EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") made as of the ____ day
of __________, 2001, by and between EP MedSystems, Inc., a New Jersey
corporation (the "Company"), and the purchasers listed on Schedule I hereto
(collectively, the "Purchasers").
RECITALS
WHEREAS, the Company and the Purchasers are parties to the Common Stock
and Warrant Purchase Agreement dated as of February 16, 2001 (the "Stock
Purchase Agreement"); and
WHEREAS, in order to induce the Company to enter into the Stock Purchase
Agreement and to induce the Purchasers to invest funds in the Company pursuant
to the Stock Purchase Agreement, the Purchasers and the Company hereby agree
that this Agreement shall govern the rights of the Purchasers to cause the
Company to register shares of Common Stock issuable to the Purchasers and
certain other matters as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein made, and
in consideration of the representations, warranties and covenants herein
contained, the parties hereto agree as follows:
SECTION 1. REGISTRATION RIGHTS
The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The terms "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means one of the Purchasers and any
transferees of Registrable Securities permitted in accordance with Section 1.12.
(d) The term "Other Securities" means all securities which may
be, or are requested to be , included in a registration, other than newly issued
shares of Common Stock not issued pursuant to the exercise or conversion of
warrants, options or other convertible securities, except as provided in the
registration rights agreements and letter agreements identified in Schedule 2.10
hereto.
(e) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means the Common Stock
issued pursuant to the Stock Purchase Agreement (the "Common Shares") or any
shares of Common Stock
issued to the Purchasers or any Holder upon the exercise of the Warrants (as
defined in the Stock Purchase Agreement) by either (i) the payment of the
Exercise Price (as defined in the Warrant) (the "Paid For Warrant Shares") or
(ii) the cashless exercise of the Warrant pursuant to Section 1(b) of the
Warrant (the "Cashless Exercised Warrant Shares"); provided, however,
Registrable Securities shall include, but not be limited to, a number of shares
of Common Stock equal to no less than 100% of the maximum number of shares of
Common Stock which would be issuable upon exercise of the Warrants, assuming
such exercise occurred either (x) on the Closing Date or (y) the date preceding
the date of filing of the Registration Statement, whichever date would produce a
greater number of Registrable Securities. Such registered shares of Common Stock
shall be allocated among the Holders pro rata based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement is declared effective by the Commission.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issued pursuant
to then exercisable or convertible securities which are, Registrable Securities.
(h) "Registration Statements" shall mean, collectively, the
registration under the Securities Act on Form S-3 or any successor form of the
Registrable Securities, including the Shelf Registration Statement (as defined
below) and the Warrant Share Shelf Registration Statement (as defined below) and
"Registration Statetment" shall mean, individually, any such Registration
Statement.
(i) The term "SEC" means the Securities and Exchange
Commission.
(j) The term "Warrant Shares" shall mean both the Paid for
Warrant Shares and the Cashless Exercised Warrant Shares.
1.2 Shelf Registration.
(a) If, at any time after the first anniversary of the date
hereof, the holders of more than 30% of the then Registrable Securities request
in writing, the Company shall promptly give written notice of the proposed
registration and any related qualification or compliance to all other Holders,
and shall, subject to the limitations specified in this Agreement (i) file a
shelf registration statement on Form S-3 or, if a form of S-3 is not available
for use by the Company, any other form available to the Company as soon as
practicable but in any event within thirty (30) days from the date of such
written request (the "Filing Date") covering the registration under the Act of
all requested Common Shares then outstanding to be offered or sold on a delayed
or continuous basis as provided by this Agreement, pursuant to Rule 415 of the
Act (the "Shelf Registration Statement"); and (ii) maintain the effectiveness of
the Shelf Registration Statement until such date as is the earlier of (A) the
date on which all of the Registrable Securities have been sold and (B) the date
on which the Registrable Securities may be immediately sold without restriction
(including without limitation as to volume by each Holder thereof) and without
registration under the Securities Act.
