EXHIBIT 4.34
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of
April 11, 2003 by and between EP MedSystems, Inc., a New Jersey corporation with
its principal office at 000 Xxxxx 00 Xxxxx, Xxxxxxxx X, Xxxx Xxxxxx, Xxx Xxxxxx
00000-0000 (the "COMPANY"), and each of the several purchasers named in Exhibit
A attached hereto (each, a "PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, the Company desires to issue and sell to the Purchasers an
aggregate of up to 120,000 shares (the "Shares") of the authorized but unissued
shares of Company common stock, no par value, stated value $0.001 per share (the
"Common Stock"); and
WHEREAS, each Purchaser, severally, wishes to purchase the number of
Shares shown next to its name on Exhibit A hereto, all upon the terms and
subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
following respective meanings:
"AFFILIATE" of a party means any corporation or other business entity
controlled by, controlling or under common control with such party. For this
purpose "control" shall mean direct or indirect beneficial ownership of fifty
percent (50%) or more of the voting or income interest in such corporation or
other business entity.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and all of the rules and regulations promulgated thereunder.
"GAAP" means United States generally accepted accounting principles.
"MAJORITY PURCHASERS" shall mean Purchasers which, at any given time,
hold greater than fifty percent (50%) of the voting power of the outstanding
Shares.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
prospects (financial or other), condition, business, operations, assets,
liabilities, or results of operations of the Company and its subsidiaries, taken
as a whole.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual, corporation, company, partnership, firm,
association, joint venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other entity.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement, dated as of January 31, 2003, among the Company and the
signatories thereto, as amended on April 11, 2003.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
all of the rules and regulations promulgated thereunder.
2. PURCHASE AND SALE OF SHARES.
2.1 PURCHASE AND SALE. Subject to and upon the terms and conditions set
forth in this Agreement, the Company agrees to issue, sell and deliver to each
Purchaser, and each Purchaser, severally, hereby agrees to purchase from the
Company, at the Closing, the number of shares of Common Stock set forth opposite
the name of such Purchaser under the heading "Number of Shares to be Purchased"
on Exhibit A hereto, at a purchase price of $1.75 per share (the "Purchase
Price"). The total purchase price payable by each Purchaser for the number of
shares of Common Stock that such Purchaser is hereby agreeing to purchase is set
forth opposite the name of such Purchaser under the heading "Purchase Price" on
Exhibit A hereto. The Company shall be obligated to register the Shares pursuant
to the terms and conditions set forth in the Registration Rights Agreement.
2.2 INITIAL CLOSING. The purchase and sale of the Lease shall take place at
10:00 a.m. EST on or about April 11, 2003, at the offices of Xxxxxx Xxxxxx White
& XxXxxxxxx LLP in New York, New York, or on such other date and at such other
location as the parties may mutually agree (which time and place are designated
as the "Closing" and the date and time of the Initial Closing are referred to as
the "Closing Date").
2.3 INDEPENDENT PURCHASERS. The Company acknowledges and agrees that each
of the Purchasers is acting solely in the capacity of an arm's length purchaser
with respect to this Agreement and the transactions contemplated hereby and that
each Purchaser has separately negotiated the terms of this Agreement. Nothing
contained herein or in any agreement or document relating to this transaction,
and no action taken by any Purchaser, shall be deemed to constitute the
Purchasers as, or to create any presumption that the Purchasers are in any way
acting in concert or as, a group with respect to the obligations or transaction
hereunder. No Purchaser has relied upon any other Purchaser for advice in
entering into the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to each of the Purchasers as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has all requisite power and authority, and all necessary licenses
and permits, to own and lease its properties and assets and to Conduct its
business as now conducted. Each subsidiary as referred to in the SEC Documents
(as hereinafter defined) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite power and authority, and all necessary licenses and permits, to
own and lease its properties and assets and to conduct its business as now
conducted. The Company and its subsidiaries are each qualified to do business as
a foreign corporation and are in good standing in all states where the conduct
of their respective businesses or their ownership or leasing of property
requires such qualification, except where the failure to so qualify would not
have a Material Adverse Effect The Company does not own or control, directly or
indirectly, any interest in any other corporation, partnership, limited
liability company, unincorporated business organization, association, trust or
other business entity.
3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of: (i) 5,000,000
shares of preferred stock of the Company, no par value per share, of which
373,779 shares are issued and outstanding; and (ii) 25,000,000 shares of Common
Stock, no par value, $.001 stated value per share, of which 18,075,524 shares
are issued and outstanding and all such outstanding shares are validly issued,
fully paid and nonassessable; (iii) 1,000,000 shares of Common Stock reserved
for issuance pursuant to the Company's 1995 Long Term Incentive Plan; (iv)
480,000 shares of Common Stock reserved for issuance pursuant to the Company's
1995 Director Option Plan; and (v) 575,000 shares of Common Stock reserved for
issuance pursuant to the Company's 2002 Stock Option Plan. With respect to the
1995 Long Term Incentive Plan, the 1995 Director Option Plan, the 2002 Stock
Option Plan and other non-plan stock options and warrants, an aggregate of
3,754,119 options and warrants have been granted or issued and are outstanding
as of March 31, 2003.
(b) There are no preemptive or similar rights to purchase or otherwise
acquire shares of capital stock of the Company pursuant to any provision of law
or the Amended and Restated Certificate of Incorporation or By-Laws of the
Company or by agreement or otherwise. Except as set forth in this Section 3.2 or
on Schedule 3.2, there are no outstanding subscriptions, warrants, options or
other rights or commitments of any character to subscribe for or purchase from
the Company, or obligating the Company to issue, any shares of capital stock of
the Company or any securities convertible into or exchangeable for such shares.
(c) There are no stockholder agreements, voting agreements, or similar
agreements with respect to the Common Stock to which the Company is a party, or
to the knowledge of the Company, by or between any stockholders of the Company
or any of its Affiliates.
3.3 AUTHORIZATION. The Company has all requisite corporate power to enter
into this Agreement and the Registration Rights Agreement to carry out and
perform its obligations under the terms of this Agreement and the Registration
Rights Agreement (including, without limitation, the issuance of the Shares).
All corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated herein and therein has been taken
or will be taken prior to the Closing Date. When executed and delivered by the
Company, each of this Agreement and the Registration Rights Agreement shall
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with their respective terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles.
3.4 VALID ISSUANCE OF THE SHARES. The Shares being purchased by the
Purchasers hereunder will, upon issuance pursuant to the terms hereof, be
validly issued, fully paid and nonassessable. Except for blue sky filing fees,
if any, there are no state or city taxes, fees or other charges payable in
connection with the execution or delivery of this Agreement, the Registration
Rights Agreement and the Shares.
