EXHIBIT 99.3
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
ADUROMED CORPORATION,
GENERAL DEVICES, INC.,
AND
THE PURCHASERS NAMED IN EXHIBIT A-I
DATED AS OF JANUARY 23, 2006
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
This Amended and Restated Securities Purchase Agreement (the "Amended
and Restated Purchase Agreement"), dated as of January 23, 2006, is entered into
by and among Aduromed Corporation, a Delaware corporation ("Aduromed"), General
Devices, Inc., Delaware corporation ("GDI"), and the persons listed on Exhibit
A-I hereto (the "Purchasers").
RECITALS
WHEREAS, Aduromed and the Purchasers have heretofore entered into that
certain Securities Purchase Agreement, dated as of September 30, 2005 (the
"Original Purchase Agreement"), pursuant to which Aduromed (a) at the First
Closing, issued to the Purchasers (i) certain shares of its Series A Preferred
Stock, $.01 par value per share (the "Aduromed Series A Preferred"), and (ii)
certain warrants (the "First Closing Aduromed Warrants") to purchase shares of
Aduromed's Common Stock, $.01 par value per share (the "Aduromed Common Stock"),
and (ii) agreed to issue to the Purchasers, at the Second Closing (as
contemplated by the Original Purchase Agreement), certain shares of its Series B
Preferred Stock, $.01 par value per share (the "Aduromed Series B Preferred")
and certain warrants (the "Second Closing Aduromed Warrants") to purchase shares
of Aduromed's Common Stock, in each case, upon the satisfaction of certain
conditions to such issuance described therein;
WHEREAS, subsequent to the consummation of the First Closing but prior
to the consummation of the Second Closing (as contemplated by the Original
Purchase Agreement), Aduromed entered into that certain Amended and Restated
Agreement and Plan of Merger, dated as of January 23, 2006 (the "Merger
Agreement"), by and among Aduromed, GDI, GD MergerSub, Inc., a Delaware
corporation, and GD MergerSub II, Inc. ("MergerSub"), a Delaware corporation,
pursuant to MergerSub shall merge with and into Aduromed (the "Merger"), with
Aduromed as the surviving entity of the Merger (the "Surviving Entity", and
together with Aduromed, GDI and MergerSub, each a "Company" and collectively,
the "Companies");
WHEREAS, pursuant to the terms of the Merger Agreement, upon the
consummation of the Merger (i) each outstanding share of Aduromed's Common
Stock, $.01 par value per share (the "Aduromed Common Stock"), will be converted
into 1.795 shares of GDI's Common Stock, $.0001 par value per share (the "GDI
Common Stock"), (ii) each outstanding share of Aduromed Series A Preferred will
be converted into 1.795 shares of GDI's Series A Preferred Stock, $.0001 par
value per share (the "GDI Series A Preferred"), which shares of GDI Series A
Preferred shall have the designations and powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof, as set forth in the Certificate of
Designation attached hereto as Exhibit K (the "GDI Series A Certificate of
Designations"), (iii) each outstanding First Closing Aduromed Warrant will be
converted in warrants (the "First Closing GDI Warrants") to purchase such number
of shares of GDI Common Stock equal to (A) 1.795, times, (B) the number of
shares of Aduromed Common Stock issuable upon exercise of the First Closing
Aduromed Warrants, and (iv) all outstanding shares of MergerSub's Common Stock,
$.01 par value per share (the "MergerSub Common Stock"), will be converted into
100 shares of Aduromed Common Stock such that the Surviving Entity will become a
wholly-owned subsidiary of GDI;
WHEREAS, as a result of the structure of the Merger, the parties
hereto have agreed to amend and restate the terms of the Original Purchase
Agreement to provide that (a) in lieu of the issuance by Aduromed to the
Purchasers of Aduromed Series B Preferred at the Second Closing (as contemplated
by the Original Purchase Agreement), GDI shall issue to the Purchasers at the
Second Closing (as contemplated herein), upon the terms and conditions set forth
herein, certain shares of GDI's Series B Preferred Stock, $.0001 par value per
share (the "GDI Series B Preferred"), which shares of GDI Series B Preferred
shall have the designations and powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof, as set forth in the Certificate of Designation attached
hereto as Exhibit L (the "GDI Series B Certificate of Designations"), and (b) in
lieu of the issuance by Aduromed to the Purchasers of Second Closing Aduromed
Warrants at the Second Closing (as contemplated by the Original Purchase
Agreement), GDI shall issue to the Purchasers at the Second Closing (as
contemplated herein), warrants (the "Second Closing GDI Warrants") to purchase
certain shares of GDI Common Stock, in each case, upon the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and other good and valuable consideration, the receipt of which is
acknowledged, the parties hereto hereby agree that the Original Purchase
Agreement be, and hereby is, amended and restated in its entirety as herein set
forth:
1. Authorization, Sale and Exchange.
1.1 Authorization.
(a) Authorization of Aduromed Series A Preferred. As of the date
of the Original Purchase Agreement, Aduromed has duly authorized the
sale and issuance, pursuant to the terms of the Original Purchase
Agreement, of 3,489,527 shares of Aduromed Series A Preferred, having
the designations and powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations
and restrictions thereof, as set forth in the Certificate of
Designation attached hereto as Exhibit B (the "Aduromed Series A
Certificate of Designations").
(b) Authorization of First Closing Aduromed Warrants. As of the
date of the Original Purchase Agreement, Aduromed has duly authorized
the sale and delivery, pursuant to the terms of the Original Purchase
Agreement, of First Closing Aduromed Warrants to purchase 3,489,527
shares (the "First Closing Aduromed Warrant Shares") of Aduromed
Common Stock, each substantially in the form attached hereto as
Exhibit C.
(c) Authorization of GDI Series A Preferred. As of the date of
this Amended and Restated Purchase Agreement, GDI has duly authorized
the issuance to the Purchasers, pursuant to the terms of the Merger
Agreement, of 6,263,702 shares of GDI Series A Preferred, having the
designations and powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations
and restrictions thereof, as set forth in the GDI Series A Certificate
of Designations.
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(d) Authorization of First Closing GDI Warrants. As of the date
of this Amended and Restated Purchase Agreement, GDI has duly
authorized the issuance and delivery to the Purchasers, pursuant to
the terms of the Merger Agreement, of First Closing GDI Warrants to
purchase 6,263,700.97 shares of GDI Common Stock (the "First Closing
GDI Warrant Shares"), each substantially in the form attached hereto
as Exhibit M.
(e) Authorization of GDI Series B Preferred. GDI will take all
action necessary to authorize, prior to the occurrence of the Second
Closing, the sale and issuance, pursuant to the terms of this Amended
and Restated Purchase Agreement, of 15,780,160 shares of GDI Series B
Preferred Stock, having the designations and powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof, as set forth in
the GDI Series B Certificate of Designation.
(f) Authorization of Second Closing GDI Warrants. GDI will take
all action necessary to authorize, prior to the occurrence of the
Second Closing, the sale and delivery, pursuant to the terms of this
Amended and Restated Purchase Agreement, of warrants to purchase
15,780,160 shares (the "Second Closing GDI Warrant Shares" and
together with the First Closing GDI Warrant Shares, the "GDI Warrant
Shares") of GDI Common Stock, each substantially in the form attached
hereto as Exhibit E (the "Second Closing GDI Warrants" and together
with the First Closing GDI Warrants, the "GDI Warrants").
1.2 Sale of Preferred Stock and Warrants.
(a) First Closing. Subject to the terms and conditions of the
Original Purchase Agreement, at the First Closing (as defined in
Section 2) Aduromed will sell and deliver to each of the Purchasers,
and each Purchaser will severally (and not jointly) purchase:
(i) such number of shares of Aduromed Series A Preferred set
forth opposite such Purchaser's name under the heading "Aduromed
Series A Preferred Shares" on Exhibit A-I, and
(ii) a First Closing Aduromed Warrant to initially purchase
such number of First Closing Aduromed Warrant Shares set forth
opposite such Purchaser's name under the heading "First Closing
Aduromed Warrants" on Exhibit A-I, which shall be equal to the
number of shares of Aduromed Series A Preferred being purchased
by such Purchaser at the First Closing,
for an aggregate purchase price set forth opposite such Purchaser's
name under the heading "First Closing Purchase Price" on Exhibit A-I
(such Purchaser's "First Closing Purchase Price"), which aggregate
First Closing Purchase Price for such Purchaser shall equal the
product of (x) $0.57, times (y) the number of shares of Aduromed
Series A Preferred being purchased by such Purchaser at the First
Closing.