(b) At any time after the first anniversary of the date hereof
prior to [fifth anniversary of closing date] 2006, in case the Company shall
receive from the Holders of at least fifty percent (50%) of the Warrant Shares a
written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or part of such
Warrant Shares owned by such Holder or Holders, the Company shall promptly give
written notice of the proposed registration and any related qualification or
compliance, to all other Holders, and shall subject
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to the limitations specified in this Agreement (i) file a shelf registration
statement on Form S-3 or any other form available to the Company as soon as
practicable (the "Warrant Share Filing Date") covering the registration under
the Act of all requested Warrant Shares then outstanding to be offered or sold
on a delayed or continuous basis as provided by this Agreement, pursuant to Rule
415 of the Act (the "Warrant Share Shelf Registration Statement"); and (ii)
maintain the effectiveness of the Warrant Share Shelf Registration Statement
until such date as is the earlier of (i) the date on which all of the Warrant
Shares so requested have been sold and (ii) the date on which the Warrant Shares
so requested may be immediately sold without restriction (including without
limitation as to volume by each Holder thereof) and without registration under
the Securities Act.
(c) If any offering pursuant to Section l.2 (a) hereof
involves an underwritten offering, an underwriter will be selected by the
Holders of three-fourths of the Registrable Securities then outstanding and
shall be reasonably acceptable to the Company. In such event, the right of any
Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute Registrable
Securities through such underwriting shall (together with the Company as
provided in Section 1.4(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each Holder and
requested by such Holder to be included in such underwriting; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all Other Securities are first entirely
excluded from the underwriting.
(d) Notwithstanding the foregoing, if the Company shall
furnish to the Holders a certificate signed by the Chief Executive Officer or
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental (a "Detrimental
Condition") to the Company and its shareholders for a registration statement to
be filed or to become or remain effective, as the case may be, (i) the Company
shall have the right to defer taking action with respect to the filing of the
Shelf Registration Statement or Warrant Share Shelf Registration Statement, as
the case may be, for a period of not more than ninety (90) days after the Filing
Date or the Warrant Share Filing Date, as the case may be, (ii) in case a Shelf
Registration Statement or a Warrant Share Registration Statement, as the case
may be, has been filed but has not become effective, the Company may cause such
registration statement to be withdrawn or may postpone amending or supplementing
such registration statement until such Detrimental Condition no longer exists,
but in no event for more than ninety (90) days, (iii) in case a Shelf
Registration Statement or a Warrant Share Registration Statement, as the case
may be, has been filed and has become effective, the Company may postpone
amending or supplementing such registration statement until such Detrimental
Condition no longer exists, but in no event for more than ninety (90) days or
(iv) require all Holders to suspend or cease selling any Registrable Securities
until such Detrimental Condition no longer exists, but in no event for more than
ninety (90) days, provided that the Company's right pursuant to this Section
1.2(d) to give notice of a Detrimental Condition may not be exercised for more
than one hundred eighty (180) days in any twelve (12) month period hereunder.
The Company shall give written notice of its determination to postpone or
withdraw a registration statement and of the fact that the Detrimental Condition
for such postponement or withdrawal no longer exists, in each case, promptly
after the occurrence thereof. The following events or circumstances may be a
Detrimental Condition: a pending
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material acquisition, merger or sale or purchase of assets, pending or
threatened material litigation, pending or threatened material regulatory or
governmental action, pending material change in the business, prospects,
condition (financial or other) or properties of the Company in each case, only
for so long as disclosure thereof has not been made in any press release or any
filing under the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"). The foregoing list is for illustrative purposes only and is not meant to
be exclusive.
(e) If the Company shall give any notice of postponement or
withdrawal of any registration statement or of suspension of selling the
Registrable Securities in accordance with subsection (d) above, the Company
shall not, during the period of postponement, withdrawal or suspension pursuant
to clauses (i), (ii), (iii) or (iv) of the prior paragraph, register any Common
Stock, other than pursuant to a registration statement on Form S-4 or S-8 (or an
equivalent registration form then in effect). Each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company that the
Company has determined to withdraw any registration statement pursuant to the
immediately preceding paragraph, such Holder will discontinue its disposition of
Registrable Securities pursuant to such registration statement and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such Holder's possession
of the prospectus covering such Registrable Securities that was in effect at the
time of receipt of such notice. If the Company shall have withdrawn or
prematurely terminated a registration statement filed under this Section 1.2
(whether pursuant to the immediately preceding paragraph, or as a result of any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court), the Company shall not be considered to have
effected an effective registration for the purposes of this Agreement until the
Company shall have filed a new registration statement covering the Registrable
Securities covered by the withdrawn registration statement and such registration
statement shall have been declared effective and shall not have been withdrawn.
