EXHIBIT 4.3
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
March 16, 2004, among Escalon Medical Corp., a Pennsylvania corporation (the
"Company"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company shares of Common Stock and Warrants on the Closing
Date.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
"Closing" means the closing of the purchase and sale of the
Common Stock pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchasers' obligations to pay the Subscription Amount and (ii) the
Company's obligations to deliver the Shares have been satisfied or
waived.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock of the Company, $0.001
par value per share.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning ascribed to
such term in Section 3.1(b).
"Per Share Purchase Price" equals $13.00 per share, subject
to adjustment for stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement but prior to the Closing Date.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Principal Market" initially means the NASDAQ Small-Cap Market
and shall also include the New York Stock Exchange, the Nasdaq National
Market or the American Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock, based upon
share volume.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and each Purchaser, in the form of Exhibit A hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by the Purchasers of the Shares and the Warrant
Shares.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"Rule 144" means Rule 144 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 effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(g).
"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" means the shares of Common Stock issued or issuable
to each Purchaser pursuant to this Agreement.
"Subscription Amount" means, as to each Purchaser, the amounts
set forth below such Purchaser's signature block on the signature page
hereto, in United States dollars and in immediately available funds.
"Subsidiary" shall mean the subsidiaries of the Company, if
any, referenced in Section 3.1(a).
"Trading Day" means a day on which the Common Stock is traded
on a Principal Market.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, any Warrants and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"Warrants" means the warrants issued to each Purchaser to
purchase shares of Common Stock, in the form of Exhibit B hereto.
"Warrant Shares" means the shares of Common Stock issueable
upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1. Closing. On the Closing Date, each Purchaser shall purchase
from the Company, severally and not jointly with the other Purchasers, and the
Company shall issue and sell to each Purchaser, the following: (a) the number of
Shares equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price and (b) Warrants to purchase shares of the Companies Common Stock
equal to fifteen percent (15%) of the Shares purchased by Purchaser at Closing
(adjusted for any stock splits, stock dividends, stock combinations and other
similar transactions) exercisable at a per share purchase price of $15.60. The
aggregate amount of Shares sold hereunder shall be up to 800,000 plus such
additional amounts of shares to be issued pursuant to the Warrants and in
Section 2.3 of this Agreement. Upon satisfaction of the conditions set forth in
Section 2.2, the Closing shall occur at the offices of the Company or such other
location as the parties shall mutually agree.
2.2. Closing Conditions; Deliveries .
(a) On the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
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(ii) a copy of the irrevocable instructions to
the Company's transfer agent instructing the transfer agent to deliver, on an
expedited basis, a certificate evidencing the number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser; and
(iii) the Registration Rights Agreement duly
executed by the Company.
(b) On the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i) this Agreement duly executed by such
Purchaser;
(ii) such Purchaser's Subscription Amount by wire
transfer to the account as specified in writing by the Company; and
(iii) the Registration Rights Agreement duly
executed by such Purchaser.
(c) The obligations of the parties are subject to the
following additional conditions:
(i) All representations and warranties of the
other party contained herein shall remain true and correct as of the Closing
Date and all covenants of the other party shall have been performed if due prior
to such date.
(ii) From the date hereof to the Closing Date,
trading in the Common Stock shall not have been suspended by the Commission
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any Principal Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Shares at the Closing.
(iii) There shall not then be in effect any legal
or other order enjoining or restraining the transactions contemplated by this
Agreement.
(iv) There shall not be in effect any law, rule
or regulation prohibiting or restricting such sale or requiring any consent or
approval of any person to issue the Shares which consent or approval shall not
have been obtained (except as may otherwise be provided in this Agreement).
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2.3. Additional Shares. In the event that the Company does not file
a Registration Statement by the Filing Date (as defined in the Registration
Rights Agreement) or a Registration Statement is not effective by the
Effectiveness Date (as defined in the Registration Rights Agreement), then for
each 30 day period (not to exceed 180 days) in which the Registration Statement
is not filed or not effective, the Company shall issue to each Purchaser,
without any further consideration to be paid by the Purchaser, additional shares
of Common Stock equal to one percent (1%) of the Shares (adjusted for any stock
splits, stock dividends, stock combinations and other similar transactions)
issued on the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. Except as set
forth in the SEC Reports, the Company hereby makes the representations and
warranties set forth below to each Purchaser:
(a) Subsidiaries. All of the direct and indirect
subsidiaries of the Company are referenced in the SEC Reports. The Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities.
