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EXHIBIT 99.1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CRITICARE SYSTEMS, INC.
THIS AGREEMENT is made this 31st day of January 1997, between
CRITICARE SYSTEMS, INC., Nasdaq Symbol "CXIM" (the "Company"), a Delaware
corporation, with its principal office at 00000 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, XX
00000 and PARESCO, INC. (the "Purchaser"), with its principal office at 000
Xxxxxx Xxxxxx, Xxxxxx Xxxx, XX 00000.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Closing Date" means the date of the delivery of the Debenture
to the Purchaser against a wire transfer of the funds to the Company.
"Closing" means the completion of the purchase and sale of the
Debenture on the Closing Date.
"Common Stock" means the Common Stock of the Company $.04 par
value.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company.
"Conversion Shares" means the Common Stock issued upon the
conversion of the Convertible Debenture.
"Convertible Debenture" means the Debenture of the Company
convertible into common stock of the Company as hereinafter provided.
"Conversion Price" means, for a period beginning sixty-one
(61) days after the Closing Date, at which time $1,250,000 face amount of
Convertible Debentures may be converted, an amount equal to a twenty (20%)
percent discount from the average closing bid price of the Common Stock as
reported by Nasdaq or on other securities exchanges or markets on which the
Common Stock is listed, for the previous five (5) trading days ending on the day
before the Conversion Date. From the period beginning ninety-one (91) days after
the Closing Date, at which time all or any part of the Convertible Debentures
may be converted, Conversion Price shall mean an amount equal to a twenty-five
(25%) percent discount from the average closing bid price of the Common Stock as
reported by Nasdaq or on other securities exchanges or markets on which the
Common Stock is listed for the previous five (5) trading days ending on the day
before the Conversion Date.
"Debenture" or "Debentures" means the Convertible
Debenture or Convertible Debentures, as appropriate.
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Section 2. Authorization and Sale of Debenture.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Company has authorized the execution and delivery of one or more
Convertible Debentures in an aggregate principal amount of Two Million, Five
Hundred Thousand ($2,500,000) Dollars (the "Principal"), with a maturity date of
5:00 PM Eastern Standard Time on February 2, 1999 (the "Maturity Date"). The
Company promises to pay to the Purchaser the Principal, if any remains
unconverted, with interest at eight (8%) percent per annum, in shares of Common
Stock on the Maturity Date. Except as otherwise provided in the Debenture, the
Principal and interest on this Debenture are payable only in shares of Common
Stock (form of Debenture annexed hereto as Exhibit A).
2.2 Agreement to Execute and Deliver the Debenture Agreement
and the Debenture. The Company will borrow $2,500,000 from the Purchaser in
reliance upon the representations and warranties of the Company contained in
this Agreement. The Purchaser will lend such sum to the Company, upon the terms
and conditions hereinafter set forth. The Debenture shall pay eight (8%) percent
interest per annum, payable in common stock at the time of each Conversion Date.
Such loan shall occur on the Closing Date and shall accrue interest from the
Closing Date.
2.3 Time and Place of Closing. The Closing shall be held at
the offices of Xxxxxxx X. Xxxxxxxxx, P.C. ("Escrow Agent"), 00 Xxxxxxxx, 00xx
Xx., Xxx Xxxx, XX 00000, on the Closing Date.
2.4 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Purchaser shall remit by wire transfer the Purchase
Price to Escrow Agent as per the separate Escrow Agreement, which shall be
executed and delivered by the parties contemporaneously with this Agreement, as
payment in full for the Debenture.
(b) Company shall deliver or cause to be delivered to
Escrow Agent a Debenture, substantially in the form set forth in Exhibit A
hereto, bearing the original signatures of an authorized officer of the Company.
(c) Wire instructions for Xxxxxxx X. Xxxxxxxxx, P.C., as
follows:
Chase Manhattan Bank, N.A.
ABA #000000000
For the Account of
United States Trust Company of New York
Account #000-0-000000
In Favor of
Xxxxxxx X. Xxxxxxxxx, P.C. Attorney Trust Account
Account #59-02347
Section 2.5. Closing. At the closing, the following shall
occur:
(a) The Escrow Agent shall deliver the Purchase Price and
the Debenture in accordance with the terms of the Escrow Agreement.
(b) The Company shall cause the legal opinion required
pursuant to the terms of Section 3.16 hereof to be executed and delivered to the
Purchaser.
(c) The Company and Purchaser shall execute and deliver
the Registration Rights Agreement in the form of Exhibit C attached hereto.