If the Company shall give any notice of withdrawal or postponement of a
registration statement, the Company shall, at such time as the Detrimental
Condition that caused such withdrawal or postponement no longer exists (but in
no event later than ninety (90) days after the date of the postponement or
withdrawal), use its reasonable best efforts to effect the registration under
the Act of the Registrable Securities covered by the withdrawn or postponed
registration statement in accordance with this Section 1.2 (unless the Holder
shall have withdrawn such request).
1.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities (other than a registration relating solely to the sale of
securities to participants in a Company stock option, stock purchase or similar
plan or a SEC Rule 145 transaction) at any time after the date hereof, the
Company shall, at such applicable time, promptly give each Holder of Registrable
Securities written notice of such registration. Upon the written request of each
Holder of such securities given within twenty (20) days after mailing of such
notice by the Company in accordance with Section 2.5, the Company shall, subject
to the provisions of Section 1.8 and Section 2.10, cause to be registered under
the Act only those securities held by each Holder properly noticed pursuant to
this Section 1.3 that each such Holder has requested to be registered. No
registration effected pursuant to this Section 1.3 shall relieve the Company of
its obligations to effect the required registration pursuant to Section 1.2. Any
Holder shall have the right to withdraw his request for inclusion of its
properly noticed securities under this Section 1.3 in any registration statement
pursuant to this Section 1.3 by giving written notice to the Company of its
request to withdraw prior to the filing of such registration statement.
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1.4 Obligations of the Company. When required under this Section 1
to effect the registration of the Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Shelf Registration
Statement or, if applicable, any other form of registration statement, as the
case may be, with respect to the Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective within one
hundred twenty (120) days after such registration statement was filed and to
keep such Shelf Registration Statement effective for the period specified in
Section 1.2(a); provided, however, that before filing a registration statement
or prospectus or any amendments or supplements thereto, or comparable statements
under securities or blue sky laws of any jurisdiction, the Company will furnish
to one counsel for the Holders (the "Holders' Counsel") participating in the
planned offering (selected by the Holders of three-fourths of the Registrable
Securities then outstanding included in such registration), and the
underwriters, if any, copies of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel.
(b) Prepare and file with the SEC as soon as practicable such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders whose Registrable Securities are
covered by the Shelf Registration Statement such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify
the securities covered by the Shelf Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders whose Registrable Securities are covered by the Shelf
Registration Statement; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or jurisdictions
unless the Company is already subject to service in such jurisdiction.
(e) In the event the Registrable Securities are to be sold
through an underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. The Holders proposing to distribute Registrable
Securities through such underwritten public offering shall also enter into and
perform their obligations under such an agreement.
(f) In the event the Registrable Securities are to be sold through
an underwritten public offering, use its reasonable best efforts to furnish, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
and (ii) a letter, dated such date, from the independent certified public
accountants of the Company addressed to the underwriters, stating that such
accountants are independent public accountants within the meaning of the Act and
the applicable published rules and regulations thereunder, and otherwise in form
and in substance as is customarily given by independent certified public
accountants to underwriters in connection with an underwritten public offering.
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(g) Promptly notify (i) each Holder selling Registrable
Securities covered by such registration statement and each managing underwriter,
if any: (A) when the registration statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the registration
statement has been filed and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, (B) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose,
(C) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the
securities or blue-sky laws of any jurisdiction or the initiation of any
proceeding for such purpose, and (D) when a prospectus relating to the
registration statement is required to be delivered under the Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; and (ii) Holders' Counsel and each managing
underwriter of any request by the SEC for amendments or supplements to such
registration statement or prospectus related thereto or for additional
information. If the notification relates to an event described in clause (i)(D),
the Company shall, in accordance with paragraph (b) of this Section 1.4,
promptly prepare and file with the SEC and furnish to each Holder selling
Registrable Securities covered by such registration statement and each managing
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances
under which they were made not misleading.
(h) Cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling Holders of Registrable
Securities and instruct any transfer agent and registrar of Registrable
Securities to release any stop transfer orders in respect thereto.
(i) Comply with all applicable rules and regulations of the
SEC, and make generally available to its security holders, as soon as reasonably
practicable after the effective date of the registration statement (and in any
event within 16 months thereafter), an earnings statement (which need not be
audited) covering the period of at least twelve consecutive months beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
(j) (i) Cause all such Registrable Securities covered by such
Registration Statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, to either cause
all such Registrable Securities to be listed on a national securities exchange
or to secure designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa 2-1 of the
Exchange Act or, failing that, secure NASDAQ authorization for such shares and,
without limiting the generality of
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the foregoing, use its reasonable best efforts to take all actions that may be
required by the Company as the issuer of such Registrable Securities in order to
facilitate the managing underwriter's arranging for the registration of at least
two market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc. (the "NASD").
