REGISTRATION RIGHTS AGREEMENT
EXHIBIT 99.3
This Registration Rights Agreement (this
“Agreement”) is made and entered into as of
January 26, 2005, among Chembio Diagnostics, Inc., a Nevada
corporation (the “Company”), and the purchasers
signatory hereto (each such purchaser is a
“Purchaser” and collectively, the
“Purchasers”).
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the
Purchasers (the “Purchase Agreement”).
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings
given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
“Advice” shall have the meaning set
forth in Section 6(d).
“Effectiveness Date” means, with respect
to the initial Registration Statement required to be filed
hereunder, the
120th calendar
day following the date hereof
(150th calendar
day following the date hereof in the event of a full review by
the Commission) and, with respect to any additional Registration
Statements which may be required pursuant to Section 3(c),
the
60th calendar
day following the date on which the Company first knows, or
reasonably should have known, that such additional Registration
Statement is required hereunder; provided,
however, in the event the Company is notified by the
Commission that one of the above Registration Statements will
not be reviewed or is no longer subject to further review and
comments, the Effectiveness Date as to such Registration
Statement shall be the fifth Trading Day following the date on
which the Company is so notified if such date precedes the dates
required above.
“Effectiveness Period” shall have the
meaning set forth in Section 2(a).
“Event” shall have the meaning set forth
in Section 2(b).
“Event Date” shall have the meaning set
forth in Section 2(b).
“Filing Date” means, with respect to the
initial Registration Statement required hereunder, the
60th calendar
day following the date hereof and, with respect to any
additional Registration Statements which may be required
pursuant to Section 3(c), the
30th day
following the date on which the Company first knows, or
reasonably should have known that such additional Registration
Statement is required hereunder.
“Holder” or
“Holders” means the holder or holders,
as the case may be, from time to time of Registrable Securities.
“Indemnified Party” shall have the
meaning set forth in Section 5(c).
“Indemnifying Party” shall have the
meaning set forth in Section 5(c).
“Losses” shall have the meaning set
forth in Section 5(a).
“Plan of Distribution” shall have the
meaning set forth in Section 2(a).
“Proceeding” means an action, claim,
suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
“Prospectus” means the prospectus
included in a Registration Statement (including, without
limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other
amendments and supplements to the
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Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated
by reference in such Prospectus.
“Registrable Securities” means, as of
the date in question, (i) all of the shares of Common Stock
issuable upon conversion in full of the shares of Preferred
Stock, (ii) all shares issuable as dividends on the
Preferred Stock assuming all dividend payments are made in
shares of Preferred Stock and the Preferred Stock is held for at
least 3 years, (iii) all Warrant Shares, (iv) any
securities issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with
respect to the foregoing and (v) any additional shares
issuable in connection with any anti-dilution provisions
associated with the Preferred Stock and Warrants (in each case,
without giving effect to any limitations on conversion set forth
in the Certificate of Designation or limitations on exercise set
forth in the Warrant).
“Registration Statement” means the
registration statements required to be filed hereunder and any
additional registration statements contemplated by
Section 3(c), including (in each case) the Prospectus,
amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration
statement.
“Rule 415” means Rule 415
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
“Selling Shareholder Questionnaire”
shall have the meaning set forth in Section 3(a).
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall
prepare and file with the Commission a “Shelf”
Registration Statement covering the resale of 130% of the
Registrable Securities on such Filing Date for an offering to be
made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on
Form S-3
(except if the Company is not then eligible to register for
resale the Registrable Securities on
Form S-3,
in which case such registration shall be on another appropriate
form in accordance herewith, such as
Form SB-2)
and shall contain (unless otherwise directed by the Holders)
substantially the “Plan of Distribution”
attached hereto as Annex A. Subject to
the terms of this Agreement, the Company shall use its best
efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after
the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the
Securities Act until all Registrable Securities covered by such
Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined
by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Holders (the
“Effectiveness Period”). The Company shall
immediately notify the Holders via facsimile of the
effectiveness of the Registration Statement on the same day that
the Company receives notification of the effectiveness from the
Commission. Failure to so notify the Holder within 1 Trading Day
of such notification shall be deemed an Event under
Section 2(b).