Section 3. General Representations and Warranties of the
Company. The Company hereby
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represents and warrants to, and covenants with, the Purchaser that the following
are true and correct as of the date hereof.
3.1 Organization; Qualification. The Company is a corporation
duly organized and validly existing under the laws of Delaware and is in good
standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 Capitalization and Conversion. The authorized capital
stock of the Company consists of 10,000,000 Shares of Common Stock, $.04 par
value, of which 7,128,272 Shares have been issued and 500,000 shares of
preferred stock, $.04 par value, of which none have been issued. All issued and
outstanding Shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable (except as set forth in Wisconsin Statutes
Section 180.0622(2)(b)). As of the Closing Date, the Company had reserved from
its authorized but unissued shares of Common Stock a sufficient number of shares
of Common Stock for issuance upon conversion of the Debenture, which is
convertible pursuant to the conversion table below, at Purchaser's option, at
the Conversion Price, which will be automatically converted on the second
anniversary of closing, at the Conversion Price, if not previously converted.
Each such conversion shall reduce the principal amount owing on the Debenture by
the amount stated in the Notice of Conversion (Exhibit B) and will be reflected
in a Convertible Debenture Principal Reduction Schedule signed by an authorized
officer of the Company.
Conversion will be permitted as follows:
0-60 days from Closing Date - None
61-90 days from Closing Date - Up to 50% of initial investment
After 90 days from Closing Date - 100% of initial investment
3.3 Authorization. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Debenture by the Company, the authorization, sale, issuance and delivery of the
Conversion Shares and the performance of the Company's obligations hereunder has
been taken. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company enforceable
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to the indemnification provisions
set forth in Section 7.2 of this Agreement. Upon their issuance and delivery
pursuant to this Agreement, the Conversion Shares will be validly issued, fully
paid and nonassessable (except as set forth in Wisconsin Statutes Section
180.0622(2)(b)) and will be free of any liens or encumbrances except for those
imposed by or on behalf of the Purchaser, its creditors or agents.
3.4 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12 (g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Action"). The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is listed and
trades on the Nasdaq National Market.
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The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer and sale of the Debenture (or for such shorter period that
the Company has been required to file such material).
3.6 SEC Filings/Full Disclosure. For a period of at least
twelve (12) months immediately preceding this offer and sale (i) none of the
Company's filings with the Securities and Exchange Commission contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, and (ii) the Company
has timely filed all requisite forms, reports and exhibits thereto with the
Securities and Exchange Commission.
Except as shown on Schedule 1 hereto, there is no fact known
to the Company (other than general economic conditions known to the public
generally) that has not been publicly disclosed by the Company or disclosed in
writing to the Purchaser which (i) could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise) or on
earnings, business affairs, properties or assets of the Company, or (ii) could
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement.
3.7 Absence of Undisclosed Liabilities. Except as shown on
Schedule 1 hereto, the Company has no material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except as set forth
in the Reports (as hereinafter defined) or as incurred in the ordinary course of
business after the date of the Reports.
3.8 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Debenture, or the consummation of any other transaction contemplated hereby,
except the filing with the SEC of a registration statement on Form S-3 for the
purpose of registering the Common Stock underlying the Debenture.
3.9 Intellectual Property Rights. Except as disclosed in the
Form 10-Ks, Form 10-Qs and Form 8-Ks filed by the Company for a period of at
least twelve (12) months immediately preceding this offer (the "Reports"), the
Company has sufficient trademarks, trade names, patent rights, copyrights and
licenses to conduct its business as presently conducted. To the Company's
knowledge, neither the Company nor its products is infringing or will infringe
any trademark, trade name, patent right, copyright, license, trade secret or
other similar right of others currently in existence; and there is no claim
being made against the Company regarding any trademark, trade name, patent,
copyright, license, trade secret or other intellectual property right which
could have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in the Reports,
the material agreements to which the Company is a party described in the Reports
are valid agreements, in full force and effect, the Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default (with or without notice or lapse of time, or both) under any of such
agreements.
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3.11 Litigation. Except as disclosed on Schedule 1 or in the
Reports, there is no action, proceeding or investigation pending, or to the
Company's knowledge threatened, against the Company which might result, either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Company. The
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company currently intends to initiate
which will materially effect the Company.
3.12 Title to Assets. Except as is required to be set forth in
the Reports, the Company has good and marketable title to all properties and
material assets described in the Reports as owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other
than such as are not material to the business of the Company.