3.5 FINANCIAL STATEMENTS. The Company has made available to each Purchaser
its audited Statements of Income, Stockholders' Equity and Cash Flows for the
fiscal year ended December 31, 2002 and its audited Balance Sheet as of December
31, 2002. All such financial statements are hereinafter referred to collectively
as the "Financial Statements." The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, and fairly present, in all material respects,
the financial position of the Company and the results of its operations as of
the date and for the periods indicated thereon, except that the unaudited
financial statements may not be in accordance with generally accepted accounting
principles because of the absence of footnotes normally contained therein and
are subject to normal year-end audit adjustments which, individually, and in the
aggregate, will not be material. Since December 31, 2003, to the Company's
knowledge, (i) except as set forth on the SEC Documents, there has been no
development or change (actual or threatened), individually or in the aggregate,
having a Material Adverse Effect, (ii) except as set forth in an SEC Document
(as defined below), there does not exist any condition reasonably likely to
result in a Material Adverse Effect and (iii) the Company has conducted its
business only in the ordinary course. Except as set forth on Schedule 3.6, the
Company has no indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
which were not fully reflected in, reserved against or otherwise described in
the Financial Statements or the notes thereto, or incurred in the ordinary
course of business consistent with the Company's past practices since December
31, 2002, and in any such case which were required generally to be reflected in
such Financial Statements under GAAP, all of which individually and in the
aggregate do not and would not have a Material Adverse Effect.
3.6 SEC DOCUMENTS. The Company has made available to each Purchaser, a true
and complete copy of the Company's Annual Report on Form 10K-SB for the year
ended December 31, 2002 and any other statement, report, registration statement
(other than registration statements on Form S-8) or definitive proxy statement
filed by the Company with the SEC during the period commencing December 31, 2002
and ending on the date hereof. The Company will, promptly upon the filing
thereof, also made available to each Purchaser all statements, reports
(including, without limitation, Quarterly Reports on Form 10-QSB and Current
Reports on Form 8-K), registration statements and definitive proxy statements
filed by the Company with the SEC during the period commencing on the date
hereof and ending on the Closing Date (all such materials required to be
furnished to each Purchaser pursuant to this sentence or pursuant to the next
preceding sentence of this Section 3.7 being called, collectively, the "SEC
Documents"). Since January 1, 2003, the Company has timely made all filings
required to be made by it under the Exchange Act, the Securities Act and the
securities laws of any state, and any rules and regulations promulgated
thereunder. The SEC Documents complied or will comply in all material respects
with the requirements of the Exchange Act or the Securities Act, as applicable,
and none of the SEC Documents contained or will contain any untrue statement of
a material fact or omitted or will omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading, as of
their respective filing dates, except to the extent corrected by a subsequently
filed SEC Document filed prior to the date hereof. The Company is eligible to
use a registration statement on Form S-3 with respect to the registration of
Registrable Securities (as such term is defined in the Registration Rights
Agreement) pursuant to the Registration Rights Agreement.
3.7 CONSENTS. Except for filings under federal and applicable state
securities laws and except for violations or potential violations which either
individually or in the aggregate would not have a Material Adverse Effect, all
permits, consents, approvals, orders, authorizations of, or declarations to or
filings with any federal, state, local or foreign court, governmental or
regulatory authority, or other person (including third party consents) required
on the part of the Company in connection with the execution, delivery or
performance of this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated herein and therein have been
obtained or will be obtained prior to the Closing Date, and will be effective as
of the Closing Date.
3.8 NO CONFLICT. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Shares) will not (x) conflict with or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to a loss of a material benefit under (i) any provision of the Amended and
Restated Certificate of Incorporation or bylaws of the Company or (ii) any
agreement or instrument, permit, franchise, license, judgment, order, statute,
law, ordinance, rule or regulations, applicable to the Company, any of its
subsidiaries or their respective properties or assets or (y) result in the
creation of any lien, security interest, charge or encumbrance upon the
Company's or any of its subsidiaries' assets, properties, or outstanding capital
stock.
3.9 BROKERS OR FINDERS. Except for Xxxxx Xxxxxxxx & Xxxx, Inc. (the
"Placement Agent"), the Company has not dealt with any broker or finder in
connection with the transactions contemplated by this Agreement, and, except for
certain fees and expenses payable by the Company to the Placement Agent, the
Company has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.10 NASDAQ NATIONAL MARKET. The Common Stock is listed on The Nasdaq
SmallCap Market, and except as set forth in the SEC Documents, there are no
proceedings to revoke or suspend such listing. The Common Stock is registered
pursuant to Section 12(g) of the Exchange Act. The Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act, or
except as set forth in the SEC Documents, delisting the Common Stock from The
Nasdaq SmallCap Market. Except as set forth in the SEC Documents, the Company
has not received any notification that, and has no knowledge that, the SEC or
the NASD is contemplating terminating such listing or registration. The issuance
of the Shares does not require stockholder approval, including, without
limitation, as may be required pursuant to the Nasdaq Marketplace Rules.
3.11 ABSENCE OF LITIGATION. Except as set forth in the SEC Documents, there
is no action, suit or proceeding or, to the Company's knowledge, any
investigation, pending, or to the Company's knowledge, threatened by or before
any governmental body against the Company or any of its subsidiaries and in
which an unfavorable outcome, ruling or finding in any said matter, or for all
matters taken as a whole, might have a Material Adverse Effect. The foregoing
includes, without limitation, any such action, suit, proceeding or investigation
that questions this Agreement or the Registration Rights Agreement or the right
of the Company to execute, deliver and perform under same.
3.12 FIDUCIARY DUTIES. The Company represents and warrants that, to the
best of its knowledge, none of its directors or officers is or has been the
subject of, or a defendant in: (i) an enforcement action or prosecution (or
settlement in lieu thereof) brought by a governmental authority relating to a
violation of securities, fiduciary or criminal laws, or (ii) a civil action (or
settlement in lieu thereof) brought by stockholders or investors for violation
of duties owed to the stockholders or investors.
3.13 TITLE TO PROPERTY AND ASSETS. Each of the Company and its subsidiaries
owns its property and assets free and clear of all mortgages, liens, loans,
claims, charges and encumbrances, except as set forth on Schedule 3.14 and
except such encumbrances and liens that arise in the ordinary course of business
and do not materially impair their respective ownership or use of such property
or assets. With respect to property and assets it leases, the Company is in
material compliance with such leases and, to the best of its knowledge, holds a
valid leasehold interest free of any liens, charges, claims or encumbrances,
except to extent such would not have a Material Adverse Effect.