(b) If: (i) a Registration Statement is not filed on
or prior to its Filing Date (if the Company files a Registration
Statement without affording the Holders the opportunity to
review and comment on the same as required by Section 3(a),
the Company shall not be deemed to have satisfied this clause
(i)), or (ii) the Company fails to file with the Commission
a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days
of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or not subject to
further review, or (iii) prior to its Effectiveness Date,
the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission
in respect of such Registration Statement within 20 calendar
days after the receipt of comments by or notice from the
Commission that such amendment is required in order for a
Registration Statement to be declared effective, or (iv) a
Registration Statement filed or required to be filed hereunder
is not
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declared effective by the Commission by its Effectiveness Date,
or (v) after the Effectiveness Date, a Registration
Statement ceases for any reason to remain continuously effective
as to all Registrable Securities for which it is required to be
effective, or the Holders are not permitted to utilize the
Prospectus therein to resell such Registrable Securities for 10
consecutive calendar days but no more than an aggregate of 15
calendar days during any
12-month
period (which need not be consecutive Trading Days) (any such
failure or breach being referred to as an
“Event”, and for purposes of clause (i) or
(iv) the date on which such Event occurs, or for purposes
of clause (ii) the date on which such five Trading Day
period is exceeded, or for purposes of clause (iii) the
date which such 20 calendar day period is exceeded, or for
purposes of clause (v) the date on which such 10 or 15
calendar day period, as applicable, is exceeded being referred
to as “Event Date”), then in addition to any
other rights the Holders may have hereunder or under applicable
law, on each such Event Date and on each monthly anniversary of
each such Event Date (if the applicable Event shall not have
been cured by such date) until the applicable Event is cured,
the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 2% of
the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement for any Registrable Securities then held by
such Holder. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after
the date payable, the Company will pay interest thereon at a
rate of 18% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing
daily from the date such partial liquidated damages are due
until such amounts, plus all such interest thereon, are paid in
full. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro-rata basis for any portion of
a month prior to the cure of an Event.
3. Registration Procedures
In connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Not less than five Trading Days prior to the filing of
each Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by
reference), the Company shall, (i) furnish to each Holder
copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel
and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of
respective counsel to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file
the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object
in good faith, provided that, the Company is notified of such
objection in writing no later than 3 Trading Days after the
Holders have been so furnished copies of such documents. Each
Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as
Annex B (a “Selling Shareholder
Questionnaire”) not less than two Trading Days prior to
the Filing Date or by the end of the fourth Trading Day
following the date on which such Holder receives draft materials
in accordance with this Section.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to a
Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and as so
supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to a
Registration Statement or any amendment thereto and as promptly
as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating
to a Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all
Registrable Securities covered by a Registration Statement
during the applicable period in accordance (subject to the terms
of this Agreement) with the intended methods of disposition by
the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.
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(c) If during the Effectiveness Period, the number of
Registrable Securities at any time exceeds 85% of the number of
shares of Common Stock then registered in a Registration
Statement, then the Company shall file as soon as reasonably
practicable but in any case prior to the applicable Filing Date,
an additional Registration Statement covering the resale by the
Holders of not less than 130% of the number of such Registrable
Securities.
(d) Notify the Holders of Registrable Securities to be sold
(which notice shall, pursuant to clauses (ii) through
(vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been
made) as promptly as reasonably possible (and, in the case of
(i)(A) below, not less than five Trading Days prior to such
filing) and (if requested by any such Person) confirm such
notice in writing no later than one Trading Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company
whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to
each of the Holders); and (C) with respect to a
Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the
issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings
for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (v) of the
occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a
Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to
a Registration Statement, Prospectus or other documents so that,
in the case of a Registration Statement or the Prospectus, as
the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; and (vi) the occurrence or existence of any
pending corporate development with respect to the Company that
the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest
of the Company to allow continued availability of the
Registration Statement or Prospectus; provided that any and all
of such information shall remain confidential to each Holder
until such information otherwise becomes public, unless
disclosure by a Holder is required by law; provided,
further, notwithstanding each Holder’s agreement to
keep such information confidential, the Holders make no
acknowledgement that any such information is material,
non-public information.
(e) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending
the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder, without charge, at least one
conformed copy of each such Registration Statement and each
amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein
by reference to the extent requested by such Person, and all
exhibits to the extent requested by such Person (including those
previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, without charge, as
many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request in connection with resales
by the Holder of Registrable Securities. Subject to the terms of
this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of
the Registrable
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Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving of any notice
pursuant to Section 3(d).
(h) Prior to any resale of Registrable Securities by a
Holder, use its commercially reasonable efforts to register or
qualify or cooperate with the selling Holders in connection with
the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky
laws of such jurisdictions within the United States as any
Holder reasonably requests in writing, to keep each registration
or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by each
Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any
such jurisdiction.