3.13 Subsidiaries. Except as disclosed in the Reports and the
financial statements, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity, except for CSI Trading Inc., a Wisconsin corporation.
3.14 Required Governmental Permits. The Company is in
possession of and operating in material compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities which are material to the conduct of its business,
all of which are valid and in full force and effect.
3.15 Listing. The Company will maintain the listing of its
Common Stock on the Nasdaq National Market or other organized United States
Markets or Quotron System.
3.16 Other Outstanding Securities. Except as disclosed in the
Reports, there are no other material outstanding debt or equity securities
presently convertible into Common Stock.
3.17 Financing; Restrictions. The Company cannot, without the
prior approval in writing from Subscriber, obtain convertible debt or equity
financing for a period of ninety (90) days following the effective date of this
Agreement.
3.18 Legal Opinion. Purchaser shall, upon the purchase of the
Debenture, receive an opinion letter from counsel to the Company, and the
Company represents that it will immediately obtain such an opinion from counsel
in the form attached to this Agreement as Exhibit E:
Section 4. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof and as of
the Closing Date.
4.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.2 of this Agreement.
4.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Company's business affairs and financial condition and has had access to
and has acquired sufficient information about the Company, including the
Reports, to reach an informed and knowledgeable decision to acquire the
Debenture. Purchaser has such business and financial experience as is required
to give it the capacity to protect its own interests in connection with the
purchase of the Debenture.
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4.3 Investment Intent. Without limiting its ability to resell
the underlying Common Stock pursuant to an effective registration statement,
Purchaser represents that it is purchasing the Debenture for its own account as
principal for investment purposes, and not with a view to a distribution.
Purchaser understands that its acquisition of the Debenture has not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchaser or otherwise acquire or take a pledge of) any of
the Debenture or the underlying Common Stock, except in compliance with the
Securities Act and any applicable state securities laws, and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Debenture or the Conversion Shares may not
be resold or otherwise transferred except in a transaction registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration is available. Purchaser understands that the Debenture
and, if converted, the Conversion Shares will be imprinted with a legend that
prohibits the transfer of such securities unless (i) it is registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Debenture constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchaser of the Debenture.
4.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the Reports, and the financial
statements contained therein. The Purchaser acknowledges that the Company has
made available to the Purchaser all documents and information that it has
requested relating to the Company and has provided answers to all of its
questions concerning the Company and the Debenture. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Company contained in this Agreement.
4.7 Legend. The certificate or certificates representing the
Debenture and, upon conversion, the Underlying Common Stock shall be subject to
a legend restricting transfer under the Securities Act of 1933, such legend to
be substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT,
IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY."
Such securities shall also include any legends required by any applicable state
securities laws.
With respect to the Conversion Shares, the legend(s) shall be
removed and the Company shall issue a replacement certificate without such
legend to the holder of such certificate if such holder provides to the Company
an opinion of counsel reasonably acceptable to the Company, to the effect that a
public sale, transfer or assignment of such stock may be made without
registration.
4.8 Restrictions on Conversion of Debenture. The Purchaser or
any subsequent holder of the Debenture (the "Holder") shall be prohibited from
(i) converting any portion of the Debenture which would result in the Purchaser
or the Holder being deemed the beneficial owner, in accordance with the
provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of
4.99% or more of the then issued and outstanding
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Common Stock of the Company, or (ii) converting any portion of the shares which
would result in the Purchaser or the Holder being issued more than 1,425,647
shares of Common Stock of the Company in the aggregate pursuant to the
Debenture. In the event that upon conversion the Holders would be entitled to
have been issued an aggregate of more than 1,425,647 shares of Common Stock of
the Company, then such Holders shall receive cash in the amount equal to 125% of
the face amount of the remaining Debentures and interest.
4.9 Certain Risks. The Purchaser recognizes that the purchase
of the Debentures and the Conversion Shares involves a high degree of risk in
that:
(i) an investment in the Company is highly
speculative and only investors who can afford the loss of their
entire investment should consider investing in the Company and the
Debenture;
(ii) a purchaser may not be able to liquidate its
investment;
(iii) transferability of the Debenture is extremely
limited;
(iv) in the event of disposition, Purchaser could
sustain the loss of its entire investment;
(v) the Debentures represent non-voting securities,
which have the right to convert into and purchase shares of voting
equity securities in a corporate entity;
(vi) no return on investment, whether through
distributions, appreciation, transferability or otherwise, and no
performance by, through or of the Company, has been promised,
assured, represented or warranted by the Company, or by any
director, officer, employee, agent or representative thereof;
(vii) while the Common Stock is presently quoted and
traded on the Nasdaq National Market and while the Purchasers are
beneficiaries of certain registration rights provided herein, the
Debenture and the Conversion Shares:
(a) are not registered under applicable federal or
state securities laws, and thus may not be sold,
conveyed, assigned or transferred unless registered
under such laws or unless an exemption from
registration is available under such laws, as more
fully described below; and
(b) are not quoted, traded or listed for trading or
quotation on the Nasdaq National Market, or any other
organized market or quotation system, and there is
therefore no present public or other market for such
Debenture, nor can there be any assurance that the
Common Stock will continue to be quoted, traded or
listed for trading or quotation on the Nasdaq
National Market or on any other organized market or
quotation system.