3.14 PATENTS. TRADEMARKS. PROPRIETARY RIGHTS.
(a) To the Company's knowledge, each of the Company and its subsidiaries
owns or has the right to use all of the Intellectual Property Rights (as defined
below), except where such failure would not have a material adverse effect on
the business, properties or assets of the Company and its subsidiaries, taken as
a whole. For purposes of this Agreement, "Intellectual Property Rights" means
all patents, copyrights, trademarks, service marks, trade names, permits, trade
secrets, computer programs, software designs and related materials and other
intellectual property that are used by the Company or a subsidiary and are
material to the conduct of the Company's or a subsidiary's business.
(b) To the Company's knowledge, the Company's and each subsidiary's use and
enjoyment of the Intellectual Property Rights do not violate any license or
conflict with or infringe the intellectual property rights of others in a manner
which would materially and adversely affect the business, assets, properties,
operations or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole.
3.15 ENVIRONMENTAL MATTERS. Except as set forth in the SEC Documents, to
the Company's knowledge, neither the Company nor any of its subsidiaries is in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, which violation could reasonably
be expected to result in a Material Adverse Effect, and to the best of its
knowledge, no expenditures are required in order to comply with any such
existing statute, law or regulation, which expenditures could reasonably be
expected to result in a Material Adverse Effect.
3.16 PERMITS. Each of the Company and its subsidiaries possesses all
franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct its business as described in the SEC Documents,
except where the failure to possess such permits would not, individually or in
the aggregate, have a material adverse effect on the Company or its
subsidiaries, or their businesses, properties, assets, operations or condition
(financial or otherwise) taken as a whole ("Material Permits"), and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
3.17 EMPLOYEES. To the Company's knowledge, no strike, labor dispute or
union organizing activities are pending or threatened against the Company or any
of its subsidiaries by its employees. No employees belong to a union or
collective bargaining unit. Neither the Company nor any of its subsidiaries has
any workers' compensation liabilities.
3.18 TAX MATTERS. The Company has filed all tax returns and reports as
required by federal, state, local, and foreign law and has paid all taxes shown
thereon that have become due and payable. Such returns and reports were
materially accurate and complete when filed and reflect all taxes and other
assessments due thereunder to be paid by the Company, except those contested by
it in good faith. The provision for taxes of the Company included in the
provision for accrued liabilities in the Company's financial statements is
adequate for taxes due or accrued as of the date thereof. The Company has never
had any material tax deficiency proposed or assessed against it.
3.19 COMPLIANCE WITH LAWS. The business and operations of the Company and
each of its subsidiaries have been conducted in accordance with all applicable
laws, rules and regulations of all governmental agencies, authorities and
instrumentalities (including, without limitation, under the Employee Retirement
Income Security Act of 1974, as amended, laws and regulations administered by
the Food and Drug Administration, and all laws relating to the employment of
labor), except for such violations which would not, individually or in the
aggregate, have a Material Adverse Effect.
3.20 INSURANCE. The Company and each of its subsidiaries maintains
insurance of the type and in the amount reasonably adequate for its business,
including, but not limited to, insurance covering all real and personal property
owned or leased by the Company against theft, damage, destruction, acts
vandalism, and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.
3.21 INVESTMENT COMPANY ACT. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the Company is not directly or indirectly
controlled by or acting on behalf of any person that is an "investment company"
within the meaning of the Investment Company Act.
3.22 COMPLIANCE WITH SECURITIES LAWS. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Section 4 hereof,
the offer and sale by the Company of the Shares are exempt from the registration
and prospectus delivery requirements of the Securities Act. The Company shall
not directly or indirectly take, and shall not permit any of its directors,
officers or Affiliates directly or indirectly to take, any action (including,
without limitation, any offering or sale to any person or entity of the Shares
or any Common Stock) that will make unavailable the exemption from registration
under the Securities Act being relied upon by the Company for the offer and sale
to the Purchasers of the Shares, as contemplated by this Agreement. No form of
general solicitation or advertising within the meaning of Rule 502(c) under the
Securities Act has been used or authorized by the Company or any of its
officers, directors or Affiliates in connection with the offer or sale of the
Shares, as contemplated by this Agreement or any other agreement to which the
Company is a party.
3.23 REGISTRATION RIGHTS. Except as set forth in the SEC Documents, there
are no persons with registration or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered by the
Company under the Securities Act which have not been satisfied.
3.24 RELATED PARTY TRANSACTIONS. Except as set forth in the SEC Documents
and on Schedule 3.25, neither the Company nor any of its officers, directors or
Affiliates nor any family member of any officer, director or Affiliate of the
Company has borrowed any moneys from or has outstanding any indebtedness or
other similar obligations to the Company. Except as set forth on Schedule 3.25,
neither the Company nor any of its officers, directors or Affiliates nor any
family member of any officer, director or Affiliate of the Company (i) owns any
direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant or lender to or borrower from, or
has the right to participate in the profits of, any person or entity which is a
participant in any transaction to which the Company is a party or (ii) is a
party to any contract, agreement, commitment or other arrangement with the
Company.
3.25 CONTRACTS. All contracts and agreements filed or required to be filed
as exhibits to the SEC Documents filed prior to the date hereof, except such
contracts and agreements that have expired by their own terms (collectively,
"Contracts") are in full force and effect and constitute legal, valid and
binding obligations of the Company and, to the best knowledge of the Company,
the other parties thereto; the Company and, to the best knowledge of the
Company, each other party thereto, have performed in all material respects all
obligations required to be performed by them under the Contracts, and no
material violation or default exists in respect thereof, nor any event that with
notice or lapse of time, or both, would constitute a default thereof, on the
part of the Company or, to the best knowledge of the Company, any other party
thereto; none of the Contracts is currently being renegotiated; and the
validity, effectiveness and continuation of all Contracts will not be materially
adversely affected by the transactions contemplated by this Agreement.
3.26 DISCLOSURE. Neither this Agreement nor the SEC Documents taken
together contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. Except with respect to a Purchaser who has executed a
non-disclosure/confidentiality agreement with the Company prior to the Closing
Date, the Company confirms that neither it, nor, to its knowledge, any Person on
its behalf, has provided any of the Purchasers or their agents or counsel with
any information that constitutes, or might reasonably be expected to constitute,
material, non-public information. The Company understands and confirms that each
of such Purchasers will rely on the foregoing representations in effecting
transactions in securities of the Company.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE PURCHASERS. Each Purchaser
severally for itself, and not jointly with the other Purchasers, represents and
warrants to, and agrees with, the Company as follows:
4.1 AUTHORIZATION. Such Purchaser has all requisite power under its
constituent documents to enter into each of this Agreement and the Registration
Rights Agreement and to carry out and perform its obligations under the terms of
this Agreement and the Registration Rights Agreement. All action on the part of
such Purchaser and, if applicable, its officers, directors, stockholders,
managers, members and equityholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated herein and therein has
been taken. When executed and delivered, each of this Agreement and the
Registration Rights Agreement will constitute the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally and by
general equitable principles.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. Such Purchaser is acquiring the
Shares being purchased by it hereunder for investment, for its own account, and
not for resale or with a view to distribution thereof in violation of the
Securities Act.