(b) Organization and Qualification. Each of the Company
and the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
the Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"Material Adverse Effect") and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on
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the part of the Company and no further action is required by the Company in
connection therewith other than in connection with the Required Approvals. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company, the issuance and sale of the Shares
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company's or any Subsidiary's certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Registration Statement,
(iii) application(s) to each applicable Principal Market for the listing of the
Shares and the Warrant Shares for trading thereon in the time and manner
required thereby, and (iv) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws
(collectively, the "Required Approvals").
(f) Issuance of the Shares. The Shares are, and on each
date on which the Warrants are exercised the Warrant Shares shall be duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock issuable pursuant to
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this Agreement. The issuance and sale of the Shares, Warrants or Warrant Shares
contemplated hereby will not give rise to any preemptive rights or rights of
first refusal on behalf of any Person.
(g) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials, including the
exhibits thereto, being collectively referred to herein as the "SEC Reports") on
a timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(h) Material Changes. Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a
Material Adverse Effect.
(i) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act
of 2002 and the rules promulgated there under which are applicable to it as of
the Closing Date.
(j) Certain Fees. Except for The Keystone Equities Group,
L.P. ("Placement Agent"), no brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement.
(k) Private Placement. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Shares or the Warrants by the Company to the Purchasers as contemplated hereby.
The issuance and sale of the Shares and the Warrants hereunder does not
contravene the rules and regulations of the Principal Market.
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(l) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Shares, will not
be or be an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(m) Registration Rights. Except as contemplated in the
Transaction Documents, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.
(n) Listing and Maintenance Requirements. The Company's
Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is likely
to have the effect of, terminating the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that the
Commission is contemplating terminating such registration. The Company has not,
in the 12 months preceding the date hereof, received notice from any Principal
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Principal Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
in all material respects with all such listing and maintenance requirements.
(o) Application of Takeover Protections. The Company and
its Board of Directors have taken all necessary action, if any, in order to
render inapplicable to the issuance of the Shares and the Warrant Shares any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents.
(p) Disclosure. The Company confirms that, neither the
Company nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(q) No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Shares to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable shareholder approval
provisions, including,
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without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.
(r) Form S-3 Eligibility. The Company is eligible to
register the resale of its Common Stock by the Purchasers on Form S-3
promulgated under the Securities Act and the Company hereby covenants and agrees
to use its best efforts to maintain its eligibility to use Form S-3 until the
Registration Statement covering the resale of the Shares and the Warrant Shares
shall have been filed with, and declared effective by, the Commission.
(s) General Solicitation. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the Shares or
Warrants by any form of general solicitation or general advertising. The Company
has offered the Shares and the Warrants for sale only to the Purchasers and
certain other "accredited investors" within the meaning of Rule 501 under the
Securities Act.
(t) Acknowledgment Regarding Purchasers' Purchase of
Shares. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely
incidental to the Purchasers' purchase of the Shares and Warrants. The Company
further represents to each Purchaser that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
3.2. Representations and Warranties of the Purchasers. Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
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(b) No Conflicts. The execution, delivery and performance
of the Transaction Documents by such Purchaser, the issuance and sale of the
Shares to such Purchaser and the consummation by such Purchaser of the other
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of such Purchaser's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
subject to the Required Approvals, conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which such Purchaser is subject
(including federal and state securities laws and regulations), or by which any
property or asset of such Purchaser is bound or affected.
(c) Investment Intent. Such Purchaser understands that
the Shares, Warrants and Warrant Shares are "restricted securities" and have not
been registered under the Securities Act or any applicable state securities law
and is acquiring such securities as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
securities or any part thereof, has no present intention of distributing any of
such securities and has no arrangement or understanding with any other persons
regarding the distribution of such securities (this representation and warranty
not limiting such Purchaser's right to sell such securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring such securities hereunder in
the ordinary course of its business. Such Purchaser does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any of
such securities.
(d) Purchaser Status. At the time such Purchaser was
offered the Shares, Warrants and Warrant Shares it was , at the date hereof and
on each date on which it exercises any of the Warrants it will be, either: (i)
an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a "qualified institutional buyer" as
defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.
(e) Experience of Such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Shares,
Warrants and Warrant Shares, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
securities and, at the present time, is able to afford a complete loss of such
investment.