(k) Provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such Registration Statement.
(l) Deliver promptly to Holders' Counsel and each underwriter,
if any, copies of all correspondence between the SEC and the Company, its
counsel or auditors and all memoranda relating to discussions with the SEC or
its staff with respect to the registration statement, other than those portions
of any such memoranda which contain information subject to attorney-client
privilege with respect to the Company, and, upon receipt of such confidentiality
agreements as the Company may reasonably request, make reasonably available for
inspection by Holders' Counsel, by any underwriter, if any, participating in any
disposition to be effected pursuant to such registration statement and any
attorney, accountant or other agent retained by any such underwriter, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers, directors
and employees to supply all information reasonably requested by Holders' Counsel
or such underwriter, attorney, accountant or agent in connection with such
registration statement.
(m) Use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration statement.
(n) Upon written request, furnish to each Holder participating
in the offering and the managing underwriter, without charge, at least one
conformed copy of the registration statement and any post-effective amendments
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference).
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1
(including without limitation, to maintain the accuracy of information
previously furnished by the Holders for use in the Shelf Registration Statement)
with respect to the Registrable Securities of the Holders whose Registrable
Securities are covered by the Shelf Registration Statement that each of such
Holders shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably requested by the Company or required to
effect the registration of such Holders' Registrable Securities.
1.6 Expenses of Registration.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Article 1,
including, without limitation: (i) SEC, stock exchange or NASD registration and
filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses of compliance with state securities
or "blue sky" laws and in connection with the preparation of a "blue sky"
survey, including without limitation, reasonable fees and expenses of blue sky
counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) fees and disbursements of counsel for the Company and (vi) fees
and disbursements of the Company's independent public accountants (including the
expenses of any audit
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and/or "cold comfort" letter) and fees and expenses of other persons, including
special experts, retained by the Company.
(b) The Company shall pay all Expenses (other than
underwriting discounts and commissions and any transfer taxes) with respect to
any registration pursuant to Section 1.2, whether or not such registration
statement becomes effective or remains effective for the period contemplated by
Section 1.2(a).
(c) Notwithstanding the foregoing, (i) the provisions of this
Section 1.6 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (ii) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (iii) the Company shall, in the case of all
registration under this Section 1, be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
1.7 Expenses of Company Registration. The Company shall bear and pay
all Expenses incurred in connection with any registration filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), but excluding underwriting discounts and commissions and
transfer taxes, if any, relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless such Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company (or by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned as provided in Section 2.10 and
thereafter pro rata among the selling shareholders according to the total amount
of securities entitled to be included therein owned by each selling shareholder
or in such other proportions as shall mutually be agreed to by such selling
shareholders, with Other Securities being eliminated in their entirety first).
For purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder that is a Holder of Registrable Securities and that is a
partnership or corporate partners, retired partners and shareholders of such
Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro-rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
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1.9 Delay of Registration. The Holders shall not have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder whose Registrable Securities are covered by a
Registration Statement, its directors, officers, fiduciaries, employees and
shareholders, members, managers, or general or limited partners (and the
directors, officers, employees and shareholders thereof), any underwriter (as
defined in the Act) for such Holders and each person, if any, who controls such
Holders or underwriter within the meaning of the Act or the Exchange Act, and
each officer, director, employee, shareholder or partner of such underwriter,
against any losses, claims, damages, or liabilities (joint or several) or
actions or proceedings (whether commenced or threatened) and expenses (including
reasonable fees of counsel and any amounts paid in any settlement effected with
the Company's prior written consent), to which they may become subject under the
Act, the Exchange Act or any state securities law, insofar as such losses,
claims, damages, or liabilities (or actions or proceedings in respect thereof)
("Claims") or expenses arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus, summary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
together with documents incorporated by reference therein, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Act, the
Exchange Act, any state securities law or NASDAQ; and the Company will pay, as
incurred, to such Holders, and each such underwriter or controlling person any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, expense or
action or proceeding; provided, however, that (A) the indemnity agreement
contained in this Section 1.10 shall not apply to amounts paid in settlement of
any such Claim if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), (B) the Company shall not be
liable in any case for any such Claim to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holders, or any such underwriter or controlling person.