4.3 INVESTOR STATUS; ETC. Such Purchaser certifies and represents to the
Company that at the time such Purchaser acquires any of the Shares, such
Purchaser will be an "Accredited Investor" as defined in Rule 501 of Regulation
D promulgated under the Securities Act and was not organized for the purpose of
acquiring the Shares. Such Purchaser's financial condition is such that it is
able to bear the risk of holding the Shares for an indefinite period of time and
the risk of loss of its entire investment. Such Purchaser has been afforded the
opportunity to ask questions of and receive answers from the management of the
Company concerning this investment and has sufficient knowledge and experience
in investing in companies similar to the Company in terms of the Company's stage
of development so as to be able to evaluate the risks and merits of its
investment in the Company.
4.4 SHARES NOT REGISTERED. Such Purchaser understands that the Shares have
not been registered under the Securities Act, by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act, and that the Shares must continue to be held by such Purchaser
unless a subsequent disposition thereof is registered under the Securities Act
or is exempt from such registration. The Purchaser understands that the
exemptions from registration afforded by Rule 144 (the provisions of which are
known to it) promulgated under the Securities Act depend on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
4.5 NO CONFLICT. The execution and delivery of this Agreement and the
Registration Rights Agreement by such Purchaser and the consummation by it of
the transactions contemplated hereby and thereby will not conflict with or
result in any violation of or default by such Purchaser (with or without notice
or lapse of time, or both) under (i) any provision of the organizational
documents of such Purchaser or (ii) any judgment, order, statute, law,
ordinance, rule or regulations, applicable to such Purchaser or its respective
properties or assets.
4.6 BROKERS. Such Purchaser has not retained, utilized or been represented
by any broker or finder in connection with the transactions contemplated by this
Agreement.
4.7 CONSENTS. All consents, approvals, orders and authorizations required
on the part of such Purchaser in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein have been obtained and are effective as of the Closing Date.
4.8 AGREEMENT WITH RESPECT TO SALES OF SHARES. Such Purchaser will not, and
will cause each of its Affiliates and any Person acting on its or their behalf
not to, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take
a pledge of) any of the shares of Common Stock, except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder.
5. CONDITIONS PRECEDENT.
5.1 CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CONSUMMATE THE
CLOSING. The obligation of each Purchaser to consummate the Closing and to
purchase and pay for the Shares being purchased by it pursuant to this Agreement
is subject to the satisfaction of the following conditions precedent (or waiver
by such Purchaser):
(a) The representations and warranties contained herein of the Company
shall be true and correct on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date (it being understood and
agreed by each Purchaser that, in the case of any representation and warranty of
the Company contained herein which is not hereinabove qualified by application
thereto of a materiality standard, such representation and warranty need be true
and correct only in all material respects in order to satisfy as to such
representation or warranty the condition precedent set forth in the foregoing
provisions of this Section 5.1(a)).
(b) Prior to the Closing Date, no Material Adverse Event shall have
occurred and the Company shall have performed all covenants, agreements,
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Closing Date.
(c) No suit, action, or other proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted before any court,
arbitrator or governmental body, agency or official and shall be pending.
(d) The purchase of and payment for the Shares by such Purchasers shall not
be prohibited by any law or governmental order or regulation. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or administrative
agency or of any other person with respect to any of the transactions
contemplated hereby (including, without limitation, the issuance of the Shares)
shall have been duly obtained or made and shall be in full force and effect.
(e) The Company shall have complied with all applicable requirements of
federal and state securities or "blue sky" laws with respect to the issuance of
the Shares, and each Purchaser, at such Purchaser's request, shall have been
provided reasonable evidence thereof.
(f) The Shares shall have been approved for listing on The Nasdaq SmallCap
Market, and each Purchaser, at such Purchaser's request, shall have been
provided reasonable evidence thereof.
(g) The Shares shall have been included as Registrable Securities (as
defined in the Registration Rights Agreement).
(h) A certificate shall have been delivered by the Company, signed by its
President or Chief Executive Officer, to the effect that: (i) the
representations and warranties of the Company contained in this Agreement are
true and correct in all material respects on and as of the Closing Date, as
though newly made on and as of that date (except for representations and
warranties which speak as of the date of the Agreement or as of another specific
date or period covered thereby) and (ii) the Company has performed or complied
with, in all material respects, all of its covenants contained in this Agreement
and required to be performed or complied with on or before Closing Date.
(i) The Company shall have delivered to each Purchaser an opinion of
counsel for the Company, dated the Closing Date, in substantially the form of
Exhibit B attached hereto.
(j) A single stock certificate shall have been delivered by the Company,
registered in the name of such Purchaser or nominee as designated by the
Purchaser in writing, representing the number of shares of Common Stock
purchased by such Purchaser, free of all restrictive and other legends (except
as provided in Section 6.2 hereof and otherwise in the form of good delivery),
against payment of the purchase price therefor by wire transfer of immediately
available funds to such account or accounts as the Company shall designate in
writing.
(k) All instruments and corporate proceedings in connection with the
transactions contemplated by this Agreement to be consummated at the Closing
shall be satisfactory in form and substance to such Purchaser, and such
Purchaser shall have received copies (executed or certified, as may be
appropriate) of all documents which such Purchaser may have reasonably requested
in connection with such transactions.
5.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CONSUMMATE THE CLOSING.
The obligation of the Company to consummate the Closing, to issue and sell to
each Purchaser the Shares to be purchased by it at the Closing is subject to the
satisfaction of the following conditions precedent (or waiver by the Company):
(a) The representations and warranties contained herein of such Purchaser
shall be true and correct on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date (it being understood and
agreed by the Company that, in the case of any representation and warranty of
each Purchaser contained herein which is not hereinabove qualified by
application thereto of a materiality standard, such representation and warranty
need be true and correct only in all material respects in order to satisfy as to
such representation or warranty the condition precedent set forth in the
foregoing provisions of this Section 5.2(a)).
(b) Such Purchaser shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing
Date.
(c) No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or materially delay
the Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
(d) The sale of the Shares by the Company and the issuance of the Warrants
by the Company shall not be prohibited by any law or governmental order or
regulation. All necessary consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations and filings with, any
governmental or administrative agency or of any other person with respect to any
of the transactions contemplated hereby shall have been duly obtained or made
and shall be in full force and effect.
(e) The Company shall have received executed agreements from each of the
Purchasers to purchase, in accordance with this Agreement, the number of shares
of Common Stock set forth on Exhibit A opposite its name under the heading
"Number of Shares to be Purchased."