4.10 No Registration, Review or Approval. The Purchaser
acknowledges and understand that the limited private offering and sale of the
Debenture and the Underlying Shares pursuant to this Agreement has not been
reviewed or approved by the SEC or by any state securities commission, authority
or agency, and is not registered under the Act or under the securities or "blue
sky" laws, rules or regulations of any state. The Purchaser acknowledges,
understands and agrees that the Debenture and the Underlying Shares are being
offered and sold hereunder pursuant to (i) a private placement exemption to the
registration provisions of the Act pursuant to Section 3(b) or Section 4(2) of
such Act and Regulation D promulgated under such Act, and (ii) a similar
exemption to the registration provisions of applicable state securities laws.
Section 5. Conditions to the Purchaser's Obligation to
Purchase. The Company understands that the Purchaser's obligation to purchase
the Debenture is conditioned upon:
(a) Acceptance by Purchaser of this Debenture Purchase
Agreement for the purchase of the Debenture, as evidenced by the execution of
this Agreement by its authorized officers;
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(b) Delivery of the Debenture into Escrow;
(c) Delivery of legal opinion as required by this
Agreement;
(d) Execution and delivery by the Company of the
Registration Rights Agreement in the form of Exhibit C.
Section 6. Conditions to Company's Obligation to Sell.
Purchaser understands that the Company's obligation to sell the Debenture is
conditioned upon:
(a) The receipt and acceptance by the Company of this
Debenture Purchase Agreement for the Debenture as evidenced by execution of this
Subscription Agreement by the President or any Vice President of the Purchaser;
and
(b) Delivery into escrow by Purchaser of good funds as
payment in full for the purchase of the Debenture.
Section 7. Compliance with the Securities Act.
7.1 Underwriter. The Company understands that the Purchaser
disclaims being an "underwriter" (as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter")),
but Purchaser being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder.
7.2 Indemnification. Each of the Company and the Purchaser
agrees to indemnify the other and to hold the other harmless from and against
any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees) which the other may sustain or incur in connection
with the breach by the indemnifying party of any representation, warranty or
covenant made by it in this Agreement.
7.3 Information Available. So long as any registration
statement is effective covering the resale of the Common Stock underlying the
Debenture, the Company will furnish to Purchaser:
(a) as soon as possible after available (but in the case
of the Company's Annual Report to Stockholders, within 150 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States of
America by a national firm of certified public accountants); (ii) each of its
Quarterly Reports to Stockholders, and its Quarterly Reports on Form 10-Q; and
(iii) a full copy of the registration statement covering the Conversion Shares
(the foregoing, in each case, including exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
7.4 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Underlying Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
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(c) to furnish to Purchaser forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any of the Underlying Shares without registration.
7.5 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Company may
be required to suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, until the prospectus is supplemented or amended to comply with the
Securities Act, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Company agrees to
file any necessary amendments, supplements and reports as soon as practicable
under the circumstances. Purchaser hereby covenants that it will not sell any
Common Stock pursuant to said prospectus during a period of not more than 20
days commencing at the time at which the Company gives the Purchaser notice of
the suspension of the use of said prospectus and ending at the time the Company
gives the Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus, as the same may have been supplemented or amended.
7.6 Transfer of Common Stock After Registration. Purchaser
hereby covenants with the Company not to make any sale of the Common Stock
except either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.7 Termination of Obligations. The obligations of the Company
pursuant to Sections 7.2, 7.3 and 7.6 hereof shall cease and terminate upon the
earlier to occur of (i) such time as all of the Common Stock have been re-sold,
or (ii) such time as all of the Common Stock may be re-sold in any three-month
period pursuant to Rule 144 under the Securities Act.