(f) General Solicitation. Such Purchaser is not
purchasing the Shares, Warrants and Warrant Shares as a result of any
advertisement, article, notice or other communication regarding such securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(g) Ownership of Company Stock. The purchaser by each
Purchaser of the Shares, Warrants and Warrant Shares is issueable to it at the
Closing will not result in such Purchaser (individually or together with other
Persons with whom such Purchaser has identified,
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or will have identified, itself as part of a "group" in a public filing made
with the Commission involving the Company's securities) acquiring, or obtaining
the right to acquire, in excess of 9.999% of the Common Stock or the voting
power of the Company on a post transaction basis that assumes that the Closing
shall have occurred.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1. Transfer Restrictions.
(a) The Shares, Warrants and Warrant Shares may only be
disposed of in compliance with state and federal securities laws. In connection
with any transfer of such securities other than pursuant to an effective
registration statement or Rule 144 to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the Company,
the form and substance of which opinion and shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require registration of
such transferred Shares, Warrants or Warrant Shares under the Securities Act. As
a condition of transfer, any such transferee shall agree in writing to be bound
by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Shares or Warrant
Shares in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT.
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The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Shares,
Warrants or Warrant Shares to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who agrees to
be bound by the provisions of this Agreement and the Registration Rights
Agreement and, if required under the terms of such arrangement, such Purchaser
may transfer pledged or secured such securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Shares, Warrants or Warrant Shares may reasonably request in connection
with a pledge or transfer of such securities, including, if the Shares or
Warrant Shares are subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus supplement
under Rule 424(b)(3) under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates evidencing the Shares or Warrant Shares
shall not contain any legend (including the legend set forth in Section 4.1(b)),
(i) while a registration statement (including the Registration Statement)
covering the resale of such securities is effective under the Securities Act, or
(ii) following any sale of such Shares or Warrant Shares pursuant to Rule 144,
or (iii) if such Shares or Warrant Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements issued
by the Staff of the Commission). The Company shall cause its counsel to issue a
legal opinion to the Company's transfer agent promptly after the Effective Date
if required by the Company's transfer agent to effect the removal of the legend
hereunder. The Company agrees that following the Effective Date or at such time
as such legend is no longer required under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing Shares and
Warrant Shares, as the case may be, issued with a restrictive legend (such date,
the "Legend Removal Date"), deliver or cause to be delivered to such Purchaser a
certificate representing such Shares and Warrant Shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.
(d) Each Purchaser, severally and not jointly with the
other Purchasers, agrees that the removal of the restrictive legend from
certificates representing Shares and Warrant Shares as set forth in this Section
4.1 is predicated upon the Company's reliance that the Purchaser will sell any
Shares or Warrant Shares pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements, or an
exemption therefrom.
(e) Until the date that each Purchaser holds less than
20% of the Shares and Warrant Shares purchased hereunder by such Purchaser, the
Company shall not undertake a reverse or forward stock split or reclassification
of the Common Stock without the prior written consent of the Purchasers holding
a majority in interest of the Shares and Warrant Shares.
12
4.2. Furnishing of Information. As long as any Purchaser owns
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act. As long
as any Purchaser owns Shares, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Shares under Rule 144. The Company
further covenants that it will take such further action as any holder of Shares
may reasonably request, all to the extent required from time to time to enable
such Person to sell such Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
4.3. Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares to the Purchasers or that
would be integrated with the offer or sale of the Shares for purposes of the
rules and regulations of any Principal Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.
4.4. Securities Laws Disclosure; Publicity. The Company shall, by
8:30 a.m. Eastern time on the Trading Day following the date hereof, issue a
press release or file a Current Report on Form 8-K, in each case reasonably
acceptable to the Placement Agent disclosing the material terms of the
transactions contemplated hereby. The Company and the Placement Agent shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of the Placement Agent, with respect
to any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Principal Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and reports filed by
the Company under the Exchange Act and (ii) to the extent such disclosure is
required by law or Principal Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure permitted under
subclause (i) or (ii).
4.5. Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and
13
use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
4.6. Reimbursement. If any Purchaser or Placement Agent becomes
involved in any capacity in any Proceeding by or against any Person who is a
stockholder of the Company (except as a result of sales, pledges, margin sales
and similar transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser's acquisition of the Shares under this
Agreement, the Company will reimburse such Purchaser and the Placement Agent for
its reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Purchasers or the Placement Agent who are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers, the Placement Agent and any of their Affiliates, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers, the Placement Agent and
any of their Affiliates and any such Person. The Company also agrees that the
Purchasers, the Placement Agent and their Affiliates, partners, directors,
agents, employees or controlling persons shall have no liability to the Company
or any Person asserting claims on behalf of or in right of the Company solely as
a result of the Purchasers acquiring the Shares under this Agreement.