(f) All instruments and corporate proceedings in connection with the
transactions contemplated by this Agreement to be consummated at the Closing
shall be satisfactory in form and substance to the Company, and the Company
shall have received counterpart originals, or certified or other copies of all
documents, including, without limitation, records of corporate or other
proceedings, which it may have reasonably requested in connection therewith.
6. TRANSFER; LEGENDS.
6.1 SECURITIES LAW TRANSFER RESTRICTIONS. No Purchaser shall sell, assign,
pledge, transfer or otherwise dispose or encumber any of the Shares being
purchased by it hereunder, except: (i) pursuant to an effective registration
statement under the Securities Act or (ii) pursuant to an available exemption
from registration under the Securities Act and applicable state securities laws
and, if reasonably requested by the Company, upon delivery by such Purchaser of
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer is exempt from registration under the Securities Act and
applicable state securities laws. Any transfer or purported transfer of the
Shares in violation of this Section 6.1 shall be voidable by the Company;
provided, however, that no opinion will be required in connection with (1) a
public sale or transfer of Shares pursuant to an effective registration
statement in connection with which such Purchaser represents in writing to the
Company that such Shares have been or are being sold pursuant to such
registration statement; (ii) a public sale of Shares pursuant to Rule 144 under
the Securities Act if such Purchaser has delivered to the Company a customary
and accurate Rule 144 broker's and seller's representation letter; or (iii) a
sale of shares pursuant to Rule 144(k) under the Securities Act if such
Purchaser has delivered to the Company a customary and accurate Rule 144
seller's representation letter. The Company shall not register any transfer of
the Shares in violation of this Section 6.1. The Company may, and may instruct
any transfer agent for the Company, to place such stop transfer orders as may be
required on the transfer books of the Company in order to ensure compliance with
the provisions of this Section 6.1.
6.2 LEGENDS. Each certificate requesting any of the Shares shall be
endorsed with a legend in substantially the form set forth below, and each
Purchaser covenants that, except to the extent such restrictions are waived by
the Company, it shall not transfer the shares represented by any such
certificate without complying with the restrictions on transfer described in
this Agreement and the legends endorsed on such certificate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE
DISPOSED OF (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH LAWS OR (II) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT, AND TO
THE EXTENT REQUIRED BY SECTION 6.1 OF THE STOCK PURCHASE
AGREEMENT PURSUANT TO WHICH THE SHARES REPRESENTED HEREBY WERE
ACQUIRED, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM THE ACT AND SUCH LAWS.
6.3 REMOVAL OF LEGENDS. Any legend endorsed on a certificate evidencing the
Shares shall be removed, and the Company shall issue a certificate without such
legend to the holder of such Shares, if such Shares are being sold pursuant to
an effective registration statement under the Securities Act or pursuant to Rule
144 promulgated thereunder, and the purchaser thereof may immediately resell
such Shares without restriction and without registration; provided, however,
that in the case of a sale pursuant to Rule 144, such holder of Shares shall
provide such information as is reasonably requested by the Company to ensure
that such Shares may be sold in reliance on Rule 144.
7. TERMINATION; LIABILITIES CONSEQUENT THEREON. This Agreement may be
terminated and the transactions contemplated hereunder abandoned at any time
prior to the Closing only as follows:
(a) with respect to a Purchaser, by such Purchaser, upon notice to the
Company if the conditions set forth in Section 5.1 shall not have been satisfied
on or prior to April 30, 2003; or
(b) with respect to a Purchaser, by the Company, upon notice to such
Purchaser if the conditions set forth in Section 5.2 to be satisfied by such
Purchaser shall not have been satisfied on or prior to April 30, 2003; or
(c) at any time by mutual agreement of the Company and not less than two
(2) Purchasers who represent at least fifty percent (50%) of the Shares being
sold hereunder; or
(d) with respect to a Purchaser, by such Purchaser, if there has been any
breach of any representation or warranty or any material breach of any covenant
of the Company contained herein and the same has not been cured within 15 days
after notice thereof (it being understood and agreed by each Purchaser that, in
the case of any representation or warranty of the Company contained herein which
is not hereinabove qualified by application thereto of a materiality standard,
such representation or warranty will be deemed to have been breached for
purposes of this Section 7.1(d) only if such representation or warranty was not
true and correct in all material respects at the time such representation or
warranty was made by the Company); or
(e) by the Company with respect to a Purchaser, if there has been any
breach of any representation, warranty or any material breach of any covenant of
such Purchaser contained herein and the same has not been cured within 15 days
after notice thereof (it being understood and agreed by the Company that, in the
case of any representation and warranty of the Purchaser contained herein which
is not hereinabove qualified by application thereto of a materiality standard,
such representation or warranty will be deemed to have been breached for
purposes of this Section 7.1(e) only if such representation or warranty was not
true and correct in all material respects at the time such representation or
warranty was made by such Purchaser).
Any termination pursuant to this Section 7 shall be without liability on
the part of any party, unless such termination is the result of a material
breach of this Agreement by a party to this Agreement in which case such
breaching party shall remain liable for such breach notwithstanding any
termination of this Agreement.
8. MISCELLANEOUS PROVISIONS.
8.1 USE OF PROCEEDS. The Company shall use the net proceeds from the sale
of the Shares for general corporate and working capital purposes and may use a
portion of such proceeds to repay a portion of indebtedness outstanding to
Medtronic, Inc. on the date hereof.
8.2 FILINGS. The Company shall make all necessary filings with the SEC and
"blue sky" filings required to be made by the Company in connection with the
sale of the Shares to the Purchasers as required by all applicable laws, and
shall provide a copy thereof to the Purchasers promptly after such filing.
8.3 PUBLIC STATEMENTS OR RELEASES. The Company shall timely file any
filings and notices required by the SEC or applicable law with respect to the
transactions contemplated hereby and provide copies thereof to the Purchasers
promptly after filing. The Company shall, at least one business day prior to the
filing or dissemination of any disclosure required by this paragraph, provide a
copy thereof to the Purchasers for their review. The Company and the Purchasers
shall consult with each other in issuing any press releases or otherwise making
public statements or filings and other communications with the SEC or any
regulatory agency or trading market with respect to the transactions
contemplated hereby, and neither party shall issue any such press release or
otherwise make, issue or release any such public statement, filing or other
communication, or otherwise disclose or use, without the prior consent of the
other parties, the existence or status of, this Agreement or the transactions
provided for herein, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement, filing or other communication. Notwithstanding the
foregoing, nothing in this Section 8.3 shall prevent any of the Company hereto
from making such other public announcements or filings as it may consider
necessary with respect to the transactions contemplated hereby in order to
satisfy its legal obligations; provided, however, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the SEC or any regulatory agency or trading market, without the
prior written consent of such Purchaser, except to the extent such disclosure
(but not any disclosure as to the controlling Persons thereof) is required by
law or trading market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure. Neither the Company nor any
Person acting on its behalf will provide any Purchaser with material, nonpublic
information about the Company unless such Purchaser consents to receive such
information in writing in advance and executes a non-disclosure/confidentiality
agreement with the Company, in a form acceptable to the Company.