Such indemnity and reimbursement of expenses shall remain in full force and
effect regardless of any investigation made by or on behalf of such indemnified
party and shall survive the transfer of such securities by such Holder.
(b) To the extent permitted by law, each Holder whose
Registrable Securities are covered by a Registration Statement will, severally
and not jointly, indemnify and hold harmless the Company, each of its directors,
officers, fiduciaries and employees and each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act, any underwriter, and
any controlling person of any such underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the Exchange Act, insofar as such Claim
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and such Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 1.10, in connection with investigating or
defending any such Claim;
9
provided, however, that the indemnity agreement contained in this Section 1.10
shall not apply to amounts paid in settlement of any such Claim if such
settlement is effected without the consent of such Holder, which consent shall
not be unreasonably withheld; provided that, in no event shall any indemnity
under this Section 1.10 exceed the net proceeds from the offering received by
such Holder. Such indemnity and reimbursement of expenses shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified party and shall survive the transfer of such securities by such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the indemnifying
party, if (i) representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; or (ii) the indemnifying party
fails to take reasonable steps necessary to defend diligently the action or
proceeding within 30 days after receiving notice from such indemnified party.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.10.
(d) If the indemnification provided for in this Section 1.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any Claim or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such Claim or expense in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such Claim or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. If, however, the allocation provided in the first
sentence of this paragraph is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified parry in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 1.10(d) were to be determined by pro rata allocation or
by any other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 1.10(d).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who
10
was not guilty of such fraudulent misrepresentation. Notwithstanding anything in
this Section 1.10(d) to the contrary, no indemnifying party (other than the
Company) shall be required pursuant to this Section 1.10(d) to contribute any
amount in excess of the net proceeds received by such indemnifying party from
the sale of Registrable Securities in the offering to which the Claims of the
indemnified parties relate, less the amount of any indemnification payment made
by such indemnifying party pursuant to Section 1.10(b).
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times;
(b) take such action as is necessary to maintain the Holder's
ability to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns over one
percent (1%) of the outstanding common stock of the Company, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Act and the Exchange Act (at any
time after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents filed by the Company
with the SEC, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights.
(a) The rights to cause the Company to register Registrable
Securities pursuant to this Section 1 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignees of such securities who
acquires at least one percent (1 %) of the Registrable Securities (as adjusted
for stock splits, combinations and the like), provided: (i) the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (ii) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including, without limitation, the provisions
of Section 1.14 below; and (iii) such assignment shall be effective only if such
transfer is exempt from registration under the Act. For the
11
purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holding of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together with the partnership; provided that all
assignees and transferees who would not qualify individually for assignment of
registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under this Section
1.
(b) Subject to clause (a) above, the right to have the Company
register the Registrable Securities pursuant to this Section 1 may not otherwise
be assigned; provided, however, that (i) any heir or the estate of a Holder
which acquires the Registrable Securities from such Holder by will or intestate
succession shall be entitled to have the Company register the Registrable
Securities pursuant to this Section 1 (provided that such heirs or such estate
shall have a single attorney-in-fact for the purpose of exercising any rights,
receiving any notices or taking any action under this Section 1), and (ii) any
individual Holder may sell, assign or transfer Registrable Securities to his or
her spouse or children or to a trust established for the benefit of his or her
spouse, children or himself or herself, and such transferee shall he entitled to
have the Company register the Registrable Securities pursuant to this Section 1,
if, and only if, such transferee agrees in writing to be bound by the terms of
this Agreement. In each such event and for purposes of this Agreement, the term
"Holder" as used herein shall include all such heirs, such estate or such
transferees.
1.13 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of three-fourths of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company that would allow such holder or prospective holder
to include such securities in any registration filed under Section 1.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders that is included.