Notwithstanding the foregoing, the Company shall have no obligation to the
Placement Agent hereunder to the extent that the liability incurred by it has
been determined by a court of competent jurisdiction to be the result of gross
negligence, willful misconduct or intentional violation of any state or federal
securities laws.
4.7. Indemnification. Subject to the provisions of this Section
4.7, the Company will indemnify and hold the Purchasers, the Placement Agent and
their directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at
14
the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by an Purchaser Party effected without the Company's prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent, that a loss, claim, damage or liability is
attributable to any Purchaser Party's breach of any of the representations,
warranties, covenants or agreements made by the Purchasers in this Agreement or
in the other Transaction Documents. Notwithstanding the foregoing, the Company
shall have no obligation to the Placement Agent hereunder to the extent that the
liability incurred by it has been determined by a court of competent
jurisdiction to be the result of gross negligence, willful misconduct or
intentional violation of any state or federal securities laws.
4.8. Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue the Shares
pursuant to this Agreement.
4.9. Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Principal Market, and
as soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date) to
list all of the Shares on such Principal Market. The Company further agrees, if
the Company applies to have the Common Stock traded on any other Principal
Market, it will include in such application all of the Shares, and will take
such other action as is necessary to cause all of the Shares to be listed on
such other Principal Market as promptly as possible. The Company will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Principal Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market.
4.10. Equal Treatment of Purchasers. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Shares or otherwise.
4.11. Delivery of Shares After Closing. The Company shall deliver,
or cause to be delivered, the respective Shares purchased by each Purchaser to
such Purchaser within 5 Trading Days of the Closing Date.
15
ARTICLE V
MISCELLANEOUS
5.1. Fees and Expenses. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Shares.
5.2. Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.3. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 6:30
p.m. (Eastern time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (Eastern time) on any Trading Day,
(c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.4. Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
5.5. Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
5.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares and Warrant Shares, provided such
transferee agrees in writing to be bound, with respect to the transferred Shares
and Warrant
16
Shares, by the provisions hereof that apply to the "Purchasers", and provided
that such transferee represents and warrants that it is an "accredited investor"
or "qualified institutional buyer" as defined in Section 3.2(d).
5.7. No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.6 and 4.7.
5.8. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania, without regard to the principles of conflicts
of law thereof. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Philadelphia
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.9. Survival. The representations and warranties herein shall
survive the Closing and delivery of the Shares.
5.10. Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11. Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties
17
will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.12. Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.13. Replacement of Shares. If any certificate or instrument
evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Shares.
5.14. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.16. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction
18
Document. Each Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.
(Signature Page Follows)
19
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ESCALON MEDICAL CORP. Address for Notice:
By:___/s/ Xxxxxxx X. DePiano_______ 000 Xxxx Xxxxxxxxxx Xxxx
Name: Xxxxxxx X. XxXxxxx Suite 100
Title: Chairman & CEO Xxxxx, XX 00000
With a copy to (which shall not constitute notice): Xxxxx Xxxxxx, LLP
Xxxxxxxx X. Xxxx, Esquire Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-
7396
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
20
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: BayStar Capital II, L.P.
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx Xxxxx
Name of Authorized Signatory: Xxxxx Xxxxx
Title of Authorized Signatory: Managing Member
Email Address of Authorized Entity: xxxxx@xxxxxxxxxx.xxx
Address for Notice of Investing Entity:
c/o BayStar Capital Management, LLC
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $325,000.00
Shares: 25,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
21
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: SDS Capital Group SPC, Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx Xxxxx
Name of Authorized Signatory: Xxxxx Xxxxx
Title of Authorized Signatory: Managing Member
Email Address of Authorized Entity: xxxxx@xxxxxxxxxx.xxx
Address for Notice of Investing Entity:
c/o SDS Management, LLC
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $1,300,000.00
Shares: 100,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
22
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Colonial Fund LLC
Signature of Authorized Signatory of Investing Entity: /s/ Xxxx X. Xxxxx
Name of Authorized Signatory: Xxxx X. Xxxxx
Title of Authorized Signatory: President
Email Address of Authorized Entity: xxxxxx@xxxxxxxxxxxx.xxx
Address for Notice of Investing Entity:
Colonial Fund CCL
1270 Avenue of the Americas, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $3,055,000.00
Shares: 235,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
23
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: W. Xxxxxxx Xxxxxxxxx
Signature of Authorized Signatory of Investing Entity: /s/ W. Xxxxxxx Xxxxxxxxx
Name of Authorized Signatory: W. Xxxxxxx Xxxxxxxxx
Title of Authorized Signatory:
Email Address of Authorized Entity: XXXXXXXXXX@XXX.XXX
Address for Notice of Investing Entity:
W. Xxxxxxx Xxxxxxxxx
000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $1,300,000.00
Shares: 100,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
24
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Transvest LTD
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxxx Xxxxxx
Name of Authorized Signatory: Xxxxxxx Xxxxxx
Title of Authorized Signatory: General Partner
Email Address of Authorized Entity: xxxxxxx@xxxxxxxxxxxx.xxx
Address for Notice of Investing Entity:
Transvest LTD
Xxxxxxxx Xxxxx
0 Xxxxxx Xx.
P.O. Box HM1022
Xxxxxxxx HMDX Bermuda
Address for Delivery of Shares for Investing Entity (if not same as above):
Transvest LTD (I/C Highlander)
0 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Subscription Amount: $650,000
Shares: 50,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
25
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Frorer Partners, L.P.
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx Xxxxxx
Name of Authorized Signatory: Xxxxx Xxxxxx
Title of Authorized Signatory: General Partner
Email Address of Authorized Entity: Xxxxxxxxxxx@xxxxxxx.xxx
Address for Notice of Investing Entity:
Frorer Partners, L.P.
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $520,000.00
Shares: 40,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
26
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Polar Capital LP
Signature of Authorized Signatory of Investing Entity: /s/ X. X. Xxxxxx
Name of Authorized Signatory: Xxxxx X. Xxxxxx
Title of Authorized Signatory: President
Email Address of Authorized Entity:
Address for Notice of Investing Entity:
Polar Capital LP
000 Xxxxxxxxxx Xxxxxx, Xxxx
Xxxxxxxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $130,000.00
Shares: 10,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: The Citizen's Alliance for Better Neighborhoods
Signature of Authorized Signatory of Investing Entity: /s/ Xxxx Xxxxx
Name of Authorized Signatory: Xxxx Xxxxx
Title of Authorized Signatory: Executive Director
Email Address of Authorized Entity:
Address for Notice of Investing Entity:
The Keystone Equities Group
X.X. Xxx 0000
Xxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $325,000.00
Shares: 25,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
28
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: SF Capital Partners Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx X. Xxxxxxxx
Name of Authorized Signatory: Xxxxx X. Xxxxxxxx
Title of Authorized Signatory: Authorized Signatory
Email Address of Authorized Entity: xxxxxxxxx@xxxxxxxxx.xxx
Address for Notice of Investing Entity:
SF Capital Partners Ltd.
0000 Xxxxx Xxxx Xxxxx
Xx. Xxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $1,625,000.00
Shares: 125,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
29
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Castle Creek Technology Partners LLC
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxx X. Xxxx
Name of Authorized Signatory: Xxxxxx X. Xxxx
Title of Authorized Signatory: Managing Director of the Investment Manager
Email Address of Authorized Entity:
Address for Notice of Investing Entity:
Castle Creek Technology Partners LLC
000 X. Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $845,000.00
Shares: 65,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
30
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Treeline Investment Partners, L.P.
By: Treeline Management LLC
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxx Xxx
Name of Authorized Signatory: Xxxxxx Xxx
Title of Authorized Signatory: Managing Member
Email Address of Authorized Entity: XXXX@XXXXXXXXXXXXXXX.XXX
Address for Notice of Investing Entity:
Treeline Investment Partners, L.P.
000 Xxxxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $65,000.00
Shares: 5,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
31
[PURCHASER SIGNATURE PAGES TO ESMC SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: MFN LLC
Signature of Authorized Signatory of Investing Entity: /s/ Louis Ottimo
Name of Authorized Signatory: Louis Ottimo
Title of Authorized Signatory: Member
Email Address of Authorized Entity:XXXXXXX@XXXXXXXX.XXX
Address for Notice of Investing Entity:
MFN LLC
000 Xxx Xxxxxxx Xxxx, Xxx 000
Xxxxxx Xxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $260,000.00
Shares: 20,000
Per Share Purchase Price: $13.00
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
32
EXHIBIT A TO SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of March ___, 2004, by and among Escalon Medical Corp., a
Pennsylvania corporation (the "Company"), and the purchasers signatory hereto
(each such purchaser, 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 Registration
Statement required to be filed hereunder, the earlier of (a) the 75th
calendar day following the date of the Purchase Agreement, unless the
Commission conducts a full review of the Registration Statement, in
which case the 120th calendar day shall apply to this clause (a) rather
than the 75th calendar day, and (b) the fifth Trading Day following the
date on which the Company is notified by the Commission that the
Registration Statement will not be reviewed or is no longer subject to
further review and comments.