8.4 FURTHER ASSURANCES. The parties agree to cooperate fully to execute
such further instruments, documents and agreements and to give such further
written assurances, as may be reasonably requested by any party to better
evidence and reflect the transactions described herein and contemplated hereby,
and to carry into effect the intents and purposes of this Agreement.
8.5 NOTIFICATION OF EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
covenants that it will provide written notice to each Purchaser (which notice
may be in electronic form) that the Company's registration statement on Form S-3
registering the Shares sold hereunder to the Purchasers has been declared
effective by the SEC, which notice shall be given promptly, but in no event more
than five (5) days after the Company has received notice of such effectiveness
from the SEC.
8.6 RIGHTS CUMULATIVE. Each and all of the various rights, powers and
remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
8.7 PRONOUNS. All pronouns or any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
8.8 NOTICES.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be
given hereunder shall be sent by postage prepaid first class mail, courier
or facsimile or delivered by hand to the party to whom such correspondence
is required or permitted to be given hereunder. The date of giving any
notice shall be the date of its actual receipt.
(b) All correspondence to the Company shall be addressed as follows:
EP MedSystems, Inc.
000 Xxxxx 00 Xxxxx
Xxxxxxxx X
Xxxx Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: President and Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
(c) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in Exhibit A.
(d) Any entity may change the address to which correspondence to it is
to be addressed by notification as provided for herein.
8.9 CAPTIONS. The captions and paragraph headings of this Agreement are
solely for the convenience of reference and shall not affect its
interpretation.
8.10 SEVERABILITY. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto. 8.11 Governing Law; Injunctive Relief.
(a) This Agreement shall be governed by and construed in accordance with
the internal and substantive laws of the State of New York and without regard to
any conflicts of laws concepts that would apply the substantive law of any other
jurisdiction.
(b) Each of the parties hereto acknowledges and agrees that damages will
not be an adequate remedy for any material breach or violation of this Agreement
if such material breach or violation would cause immediate and irreparable harm
(an "IRREPARABLE BREACH"). Accordingly, in the event of a threatened or ongoing
Irreparable Breach, each party hereto shall be entitled to seek, in any state or
federal court in the State of New York, equitable relief of a kind appropriate
in light of the nature of the ongoing or threatened Irreparable Breach, which
relief may include, without limitation, specific performance or injunctive
relief; provided, however, that if the party bringing such action is
unsuccessful in obtaining the relief sought, the moving party shall pay the
non-moving party's costs, including actual attorney's fees, incurred in
connection with defending such action. Such remedies shall not be the parties'
exclusive remedies, but shall be in addition to all other remedies provided in
this Agreement.
8.12 WAIVER. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
8.13 Expenses. Each party will bear its own costs and expenses in
connection with this Agreement.
8.14 ASSIGNMENT. The rights and obligations of the parties hereto shall
inure to the benefit of and shall be binding upon the authorized successors and
permitted assigns of each party. No Purchaser may assign its rights or
obligations under this Agreement or designate another person (i) to perform all
or part of its obligations under this Agreement or (ii) to have all or part of
its rights and benefits under this Agreement, in each case without the prior
written consent of the Company, which consent will not be unreasonably withheld.
In the event of any assignment in accordance with the terms of this Agreement,
the assignee shall specifically assume and be bound by the provisions of the
Agreement by executing and agreeing to an assumption agreement reasonably
acceptable to the other party.
8.15 SURVIVAL. The respective representations and warranties given by the
parties hereto, and the other covenants and agreements contained herein, shall
survive the Closing Date and the consummation of the transactions contemplated
herein for a period of two years, without regard to any investigation made by
any party.
8.16 ENTIRE AGREEMENT. This Agreement along with the schedules and exhibits
attached hereto and incorporated herewith constitute the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by the Company and (a) prior to Closing, not less than two
Purchasers who represent at least fifty percent (50%) of the Shares being sold
hereunder or (b) following Closing, the Majority Purchasers; provided, however,
that, in each case, no such amendment shall increase the obligations of any
Purchaser without such Purchaser's written consent.
8.17 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The remainder of this page has been intentionally left
blank; signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement as of the day and year first above written.
EP MEDSYSTEMS, INC.
By: /s/ Xxxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxxx Xxxxxxx
President and Chief Executive Officer
PURCHASERS: MEDCAP PARTNERS L.P.
By:/s/ C. Xxxx Xxxxx
--------------------------------------------------
Name: C. Xxxx Xxxxx
Title: Managing Member
BONANZA CAPITAL MASTERFUND LTD.
By: /s/ Xxxxx Xxxxx
--------------------------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
Exhibit A
---------------------------------------------------------------------------------------------------------
PURCHASER NUMBER OF SHARES PURCHASE PRICE
($)
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx 10.000 1.75
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
MedCap Partners L.P. 14,442 1.75
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Bonanza Capital Masterfund Ltd. 95,858 1.75
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Exhibit B
Form of Opinion of Xxxxxx Xxxxxx White & XxXxxxxxx LLP
April 11, 2003
To the Purchasers listed
on Exhibit A hereto:
We have acted as counsel to EP MedSystems, Inc., a New Jersey corporation
(the "COMPANY"), in connection with the Common Stock Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of as of April 11, 2003 and Amendment No. 1 to
Registration Rights Agreement, dated as of April 11, 2003 (the "AMENDMENT", and,
together with the Purchase Agreement, the "TRANSACTIONAL AGREEMENTS").
Capitalized terms used without definition in this opinion have the meanings
given to them in the Purchase Agreement (including the schedules thereto).
In connection with this opinion, we have assumed the authenticity of all
records, documents, and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents, and instruments submitted
to us as copies. We have also assumed that there are no facts or circumstances
relating to you that might prevent you from enforcing any of the rights to which
our opinion relates (for example, lack of due incorporation or regulatory
prohibitions). We have based our opinion upon our review of the following
records, documents and instruments:
(a) The Certificate of Incorporation of the Company certified to us by an
officer of the Company as being complete and in full force and effect as of the
date of this opinion;
(b) The Bylaws of the Company certified to us by an officer of the Company
as being complete and in full force and effect as of the date of this opinion;
(c) Records certified to us by an officer of the Company as constituting
all records of proceedings and actions of the Board of Directors and the
shareholders of the Company relating (i) to the transactions contemplated by the
Transactional Agreements and (ii) to the issuance of all of the issued and
outstanding shares of the Company's capital stock;
(d) The Purchase Agreement;
(e) The Amendment;
(f) A Certificate of "good standing" relating to the Company issued by the
Secretary of State of the State of New Jersey dated January 29, 2003;
(g) A Certificate of the President of the Company as to certain factual
matters (the "OFFICER'S CERTIFICATE");
(h) The agreements and instruments identified in the Officer's Certificate;
(i) The stock records of the Company evidencing the outstanding capital
stock of the Company and certified to us by an officer of the Company as being
complete and correct; and
(j) The stock certificates representing the shares being purchased by you
(the "SHARES").