Section 8. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
Section 9. Conversion of the Debenture. Conversion of the
Debenture to Common Stock may be made pursuant to the timetable set forth in
Section 3.2. The Debenture may be held by Purchaser for up to two (2) years from
the Closing Date. If any Debenture remain outstanding on the second anniversary
of the Closing Date, subject to the provisions of Section 4.8 hereof, all
remaining portions of the Debenture will be converted on that date at the
conversion price as defined herein. This two year period shall be extended for
each day after sixty (60) days from the date of exercise of the Demand
Registration Right, that the Registration Statement is not effective.
9.1 Notice of Conversion. Conversion of the Debenture to
Common Stock may be exercised in whole or in part by Purchasers telecopying an
executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit B) to the Company and delivering the original Notice of Conversion and
the certificate representing the Debenture to the Company by express courier
within three (3) business days of exercise. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date. The Company will transmit
the certificates representing the Common Stock issuable upon conversion of all
or any part of the Debenture (together with the certificates representing
portions of the Debenture not so converted) to the Purchaser via express courier
within five (5) business days after the Company has received the original Notice
of Conversion and Debenture certificate being so converted. In addition to any
other remedies which may be available to the Purchaser, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within such five (5) business day period, the Purchaser will be entitled to
revoke the relevant Notice of Conversion by delivering by telecopier with an
original by overnight courier a notice to such effect to the Company whereupon
the Company and the Purchaser
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shall each be restored to their respective positions immediately prior to the
delivery of the Notice of Conversion. Upon receipt of such Notice the Company
shall return by overnight courier the original certificate representing the
Debenture. The Notice of Conversion and certificate representing the portion of
the Debenture converted shall be delivered as follows:
To the Company:
Criticare Systems, Inc.
00000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Von der Ruhr
(fax) (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing.
In the event that the Common Stock issuable upon conversion of
the Debenture is not delivered within five (5) business days of receipt by the
Company of a valid Conversion Notice and the Debenture to be converted (such
date of receipt referred to as the "Conversion Date"), the Company shall pay to
the Purchaser, by wire transfer, as liquidated damages for such failure and not
as a penalty, for each $100,000 of Debenture sought to be converted, $100 for
each of the first two (2) days, $200 for each of the next two days, $300 for
each of the next two days, $400 for each of the next two days and $500 per day
thereafter that the Conversion Shares are not delivered, which penalty shall run
from the sixth business day after the Conversion Date.
Section 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
Criticare Systems, Inc.
00000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Von der Ruhr
(fax) (000) 000-0000
copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxx Xxxxxxx XxxXxxxxx Xxxxxx & Xxxxxxxxxx
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
Paresco, Inc.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
copy to:
Xxxxxxx X. Xxxxxxxxx, P.C.
00 Xxxxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
or at such other address or addresses as may have been furnished to the Company
in writing; or
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(c) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Company at the
time of the transfer or transfers, or at such other address or addresses as may
have been furnished by such transferee or transferees to the Company in writing.
Section 11. Miscellaneous.
11.1 Listing. The Company will use its best efforts to
maintain the listing of its Common Stock on the Nasdaq National Market.
11.2 Entire Agreement. This Agreement, including Exhibit A
(Form of Convertible Debenture), Exhibit B (Form of Notice of Conversion),
Exhibit C (Form of Registration Rights Agreement) and Exhibit D (Form of
Convertible Debenture Escrow Agreement), embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement or any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
11.3 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and by
Purchaser.
11.4 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
11.5 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
11.6 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the 1933 Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the federal district court for the Southern District of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if either party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
11.7 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Company, and if the Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
11.8 Fees. The Company acknowledges that Purchaser shall have
no responsibility for the payment of any of its fees in connection with this
offering. The Company agrees to pay to Xxxxxxx X. Xxxxxxxxx, P.C., the sum of
Fifteen Thousand ($15,000) Dollars for legal services rendered and
disbursements.
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11.9 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
11.10 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Company,
except as may be required by applicable law or regulation.
11.11 Survival. The representations and warranties in this
Agreement shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
CRITICARE SYSTEMS, INC.
By /s/ Xxxxxxx X. Von der Ruhr
------------------------------
Officer - President
PURCHASER:
PARESCO, INC.
By /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Officer - Director of Operations
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SCHEDULE 1
The Company's German subsidiary is subject to a court judgment
in Germany in the amount of approximately $185,000 related to an employment
termination dispute. The subsidiary and the Company vigorously object to the
court's ruling and the subsidiary intends to appeal this judgment. If that
judgment stands, the Company's consolidated income statement is likely to be
required to reflect that judgment.
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