"Effectiveness Period" shall have the meaning set forth in
Section 2.
"Filing Date" means, with respect to the Registration
Statement required to be filed hereunder, the 30th calendar day
following the date of the Purchase Agreement.
"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).
"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.
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"Prospectus" means the prospectus included in the 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 the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means all of the Shares, together
with any shares of Common Stock issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing, and the Warrant Shares.
"Registration Statement" means the registration statements
required to be filed hereunder, including (in each case) the
Prospectus, amendments and supplements to the 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 the 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.
2. Registration. On or prior to the Filing Date, the Company
shall prepare and file with the Commission the Registration Statement covering
the resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement required
hereunder 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 the
Registration shall be on another appropriate form permitting registration of the
Registrable Securities for resale by such Holders in accordance herewith and the
methods of distribution elected by the Holders herein). The Registration
Statement required hereunder shall contain (except if 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 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 not later
than the Effectiveness Date, and shall use best efforts to keep the Registration
Statement continuously effective under the Securities Act until the date when
all Registrable Securities covered by the Registration Statement have been sold
or may be sold without registration under the Securities Act 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"). None of the Company's
security holders (other than the Holders of
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Registrable Securities) shall have the right to include any of the Company's
securities in the Registration Statement to be filed pursuant to this Section 2.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Furnish to the Holders copies of all such documents
filed (including documents incorporated or deemed incorporated by
reference to the extent requested by such Holder), not more than five
Trading Days after the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as
to the applicable Registrable Securities for the Effectiveness Period;
(ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, 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
the Registration Statement or any amendment thereto; 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 the Registration Statement during the
Effectiveness Period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be
sold as promptly as reasonably possible and (if requested by any such
Holder) confirm such notice in writing promptly following the day
(i)(A) when the Registration Statement and Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is
filed; (B) when the Commission notifies the Company whether there will
be a "review" of the Registration Statement and whenever the Commission
comments in writing on the Registration Statement; and (C) with respect
to the 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 during the Effectiveness
Period for amendments or supplements to the 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 the 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; and (v) of the occurrence of any event or
passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any
statement made in the Registration Statement or Prospectus or any
document incorporated or
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deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration
Statement, Prospectus or other documents, 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.
(d) Use reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the 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.
(e) Furnish to each Holder, without charge, at least one
conformed copy of the 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.
(f) 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 Holder 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 Securities
covered by such Prospectus and any amendment or supplement thereto,
except after the giving of any notice pursuant to Section 3(c)(ii),
(iii), (iv) and (v).
(g) Prior to any resale of Registrable Securities by a
Holder, use its 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 the
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 the 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.
(h) 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 the Registration Statement, which certificates
shall be free, to the extent permitted by the Purchase Agreement, of
all restrictive legends, and
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to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request.
(i) Upon the occurrence of any event contemplated by
Section 3(c)(v), as promptly and in any event within 30 days of such
event, prepare a supplement or amendment, including a post-effective
amendment, to the 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 the 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 (v) of Section 3(c) 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 reasonable efforts to ensure that the
use of the Prospectus may be resumed as promptly as is practicable.
(j) Comply with all applicable rules and regulations of
the Commission.
(k) 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.
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 respect to filings
required to be made with the Principal Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and the Holders, (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-
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 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 the 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 the 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(c)(ii)-(v), 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 of which the Company
is aware in connection with the transactions contemplated by this
Agreement.
(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 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 the 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
-6-
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(c)(ii)-(v), 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, based upon
the opinion of counsel, 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.
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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.
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason
of public policy or otherwise), then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether 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 its respective obligations under this Agreement,
each Holder or the Company, as
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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 and any securities issued to investors in
private placement transactions effected by the Company after the date
of the Purchase Agreement and prior to the actual filing date of the
Registration Statement, 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 other
than the Registrable Securities. No Person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company. The Company shall not file any other
registration statement until after the Effective Date.
