completed Notice
of Conversion to the Company at (000) 000-0000, Attn: Chairman (or such other
telecopier number or addressee as may be identified by notice from the Company
to the Buyer in the manner contemplated by Section 11 hereof) and (y)
delivering, within five (5) business days thereafter, the original Notice of
Conversion and the certificates for the Preferred Stock being converted to the
Company by express courier, with a copy to the transfer agent.
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(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Preferred Stock, the date specified in
the Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that is received by the Company on or before such specified
date. If any of the foregoing conditions is not met, the Conversion Date shall
be the first business day following actual receipt by the Company of the Notice
of Conversion.
(iii) The Company will transmit (or cause it transfer agent to
transmit) the certificates representing the Converted Shares issuable upon
conversion of any Preferred Stock (together with certificates representing the
Preferred Stock not being so converted) to the Buyer via express courier, by
electronic transfer or otherwise, within three (3) business days after receipt
by the Company of the original Notice of Conversion and the certificate(s)
representing the Preferred Stock being converted (the "Delivery Date").
d. The Company understands that a delay in the issuance of the
shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. of Business Days Late" is
defined as the number of business days beyond five (5) business days from
Delivery Date:
Late Payment For Each $10,000
No. of of Preferred Stock Liquidation
Business Days Late Amount Being Converted
------------------ ------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000+$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within five (5) business days
after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering
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a notice to such effect to the Company whereupon the Company and the Buyer shall
each be restored to their respective positions immediately prior to delivery of
such Notice of Conversion.
e. If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Shares to be issued upon conversion of the Preferred Stock
and after such Delivery Date, the holder of the Preferred Stock being converted
(a "Converting Holder") purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Converting Holder (the "Sold
Shares"), which delivery such Converting Holder anticipated to make using the
Shares to be issued upon such conversion (a "Buy-In"), the Company shall pay to
the Converting Holder, in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
f. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the Escrow
Agent pursuant to Section 1(b) hereof, on a delivery against payment basis, no
later than on the Closing Date.
7. CLOSING DATE.
(i) The closing of the issuance and sale of the Preferred Stock
shall occur on the date (the "Closing Date") which is the first NYSE trading day
after the fulfillment or waiver of all closing conditions pursuant to Sections 8
and 9 hereof or such other date and time as is mutually agreed upon by the
Company and the Buyer, but in no event later than December 31, 1997.
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(ii) The closing of the purchase and issuance of Preferred Stock
shall occur on the Closing Date at the offices of the Escrow Agent and shall
take place no later than 12:00 Noon, New York time, on such day or such other
time as is mutually agreed upon by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Property only upon
satisfaction of the conditions set forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Preferred Stock to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by or the Buyer to the Escrow Agent of good funds as
payment in full of the Purchase Price in accordance with this Agreement;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement, as if made on such date,
and the performance by the Buyer on or before such date of all covenants and
agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the Preferred
Stock in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date of
the representations and warranties of the Company contained in this Agreement.
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
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d. The Registration Rights Agreement shall be in full force and
effect on the Closing Date and the Company shall not be in default thereunder;
and
e. On or before the Closing Date, the Buyer or the Escrow Agent
shall have received an opinion of counsel for the Company, dated the Closing
Date, in form, scope and substance reasonably satisfactory to the Buyer,
substantially to the effect set forth in ANNEX III attached hereto.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
b. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original.
d. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
Terms used in the singular case shall be deemed to refer to the plural case and
terms used in the plural case shall be deemed to refer to the singular case,
unless the context otherwise requires. Terms used in the masculine, feminine or
neuter gender shall be deemed to refer to any other gender, unless the context
otherwise requires.
e. 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 or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES. Except as and to the extent otherwise specified herein
(such as with respect to the giving of a Notice of Conversion), any notice which
shall be required or permitted hereunder shall be given in writing and shall be
deemed effectively given on the earliest of
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(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail,
or
(iii) the third business day after mailing by recognized
international express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: ESCALON MEDICAL CORP.
000 Xxxx Xxxxxxxxx Xxxx
Xxxxx, XX 00000
ATTN: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
ATTN: Xxxxx X. XxXxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
Telephone No.: (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and
the Buyer's representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Preferred Stock and the
Purchase Price, and shall inure to the benefit of the Buyer and the Company and
their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer or one of its officers thereunto duly authorized as of the date set forth
below.
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED: 1,350
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $1,350,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 31st day of December, 1997.
c/o ISRC, 000 Xxxxxxx Xxxxxx, Xxxxx 000 Combination, Inc.
--------------------------------------- ---------------------------------
Address Printed Name of Subscriber
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------
By: /s/ Xxxxx Xxxxxx
Telecopier No. -------------------------------
------------------------- (Signature of Authorized Person)
Xxxxx Xxxxxx, President
----------------------------------
Printed Name and Title
Turks and Caicos
---------------------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
ESCALON MEDICAL CORP.
By: /s/ Xxxxxxx X. XxXxxxx
------------------------
Title: Chairman & C.E.O.
------------------------
Date: December 31, 1997
------------------------