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(b) Merger Closing. Subject to the terms and conditions of the
Merger Agreement, at the closing of the Merger, GDI will issue and
deliver to each of the Purchasers, in accordance with the Merger
Agreement:
(i) such number of shares of GDI Series A Preferred set
forth opposite such Purchaser's name under the heading "GDI
Series A Preferred Shares" on Exhibit A-I, and
(ii) a First Closing GDI Warrant to initially purchase such
number of First Closing GDI Warrant Shares set forth opposite
such Purchaser's name under the heading "First Closing GDI
Warrants" on Exhibit A-I, which shall be equal to the number of
shares of GDI Series A Preferred being issued to such Purchaser
in connection with the Merger.
(c) Second Closing. Subject to the terms and conditions of this
Amended and Restated Purchase Agreement, at the Second Closing (as
defined in Section 2), if such Second Closing shall occur in
accordance with this Amended and Restated Purchase Agreement, GDI will
sell and deliver to each of the Purchasers, and each Purchaser will
severally (and not jointly) purchase:
(i) such number of shares of GDI Series B Preferred set
forth opposite such Purchaser's name under the heading "GDI
Series B Preferred Shares" on Exhibit A-II, and
(ii) a Second Closing GDI Warrant to initially purchase such
number of Second Closing GDI Warrant Shares set forth opposite
such Purchaser's name under the heading "Second Closing GDI
Warrants" on Exhibit A-II, which shall be equal to the number of
shares of GDI Series B Preferred being purchased by such
Purchaser at the Second Closing,
for an aggregate purchase price set forth opposite such Purchaser's
name under the heading "Second Closing Purchase Price" on Exhibit A-II
(such Purchaser's "Second Closing Purchase Price").
1.3 Use of Proceeds. Aduromed, GDI and the Surviving Entity will use
the proceeds from the sale of the Aduromed Series A Preferred, the First Closing
Aduromed Warrants, the GDI Series B Preferred and the Second Closing GDI
Warrants sold under the Original Purchaser Agreement and this Amended and
Restated Purchase Agreement for the purposes set forth on Schedule 1.3 attached
hereto.
1.4 Separate Agreements. Aduromed's and GDI's agreement with each of
the Purchasers is a separate agreement, and the sale of the Aduromed Series A
Preferred, the First Closing Aduromed Warrants, the GDI Series B Preferred and
the Second Closing GDI Warrants to each of the Purchasers is a separate sale.
2. The Closings.
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2.1 The First Closing. The first closing (the "First Closing") of the
sale and purchase of Aduromed Series A Preferred and First Closing Aduromed
Warrants under the Original Purchase Agreement shall take place at the offices
of Mayer, Brown, Xxxx & Maw LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at
such other place as is mutually agreeable to Aduromed and the Purchasers. At the
First Closing, Aduromed shall deliver to each Purchaser (a) certificates
representing shares of Aduromed Series A Preferred in an amount calculated in
accordance with Section 1.2(a) and (b) First Closing Aduromed Warrants to
purchase First Closing Aduromed Warrant Shares in an amount calculated in
accordance with Section 1.2(a), in each case, registered in the name of each
such Purchaser, against payment to Aduromed of the First Closing Purchase Price
therefor, by wire transfer, Federal Reserve Bank Check, or other method
acceptable to Aduromed. The First Closing occurred on September 1, 2005 (the
"First Closing Date").
2.2 The Merger Closing. At the closing of the Merger in accordance
with the Merger Agreement, GDI shall deliver to each Purchaser (a) certificates
representing shares of GDI Series A Preferred to be issued to the Purchasers
pursuant to the Merger Agreement, which shall be in an amount calculated in
accordance with Section 5 of the Merger Agreement and Section 1.2(b) hereof and
(b) First Closing GDI Warrants to purchase First Closing GDI Warrant Shares in
an amount calculated in accordance with Section 8 of the Merger Agreement and
Section 1.2(b) hereof, in each case, registered in the name of each such
Purchaser.
2.3 The Second Closing. The second closing (the "Second Closing" and
together with the First Closing, the "Closings"), if any, of the sale and
purchase of GDI Series B Preferred and Second Closing GDI Warrants under Amended
and Restated Purchase Agreement shall take place at the offices of Mayer, Brown,
Xxxx & Maw LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place
as is mutually agreeable to GDI, Aduromed and the Purchasers. At the Second
Closing, GDI shall deliver to the Purchasers (a) certificates representing
shares of GDI Series B Preferred in an amount calculated in accordance with
Section 1.2(c) and (b) Second Closing GDI Warrants to purchase Second Closing
GDI Warrant Shares in an amount calculated in accordance with Section 1.2(c), in
each case, registered in the name of such Purchasers, against payment to GDI of
the Second Closing Purchase Price therefor, by wire transfer, Federal Reserve
Bank Check, or other method acceptable to GDI. Subject to the satisfaction or
waiver of each of the conditions set forth in Section 6.2, the Second Closing
shall occur immediately following the closing of the Merger in accordance with
the Merger Agreement or on such other date as is mutually agreeable to GDI,
Aduromed and the Purchasers (the "Second Closing Date" and together with the
First Closing Date, the "Closing Dates").