(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(c), such Holder will forthwith discontinue
disposition of such Registrable Securities under the 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 commercially reasonable efforts to
ensure that the use of the Prospectus may be resumed as promptly as it
practicable.
(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 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, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
-9-
(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; provided, however, that any
Holder may waive or consent to departures from the provisions of this
Agreement as long as such waiver or consent does not adversely affect
or impair the rights of the other Holders under this Agreement.
(g) Notices. Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be
made in accordance with the provisions of 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.
Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.
(i) 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.
(j) Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be determined with the provisions of the Purchase
Agreement.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) 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.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
-10-
(n) Independent Nature of Purchasers' 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.
*************************
-11-
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
ESCALON MEDICAL CORP.
By:__________________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[PURCHASER'S SIGNATURE PAGE TO ESMC RRA]
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
-13-
[PURCHASER'S SIGNATURE PAGE TO ESMC RRA]
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
-14-
ANNEX A
Plan of Distribution
The Selling Stockholders (the "Selling Stockholders") of the common
stock ("Common Stock") of Escalon Medical Corp. (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 any 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. The Selling Stockholders 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. Each Selling Stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
-15-
In connection with the sale of our 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 our 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 broker-dealers 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 broker-dealers 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 agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.
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
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 our common stock for a period
of two business days prior to the commencement
-16-
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 our 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.
-17-
Schedule 6(b)
None
Schedule to the RRA
EXHIBIT B TO SECURITIES PURCHASE AGREEMENT
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH
THIS SECURITY IS EXERCISABLE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
ESCALON MEDICAL CORP.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") CERTIFIES
that, for value received, _____________ (the "Holder"), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the day beginning 181 days after the date of
the Purchase Agreement (the "Initial Exercise Date") and on or prior to the
fifth anniversary of the Initial Exercise Date (the "Termination Date") but not
thereafter, to subscribe for and purchase from Escalon Medical Corp., a
Pennsylvania corporation (the "Company"), up to ____________ shares (the
"Warrant Shares") of Common Stock, par value $0.001 per share, of the Company
(the "Common Stock"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be $15.60, subject to adjustment
hereunder. The Exercise Price and the number of Warrant Shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein.
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS
SET FORTH IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT (THE "PURCHASE
AGREEMENT"), DATED MARCH ____, 2004 AMONG THE COMPANY AND THE PURCHASERS
SIGNATORY THERETO.
1
1. Title to Warrant.
(a) Prior to the Termination Date and
subject to compliance with applicable laws and Section 7 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
office or agency of the Company by the Holder in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed. The transferee shall sign an investment letter
in form and substance reasonably satisfactory to the Company. Notwithstanding
the foregoing, the Company shall not be obligated to register or issue any New
Warrant in an amount less than 5% of the total number of shares of Common Stock
into which this Warrant is exercisable.
(b) Notwithstanding anything to the
contrary, Holder shall not transfer or assign any portion of this Warrant if
such transfer or assignment would violate federal or state securities laws.
Until the Warrant Shares have been registered under the Securities Act and
registered and qualified under the securities laws of any state in question, the
Company shall cause each certificate evidencing any Warrant Shares to bear the
following legend:
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH
THIS SECURITY IS EXERCISABLE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
2
2. Authorization of Shares. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. Exercise of Warrant.
(a) Exercise of the purchase rights represented by
this Warrant may be made at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise
Form annexed hereto (or such other office or agency of the Company as
it may designate by notice in writing to the registered Holder at the
address of such Holder appearing on the books of the Company);
provided, however, within 5 Trading Days of the date said Notice of
Exercise is delivered to the Company, the Holder shall have surrendered
this Warrant to the Company and the Company shall have received payment
of the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank. Certificates
for shares purchased hereunder shall be delivered to the Holder within
5 Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant and payment of the aggregate
Exercise Price as set forth above ("Warrant Share Delivery Date"). This
Warrant shall be deemed to have been exercised on the later of the date
the Notice of Exercise is delivered to the Company by facsimile copy or
the date the Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become
a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the Exercise
Price and all taxes required to be paid by the Holder, if any, pursuant
to Section 5 prior to the issuance of such shares, have been paid.