(i) If NASDR Rule 2710 requires any broker-dealer to
make a filing prior to executing a sale by a Holder, make an
Issuer Filing with the NASDR, Inc. Corporate Financing
Department pursuant to NASDR Rule 2710(b)(10)(A)(i) and
respond within five Trading Days to any comments received from
NASDR in connection therewith, and pay the filing fee required
in connection therewith.
(j) If requested by the Holders, cooperate with the Holders
to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the
Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and
registered in such names as any such Holders may reasonably
request.
(k) Upon the occurrence of any event contemplated by this
Section 3, as promptly as reasonably possible under the
circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare
a supplement or amendment, including a post-effective amendment,
to a Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither a
Registration Statement nor such Prospectus will contain 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 light of the circumstances under which
they were made, not misleading. If the Company notifies the
Holders in accordance with clauses (ii) through
(vi) of Section 3(d) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have
been made, then the Holders shall suspend use of such
Prospectus. The Company will use its best efforts to ensure that
the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right
under this Section 3(j) to suspend the availability of a
Registration Statement and Prospectus, subject to the payment of
partial liquidated damages pursuant to Section 2(b), for a
period not to exceed 60 days (which need not be consecutive
days) in any 12 month period.
(l) Comply with all applicable rules and regulations of the
Commission.
(m) The Company may require each selling Holder to furnish
to the Company a certified statement as to the number of shares
of Common Stock beneficially owned by such Holder and, if
required by the Commission, the person thereof that has voting
and dispositive control over the Shares. During any periods that
the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely
because any Holder fails to furnish such information within
three Trading Days of the Company’s request, any liquidated
damages that are accruing at such time shall be tolled and any
Event that may otherwise occur solely because of such delay
shall be suspended, until such information is delivered to the
Company.
4. Registration Expenses. All fees
and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation,
(i) all registration and filing fees (including, without
limitation, fees and expenses (A) with
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respect to filings required to be made with the Trading Market
on which the Common Stock is then listed for trading,
(B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing
(including, without limitation, fees and disbursements of
counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as
reasonably requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer
Filing, with respect to any filing that may be required to be
made by any broker through which a Holder intends to make sales
of Registrable Securities with NASD Regulation, Inc. pursuant to
the NASD Rule 2710, so long as the broker is receiving no
more than a customary brokerage commission in connection with
such sale, (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in
connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall
be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any
annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities
exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to
the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.
5. Indemnification
(a) Indemnification by the
Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including
brokers who offer and sell Registrable Securities as principal
as a result of a pledge or any failure to perform under a margin
call of Common Stock), investment advisors and employees of each
of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person,
to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys’ fees)
and expenses (collectively, “Losses”), as
incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case
of any Prospectus or form of prospectus or supplement thereto,
in light of the circumstances under which they were made) not
misleading, except to the extent, but only to the extent, that
(i) such untrue statements or omissions are based solely
upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in
the case of an occurrence of an event of the type specified in
Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(d). The
Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement
of which the Company is aware.
(b) Indemnification by
Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against
all Losses, as incurred, to the extent arising out of or based
solely upon: (x) such Holder’s failure to comply with
the prospectus delivery requirements of the Securities Act or
(y) any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, any Prospectus, or
any form of prospectus, or in any amendment or
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supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading (i) to the extent,
but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such
Registration Statement or such Prospectus or (ii) to the
extent that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration
Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), such Prospectus or such
form of Prospectus or in any amendment or supplement thereto or
(2) in the case of an occurrence of an event of the type
specified in
Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(d). In
no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification
Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall have the right to
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment
of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to
give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by
a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall
have prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless:
(1) the Indemnifying Party has agreed in writing to pay
such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding
and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating
or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying
Party for that portion of such fees and expenses applicable to
such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative
faults of the parties.
(d) Contribution. If the
indemnification under Section 5(a) or 5(b) is unavailable
to an Indemnified Party or insufficient to hold an Indemnified
Party harmless for any Losses, then each Indemnifying Party
shall contribute to the amount paid or payable by such
Indemnified Party, in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or
omissions that
7
resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’
relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include, subject to the
limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by
such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section was available
to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this
Section 5(d), no Holder shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, except in the case of
fraud by such Holder.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a
breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
(b) No Piggyback on
Registrations. Except as set forth on
Schedule 6(b) attached 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 the Registration Statement other than the Registrable
Securities. The Company shall not file any other registration
statements until the initial Registration Statement required
hereunder is declared effective by the Commission, provided that
this Section 6(b) shall not prohibit the Company from
filing amendments to registration statements already filed.