1.14 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration, and each Holder agrees to enter into an agreement to such effect
with such underwriter; provided, however, that (a) all officers and directors of
the Company enter into similar agreements, (b) such market stand-off time period
shall not' exceed 120 days, and (c) the market stand-off period provided by this
Section 1.14 shall be effective with respect to only one registration statement
designated by the Company. If the underwriters agree to any waivers of such
restrictions, then the Holders shall be entitled to sell, transfer or dispose of
the same number or amount of securities of the Company as the person or entity
receiving such waiver, upon the same terms and conditions set forth in such
waiver,
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holders (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
12
1.15 No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
SECTION 2. MISCELLANEOUS
2.1 Successors and Assigns. Except as otherwise provided herein, and
provided that the transfer or assignment is in accordance with the terms hereof,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and permitted assigns of the parties
(including any permitted transferees of any shares of Registrable Securities).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New Jersey without regard to principles of
conflicts or choice of laws.
2.3 Counterparts. This Agreement may be executed 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.
2.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid or by a recognized national overnight courier and addressed to
the party to be notified at the address indicated for such party in the Stock
Purchase Agreement, or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties.
2.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
three-fourths of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section 2.6 shall be binding upon each
Holder of any Registrable Securities then outstanding, each future Holder of all
such Registrable Securities, and the Company.
2.7 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
2.8 Nominees for Beneficial Owners. If Registrable Securities are
held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its option, be treated as the Holder of such Registrable Securities for
purposes of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any determination of any number or
percentage of shares constituting Registrable Securities held by any Holder or
Holders of Registrable Securities
13
contemplated by this Agreement), provided that the Company shall have received
assurances reasonably satisfactory to it of such beneficial ownership.
2.9 No Inconsistent Agreements. Except as provided in Schedule 2.10
hereto, the rights granted to the Holders of Registrable Securities hereunder do
not in any way conflict with and are not inconsistent with any other agreements
to which the Company is a party or by which it is bound. Without the prior
written consent of the Holders of the majority of the Registrable Securities
then outstanding, neither the Company nor any Holder will, on or after the date
of this Agreement, enter into any agreement with respect to its securities which
is inconsistent with the rights granted in this Agreement or otherwise conflicts
with the provisions hereof, other than any lock-up agreement with the
underwriters in connection with any registered offering effected hereunder,
pursuant to which the Company shall agree not to register for sale, and the
Company shall agree not to sell or otherwise dispose of, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, for
a specified period following the registered offering.
2.10 Prior Registration Rights. Each Purchaser acknowledges that its
rights and obligations under this Agreement are granted subject to the prior
registration rights identified in Schedule 2.10 hereto.
2.11 No Piggyback on Registrations. Except as provided in Schedule
2.10 hereto, neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of the Company
in a registration statement hereunder, and the Company shall not after the date
hereof enter into any agreement providing such right to any of its security
holders, unless the right so granted is subject in all respects to the prior
rights in full of the Holders set forth herein (but only to the extent such
rights are then in effect), and is not otherwise in conflict with the provisions
of this Agreement.
2.12 Most Favored Registration Rights. The Company shall not grant
to any person any registration rights ("New Registration Rights") with respect
to securities of the Company if such New Registration Rights are, in the
reasonable opinion of any Purchaser, superior in any material fashion to the
registration rights granted to any Purchaser pursuant to this Agreement (but
only to the extent such rights are then in effect), unless the Holders of a
majority of the Registrable Securities consent to such New Registration Rights
in writing.
2.13 Entire Agreement. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
[signature page follows]
14
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EP MEDSYSTEMS, INC.
By:_________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
PURCHASERS:
CARDIAC CAPITAL, LLC.
By: Xxxxxxx Investment Fund, Manager
By:_________________________________
Name: R. Xxxxxx Xxxxxxx
Title: General Partner
TEXADA TRUST
By:_________________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Trustee
15
SCHEDULE I
============================================================================
PURCHASER NUMBER OF NUMBER OF
COMMON WARRANT
SHARES SHARES
============================================================================
Cardiac Capital, LLC 1,500,000 750,000
c/o Xxxxx X. Xxxxxxx
100 Stierli Court, Suite 107
Mt. Arlington, N.J. 07856
with a copy to:
Cardiac Capital, LLC
c/x Xxxxxxx Investment Fund
0000 Xxxxxxxx Xxxx, X.X.
Xxxxxxx, XX 00000
Attention: Xxx X. Xxxxx
----------------------------------------------------------------------------
Texada Trust 125,000 62,500
0 Xxxxxxxx Xxxx
Xxxxxx, Xxxxx
Attention: Xxxxxx X. Xxxxxxxxx, Trustee
----------------------------------------------------------------------------
Total 1,625,000 812,500
----------------------------------------------------------------------------