Nothing herein shall limit a Holder's right to pursue any remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief
with respect to the Company's failure to timely deliver certificates
representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
(c) The Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 3(a) or otherwise, to
the extent that after giving effect to such issuance after exercise,
the Holder (together with the Holder's affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of
9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such issuance. For purposes of the
foregoing sentence, the number of shares of Common
3
Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder
or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Warrants) subject to
a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 3(c), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act, it being
acknowledged by Holder that the Company is not representing to Holder
that such calculation is in compliance with Section 13(d) of the
Exchange Act and Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the
limitation contained in this Section 3(c) applies, the determination of
whether this Warrant is exercisable (in relation to other securities
owned by the Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the
submission of a Notice of Exercise shall be deemed to be such Holder's
determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder) and of which portion of this
Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes of
this Section 3(c), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company's most recent Form 10-Q
or Form 10-K, as the case may be, (y) a more recent public announcement
by the Company or (z) any other notice by the Company or the Company's
Transfer Agent setting forth the number of shares of Common Stock
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by the
Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.
(d) If at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder at such
time, this Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the closing price of the Company's Common Stock on
the Trading Day immediately preceding the date of such
election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
4
(e) If this Warrant is exercised in whole or in part
prior to the filing date of a Registration Statement as contemplated by
the Registration Rights Agreement between the Company, the Holder and
certain other investors, dated as of the date hereof (the "Registration
Rights Agreement"), any and all Warrant Shares that result from such
exercise shall be deemed to be "Registrable Securities" as that term is
defined in the Registration Rights Agreement.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 1 and 7(e)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
(b) This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed
5
by the Holder or its agent or attorney. Subject to compliance with
Section 7(a), as to any transfer which may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants
under this Section 7.
(d) The Company agrees to maintain, at its aforesaid
office, books for the registration and the registration of transfer of
the Warrants.
(e) If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration
statement under the Securities Act and under applicable state
securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion
of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the
Securities Act and under applicable state securities or blue sky laws,
(ii) that the holder or transferee execute and deliver to the Company
an investment letter in form and substance acceptable to the Company
and (iii) that the transferee be an "accredited investor" as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the
Securities Act or a qualified institutional buyer as defined in Rule
144A(a) under the Securities Act.
8. No Rights as Shareholder until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company prior to the exercise hereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price (or by means of a cashless
exercise), the Warrant Shares so purchased shall be and be deemed to be issued
to such Holder as the record owner of such shares as of the close of business on
the later of the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a Saturday, Sunday or legal holiday.
6
11. Adjustments of Exercise Price and Number of Warrant
Shares; Stock Splits, etc. The number and kind of securities purchasable upon
the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following. In case
the Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company that
are purchasable pursuant hereto immediately after such adjustment. An adjustment
made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
12. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all of its
property, assets or business to another corporation and, pursuant to the terms
of such reorganization, reclassification, merger, consolidation or disposition
of assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring corporation
("Other Property"), are to be received by or distributed to the holders of
Common Stock of the Company, then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class
7
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
13. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Company shall give notice thereof to the Holder, which notice shall state
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, or any right to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any
class or any other securities or property, or to receive any other
right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock
of the Company or any consolidation or merger of the Company with, or
any sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 10 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 10
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to
8
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).
15. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment
in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
16. Miscellaneous.
(a) Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Warrant
shall be determined in accordance with the provisions of the Purchase
Agreement.
(b) Restrictions. The Holder acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not
registered, will have restrictions upon resale imposed by state and
federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or
any delay or failure to exercise any right hereunder on the part of
Holder shall operate as a waiver of such right or otherwise prejudice
Holder's rights, powers or remedies, notwithstanding all
9
rights hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results in
any material damages to the Holder, the Company shall pay to Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in
the absence of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or privileges
of Holder, shall give rise to any liability of Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.
(h) Amendment. This Warrant may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Holder.
(i) Severability. Wherever possible, each provision
of this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are
for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: March _____, 2004
ESCALON MEDICAL CORP.
By:__________________________________________
Name:
Title:
11
NOTICE OF EXERCISE
To: Escalon Medical Corp.
(1) The undersigned hereby elects to purchase ________ Warrant
Shares of the Company pursuant to the terms of the attached Warrant No. ________
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares
as is necessary, in accordance with the formula set
forth in subsection 3(d), to exercise this Warrant
with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise
procedure set forth in subsection 3(d).
(3) Please issue a certificate or certificates representing
said Warrant Shares in the name of the undersigned or in such other name as is
specified below:
_______________________________
The Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. The undersigned is an "accredited
investor" as defined in Regulation D under the Securities Act of 1933, as
amended.
[PURCHASER]
By: ___________________________
Name:
Title:
Dated: ________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant No. _______ and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