With your consent, we have based our opinion expressed in paragraph 1 below
as to the good standing of the Company under the laws of the State of New Jersey
solely upon the document referred to in (f) above and a telephonic conversation
with the State of New Jersey on the date hereof. In addition, we have, with your
consent, (i) based our opinion expressed in paragraph 8 below that shares of the
Company's capital stock are fully paid and nonassessable solely upon the
statement in the Officer's Certificate that the Company has received the
consideration recited in the applicable agreements and resolutions of the
Company's Board of Directors, (ii) based our opinion expressed in paragraph 8
below regarding the capitalization of the Company solely upon our review of the
records identified as items (c) and (i) above, and (iii) relied upon the
Officer's Certificate with respect to factual matters relevant to this opinion.
In Insofar as this opinion relates to any mortgage, indenture, lease,
contract or other agreement or undertaking of the Company (the "DOCUMENTS"), our
opinion is limited to those Documents which are in writing and are filed as
exhibits to the SEC Documents (the "SCHEDULED AGREEMENTS"), and no opinion is
expressed herein as to any mortgage, indenture, lease, contract or other
agreement (oral or written) or undertaking of the Company other than the
Scheduled Agreements. In rendering our opinions insofar as they require
interpretation of the Scheduled Agreements we have not reviewed, and express no
opinion on, (i) financial covenants or similar provisions requiring financial
calculations or determinations to ascertain compliance, (ii) provisions relating
to the occurrence of a "material adverse event" or words of similar import, or
(iii) parol evidence bearing on interpretation or construction. Moreover, to the
extent that any of the Transactional Agreements or any of the Scheduled
Agreements is governed by the laws of any jurisdiction other than the federal
laws of the United States or the laws of the State of New York, our opinion
relating to those agreements and instruments is based solely upon the plain
meaning of their language without regard to interpretation or construction that
might be indicated by the laws governing those agreements or instruments.
Where our opinion relates to our "knowledge", such knowledge is based
upon our examination of the records, documents, instruments, and certificates
enumerated or described above and the actual knowledge of attorneys in this firm
who are currently involved in substantive legal representation of the Company.
With your consent, we have not examined any records of any court, administrative
tribunal or other similar entity in connection with our opinion expressed in
paragraph 7 below.
II.
We express no opinion as to any anti-fraud provisions of applicable federal
or state securities laws, any tax, anti-trust, land use, export, safety,
environmental or hazardous materials laws, rules or regulations.
This opinion is limited to the federal laws of the United States of America
and the laws of the State of New York. We disclaim any opinion as to the laws of
any other jurisdiction and we further disclaim any opinion as to any statute,
rule, regulation, ordinance, order or other promulgation of any regional or
local governmental body.
III.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed below, it is our opinion
that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of New Jersey.
2. The Company has all requisite corporate power and corporate authority to
enter into and perform the Transactional Agreements, to own its properties, and
to carry on its business as, to our knowledge, it is now conducted and proposed
to be conducted as contemplated by the Transactional Agreements.
3. Each of the Transactional Agreements has been duly authorized by all
necessary corporate action on the part of the Company, its directors, and
shareholders and has been duly executed and delivered on behalf of the Company.
4. Each of the Transactional Agreements is a valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject, as to enforcement, (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other laws of general applicability relating to or
affecting creditors' rights, (ii) to general principles of equity, whether such
enforcement is considered in a proceeding in equity or at law, and (iii) to
limitations imposed by applicable law or public policy on the enforceability of
any indemnification provisions.
5. No governmental consents, approvals, authorizations, registrations,
declarations, or filings are required for the execution and delivery of the
Transactional Agreements on behalf of the Company and performance of the
Transactional Agreements by the Company, including the issuance of the Shares,
except (i) such as may be required pursuant to the Amendment, and (ii) filings
with the Securities and Exchange Commission and certain state securities law
administrators which are permitted to be filed by applicable laws, rules or
regulations subsequent to the issuance and sale of the Shares pursuant to the
Purchase Agreement or which are not required by applicable state securities
laws, rules or regulations to be filed as a condition to the reliance by the
Company upon certain exemptions from the registration or qualification
requirements under such state securities laws.
6. The execution and delivery of the Transactional Agreements on behalf of
the Company does not (i) conflict with any provision of the Certificate of
Incorporation or Bylaws of the Company, or (ii) result in a breach or violation
of, or constitute a default under, the Scheduled Agreements or any judgments or
decrees identified in the Officer's Certificate.
7. Except as set forth in the SEC Documents, to our knowledge, there are no
pending or threatened actions, suits, proceedings, or governmental
investigations against the Company.
8. The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock. Immediately
prior to the Closing, the stock records of the Company indicate that 18,075,524
shares of Common Stock and 373,779 shares of Preferred Stock were issued and
outstanding. All such issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable.
9. The Shares, when issued at the Closing in compliance with the Purchase
Agreement, will be duly authorized, validly issued, fully paid, and
non-assessable and free of preemptive rights set forth in the Certificate of
Incorporation, Bylaws, or of which we have knowledge; provided, however, that
the Shares may be subject to restrictions on transfer under state and federal
securities laws.
10. Subject to the accuracy of your representations in Section 4 of the
Purchase Agreement and the statement in the Officer's Certificate that the
Company has not offered or sold Shares by means of advertising or public
solicitation, the offer, sale, and issuance of the Shares in conformity with the
terms of the Purchase Agreement constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended.
IV.
We further advise you that:
A. As noted, the enforceability of the Transactional Agreements is subject
to the effect of general principles of equity. These principles include, without
limitation, concepts of commercial reasonableness, materiality and good faith
and fair dealing. As applied to the Transactional Agreements, these principles
will require you to act reasonably, in good faith and in a manner that is not
arbitrary or capricious in the administration and enforcement of the
Transactional Agreements and will preclude you from invoking penalties for
defaults that bear no reasonable relation to the damage suffered or that would
otherwise work a forfeiture.
B. The effectiveness of indemnities, rights of contribution, exculpatory
provisions and waivers of the benefits of statutory provisions may be limited on
public policy grounds.