(c) Compliance. Each Holder
covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(d) Discontinued Disposition. Each
Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in
Section 3(d), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration
Statement until such Holder’s receipt of the copies of the
supplemented Prospectus
and/or
amended Registration Statement, or until it is advised in
writing (the “Advice”) by the Company that the
use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The
Company will use its best efforts to ensure that the use of the
Prospectus may be resumed as promptly as it practicable. The
Company agrees and acknowledges that any periods during which
the Holder is required to discontinue the disposition of the
Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).
(e) Piggy-Back Registrations. If
at any time during the Effectiveness Period there is not an
effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an
offering for its own account or the account of others
8
under the Securities Act of any of its equity securities, other
than on
Form S-4
or
Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option
or other employee benefit plans, then the Company shall send to
each Holder a written notice of such determination and, if
within fifteen days after the date of such notice, any such
Holder shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided,
that, the Company shall not be required to register any
Registrable Securities pursuant to this Section 6(e) that
are eligible for resale pursuant to Rule 144(k) promulgated
under the Securities Act or that are the subject of a then
effective Registration Statement.
(f) Amendments and Waivers. The
provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
not be given, unless the same shall be in writing and signed by
the Company and each Holder of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders and that does
not directly or indirectly affect the rights of other Holders
may be given by Holders of all of the Registrable Securities to
which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(g) Notices. Any and all notices
or other communications or deliveries required or permitted to
be provided hereunder shall be delivered as set forth in the
Purchase Agreement.
(h) Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior
written consent of all of the Holders of the then-outstanding
Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.
(i) No Inconsistent
Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall
the Company or any of its subsidiaries, on or after the date of
this Agreement, enter into any agreement with respect to its
securities, that would have the effect of impairing the rights
granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set forth on
Schedule 6(i), neither the Company nor any of its
subsidiaries has previously entered into any agreement granting
any registration rights with respect to any of its securities to
any Person that have not been satisfied in full.
(j) Execution and
Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed
shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the
event that any signature is delivered by facsimile transmission,
such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed)
the same with the same force and effect as if such facsimile
signature were the original thereof.
(k) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined with the
provisions of the Purchase Agreement.
(l) Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
(m) Severability. If any term,
provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, void
or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
9
(n) Headings. The headings in this
Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
(o) Independent Nature of Holders’ Obligations
and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any
other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other
agreement or document delivered at any closing, and no action
taken by any Holder pursuant hereto or thereto, shall be deemed
to constitute the Holders as a partnership, an association, a
joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions
contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be
necessary for any other Holder to be joined as an additional
party in any proceeding for such purpose.
* * * * * * * * * * * * * * * * * * * *
10
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
CHEMBIO DIAGNOSTICS, INC.
| By: |
Name: Title: |
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
11
[HOLDER’S
SIGNATURE PAGE TO CEMI RRA]
| Name of Holder: |
| Signature of Authorized Signatory of Holder: |
| Name of Authorized Signatory: |
| Title of Authorized Signatory: |
[SIGNATURE
PAGES CONTINUE]
12
ANNEX A
Plan
of Distribution
Each Selling Stockholder (the “Selling
Stockholders”) of the common stock (“Common
Stock”) of Chembio Diagnostics, Inc., a Nevada
corporation (the “Company”) and any of their
pledgees, assignees and
successors-in-interest
may, from time to time, sell any or all of their shares of
Common Stock on the Trading Market or any other stock exchange,
market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
| • | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | |
| • | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; | |
| • | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | |
| • | an exchange distribution in accordance with the rules of the applicable exchange; | |
| • | privately negotiated transactions; | |
| • | settlement of short sales entered into after the date of this prospectus; | |
| • | broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; | |
| • | a combination of any such methods of sale; | |
| • | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or | |
| • | any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell shares under
Rule 144 under the Securities Act of 1933, as amended (the
“Securities Act”), if available, rather than
under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange
for other brokers-dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the
Selling Stockholders (or, if any broker-dealer acts as agent for
the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess
of a customary brokerage commission in compliance with NASDR
Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the Common Stock or interests
therein, the Selling Stockholders may enter into hedging
transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume.
The Selling Stockholders may also sell shares of the Common
Stock short and deliver these securities to close out their
short positions, or loan or pledge the Common Stock to
broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which
require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to
reflect such transaction).