C. Any provisions of the Transactional Agreements requiring that waivers
must be in writing may not be binding or enforceable if a non-executory oral
agreement has been created modifying any such provision or an implied agreement
by trade practice or course of conduct has given rise to a waiver.
This opinion is rendered to you in connection with the Purchase Agreement
and is solely for your benefit. This opinion may not be relied upon by you for
any other purpose, or relied upon by any other person, firm, corporation, or
other entity for any purpose, without our prior written consent. We disclaim any
obligation to advise you of any developments in areas covered by this opinion
that occur after the date of this opinion.
Very truly yours,
Exhibit A
PURCHASERS
1. Xxxxxxx X. Xxxxxxxx
2. Bonanza Capital Masterfund Ltd.
3. MedCap Partners L.P.
Schedules
The following Schedules are provided, as of April 11, 2003, pursuant to the
Common Stock and Warrant Purchase Agreement, dated as of April 11, 2003 (the
"AGREEMENT").
The Schedule numbers correspond to the section numbers in the Agreement;
however, any information disclosed herein under any Schedule number shall be
deemed to be disclosed and incorporated with respect to any other section under
the Agreement where such disclosure would be appropriate. Any terms defined in
the Agreement shall have the same meaning when used in these Schedules as when
used in the Agreement, unless the context otherwise requires.
Schedule 3.2
OUTSTANDING SUBSCRIPTIONS, WARRANTS, OPTIONS OR OTHER RIGHTS OR COMMITMENTS
On November 21, 2002, the Company received two $375,000 mortgage loans on
the Company's West Berlin, N.J. corporate office building (the "Mortgage
Loans"). The Mortgage Loans mature on January 15, 2006, bear interest at a rate
of 8.0 % per annum, and principal and interest thereon are initially and through
December 31, 2003 convertible, at the lender's option, into Common Stock at a
conversion price equal to $2.14, an amount in excess of the market price of the
Common Stock on the date of the funding of the loan. Beginning January 1, 2004
through December 31, 2004, principal and unpaid interest are convertible into
Common Stock at $2.50 per share. Beginning January 1, 2005 through the Maturity
Date, principal and unpaid interest are convertible into Common Stock of Company
at $3.00 per share. On April 11, 2003, the Company agreed to convert $375,000 of
the Mortgage Loans into 300,000 shares of common stock. In order to close the
conversion, the Company reduced the conversion price from $2.14 per share to
$1.25 per share.
Schedule 3.6
INDEBTEDNESS, OBLIGATIONS OR LIABILITIES NOT REFLECTED IN THE FINANCIAL
STATEMENTS
(i) The Financial Statements covering the period from December 31, 2001
through September 30, 2002 do not reflect obligations under contracts or
commitments for which expenses have not yet been incurred, entered into or
arisen in the ordinary course of business and, consistent with generally
accepted accounting principles and with past practices, that individually or in
the aggregate do not have a Material Adverse Effect.
(ii) As described on Schedule 3.2, the Company received the Mortgage Loans
with respect to the Company's West Berlin, N.J. corporate office building.
Schedule 3.14
MORTGAGES, LIENS, LOANS, CLAIMS, CHARGES AND ENCUMBRANCES
In connection with the Mortgage Loans (as defined on Schedule 3.2), the
Company granted a first priority security interest in the building owned by the
Company and located at 575 Route 00 Xxxxx - Xxxxxxxx X Xxxx Xxxxxx, Xxx Xxxxxx
00000.
Schedule 3.25
RELATED PARTY TRANSACTIONS
1. Xxxxxxxx Xxxx is a member of the Board of Directors of the Company and
is a Managing Member of the General Partner of each of the EGS Entities, each of
which is a shareholder of the Company.
TABLE OF CONTENTS
1. Definitions..........................................................1
2. Purchase and Sale of Shares...........................................2
2.1 Purchase and Sale............................................2
2.2 Initial Closing..............................................2
3. Representations and Warranties of the Company.........................3
3.1 Organization and Good Standing...............................3
3.2 Capitalization...............................................3
3.3 Authorization................................................4
3.4 Valid Issuance of the Shares.................................4
3.5 Valid Issuance of the Warrants...............................4
3.6 Financial Statements.........................................4
3.7 SEC Documents................................................5
3.8 Consents.....................................................5
3.9 No Conflict..................................................5
3.10 Brokers or Finders...........................................6
3.11 Nasdaq National Market.......................................6
3.12 Absence of Litigation........................................6
3.13 Fiduciary Duties.............................................6
3.14 Title to Property and Assets.................................6
3.15 Patents. Trademarks. Proprietary Rights......................7
3.16 Environmental Matters........................................7
3.17 Permits......................................................7
3.18 Employees....................................................7
3.19 Tax Matters..................................................7
3.20 Compliance with Laws.........................................8
3.21 Insurance....................................................8
3.22 Investment Company Act.......................................8
3.23 Compliance With Securities Laws..............................8
3.24 Registration Rights..........................................9
-i-
TABLE OF CONTENTS
(continued)
3.25 Related Party Transactions...................................9
3.26 Contracts....................................................9
3.27 Disclosure...................................................9
4. Representations, Warranties and Agreements of the Purchasers.........10
4.1 Authorization...............................................10
4.2 Purchase Entirely for Own Account...........................10
4.3 Investor Status; Etc........................................10
4.4 Shares Not Registered.......................................10
4.5 No Conflict.................................................10
4.6 Brokers.....................................................11
4.7 Consents....................................................11
4.8 Agreement with Respect to Sales of Shares...................11
5. Conditions Precedent.................................................11
5.1 Conditions to the Obligation of the Purchasers to
Consummate the Closing................................11
5.2 Conditions to the Obligation of the Company to
Consummate the Closing................................13
6. Transfer; Legends....................................................14
6.1 Securities Law Transfer Restrictions........................14
6.2 Legends.....................................................14
6.3 Removal of Legends..........................................15
7. Termination; Liabilities Consequent Thereon..........................15
8. Miscellaneous Provisions.............................................16
8.1 Use of Proceeds.............................................16
8.2 Filings.....................................................16
8.3 Public Statements or Releases...............................16
8.4 Further Assurances..........................................17
8.5 Notification of Effectiveness of Registration
Statement.............................................17
8.6 Rights Cumulative...........................................17
8.7 Pronouns....................................................17
8.8 Notices.....................................................17
-ii-
TABLE OF CONTENTS
(continued)
8.9 Captions....................................................18
8.10 Severability................................................18
8.11 Governing Law; Injunctive Relief............................18
8.12 Waiver......................................................18
8.13 Expenses....................................................19
8.14 Assignment..................................................19
8.15 Survival....................................................19
8.16 Entire Agreement............................................19
8.17 Counterparts................................................19
Exhibit A.....................................................................21
Exhibit B.....................................................................22
Schedules.....................................................................23