The Selling Stockholders and any brokerdealers or agents that
are involved in selling the shares may be deemed to be
“underwriters” within the meaning of the Securities
Act in connection with such sales. In such event, any
commissions received by such brokerdealers or agents and any
profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the
Securities Act. Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to
distribute the Common Stock. In no event shall any broker-dealer
receive fees, commissions and markups which, in the aggregate,
would exceed eight percent (8%).
13
The Company is required to pay certain fees and expenses
incurred by the Company incident to the registration of the
shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be
“underwriters” within the meaning of the Securities
Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities
covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under
Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any
written or oral agreements, understandings or arrangements with
any underwriter or broker-dealer regarding the sale of the
resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares
by the Selling Stockholders.
We agreed to keep this prospectus effective until the earlier of
(i) the date on which the shares may be resold by the
Selling Stockholders without registration and without regard to
any volume limitations by reason of Rule 144(e) under the
Securities Act or any other rule of similar effect or
(ii) all of the shares have been sold pursuant to the
prospectus or Rule 144 under the Securities Act or any
other rule of similar effect. The resale shares will be sold
only through registered or licensed brokers or dealers if
required under applicable state securities laws. In addition, in
certain states, the resale shares may not be sold unless they
have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the resale shares may
not simultaneously engage in market making activities with
respect to the Common Stock for a period of two business days
prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder,
including Regulation M, which may limit the timing of
purchases and sales of shares of the Common Stock by the Selling
Stockholders or any other person. We will make copies of this
prospectus available to the Selling Stockholders and have
informed them of the need to deliver a copy of this prospectus
to each purchaser at or prior to the time of the sale.
14
Annex B
CHEMBIO
DIAGNOSTICS,
INC.
Selling
Securityholder Notice and Questionnaire
The undersigned beneficial owner of common stock, par value
$0.01 per share (the “Common Stock”), of
Chembio Diagnostics, Inc., a Nevada corporation (the
“Company”), (the “Registrable
Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the
“Commission”) a registration statement on
Form S-3
(the “Registration Statement”) for the
registration and resale under Rule 415 of the Securities
Act of 1933, as amended (the “Securities Act”),
of the Registrable Securities, in accordance with the terms of
the Registration Rights Agreement, dated as of
January , 2005 (the “Registration
Rights Agreement”), among the Company and the
Purchasers named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the
address set forth below. All capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the
Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related
prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named
or not being named as a selling securityholder in the
Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby
elects to include the Registrable Securities owned by it and
listed below in Item 3 (unless otherwise specified under
such Item 3) in the Registration Statement.
15
The undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:
QUESTIONNAIRE
| 1. | Name. |
| (a) |
Full Legal Name of Selling Securityholder |
| (b) |
Full Legal Name of Registered Holder (if not the same as
(a) above) through which Registrable Securities Listed in
Item 3 below are held: |
| (c) |
Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power
to vote or dispose of the securities covered by the
questionnaire): |
2. Address
for Notices to Selling Securityholder:
Telephone:
Fax:
Contact
Person:
| 3. | Beneficial Ownership of Registrable Securities: |
| (a) |
Type and Number of Registrable Securities beneficially owned: |
| 4. | Broker-Dealer Status: |
(a) Are you a broker-dealer?
Yes o
No o
Note: If yes, the Commission’s staff has
indicated that you should be identified as an underwriter in the
Registration Statement.
(b) Are you an affiliate of a broker-dealer?
Yes o No o
(c) If you are an affiliate of a broker-dealer, do you
certify that you bought the Registrable Securities in the
ordinary course of business, and at the time of the purchase of
the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to
distribute the Registrable Securities?
Yes o
No o
16
Note: If no, the Commission’s staff has
indicated that you should be identified as an underwriter in the
Registration Statement.
| 5. | Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder. |
Except as set forth below in this Item 5, the
undersigned is not the beneficial or registered owner of any
securities of the Company other than the Registrable Securities
listed above in Item 3.
| (a) | Type and Amount of Other Securities beneficially owned by the Selling Securityholder: |
| 6. | Relationships with the Company: |
Except as set forth below, neither the undersigned nor any of
its affiliates, officers, directors or principal equity holders
(owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any
other material relationship with the Company (or its
predecessors or affiliates) during the past three years.
State any exceptions here:
The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of
the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any
amendments or supplements thereto. The undersigned understands
that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration
Statement and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and
delivered either in person or by its duly authorized agent.
|
Dated:
|
Beneficial Owner: | |
|
By:
Name:
Title: |
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND
QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
17