3. First Closing Representations of Aduromed. For the purposes of this
Amended and Restated Purchase Agreement, the phrase "to Aduromed's knowledge"
shall include facts, events or circumstances that are actually known by, or
should have reasonably been known (after reasonable investigation) by, the Chief
Executive Officer or Chief Financial Officer of Aduromed. Except as disclosed by
Aduromed in the First Closing Disclosure Schedule attached as Exhibit F hereto
(the "First Closing Disclosure Schedule"), which First Closing Disclosure
Schedule makes explicit reference to the particular representation or warranty
as to which exception is taken (provided, that matters disclosed in any
particular part of the First Disclosure Schedule shall be deemed to have been
disclosed in the other parts of the First Disclosure Schedule regardless of
whether a specific cross reference is made provided the relevance of the
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disclosed information with respect to such other parts would be reasonably
apparent, to a person experienced in corporate dealings of the nature
encompassed by the Original Purchase Agreement and the First Closing Related
Agreements, from the information disclosed), which exceptions shall be deemed to
be part of the representations and warranties made hereunder, Aduromed hereby
represents and warrants, as of the date of the Original Purchase Agreement and
as of the First Closing Date to the Purchasers as follows:
3.1 Organization and Corporate Power. Aduromed and each of its
subsidiaries is duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization and has full power and
authority to own its properties and to conduct its business as presently
conducted and as proposed to be conducted by it and to enter into and perform
the Original Purchase Agreement and the First Closing Related Agreements (as
defined in Section 3.6 below), to carry out the transactions contemplated by the
Original Purchase Agreement and the First Closing Related Agreements and to (a)
issue, sell and deliver the shares of Aduromed Series A Preferred to be sold and
delivered to the Purchasers at the First Closing, (b) sell and deliver the First
Closing Aduromed Warrants to be sold and delivered to the Purchasers at the
First Closing, (c) issue, sell and deliver the First Closing Aduromed Warrant
Shares upon exercise of the First Closing Aduromed Warrants and (d) issue, sell
and deliver the shares of Aduromed Common Stock issuable upon conversion of the
shares of Aduromed Series A Preferred (the "Aduromed Conversion Shares").
Aduromed and each of its subsidiaries is duly qualified to do business as a
foreign corporation in every jurisdiction in which the failure to so qualify
would reasonably be expected to have a First Closing Material Adverse Effect.
For purposes of this Amended and Restated Purchase Agreement, the term "First
Closing Material Adverse Effect" shall mean (i) a material adverse effect on the
results of operations, business, assets, liabilities or condition (financial or
otherwise) of Aduromed and its subsidiaries, taken as a whole, or (ii) any
material limitation on the ability of Aduromed to perform its obligations under,
or the legality, validity or enforceability of, the Original Purchase Agreement
or the First Closing Related Agreements. Aduromed has furnished to the
Purchasers true and complete copies of its certificate of incorporation and
by-laws, each as amended to date and presently in effect.
3.2 Capitalization.
(a) The authorized capital stock of Aduromed (immediately prior
to the First Closing) consists of (i) 50,000,000 shares of Aduromed
Common Stock, of which 10,585,600 shares are issued and outstanding,
and (ii) 20,000,000 shares of Preferred Stock, of which 3,489,527
shares have been designated as Series A Preferred Stock, of which no
shares are issued and outstanding.
(b) All of the issued and outstanding shares of Aduromed's
capital stock have been duly authorized and validly issued and are
fully paid and nonassessable. Except as set forth in the First Closing
Disclosure Schedule or as provided in the Original Purchase Agreement
or in the First Closing Related Agreements, as of the date of the
Original Purchase Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of Aduromed is
authorized or outstanding, (ii) Aduromed has no obligation (contingent
or otherwise) to issue any subscription, warrant, option, convertible
security or other such
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right or to issue or distribute to holders of any shares of its
capital stock, any evidences of indebtedness or assets of Aduromed,
and (iii) Aduromed has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding
shares of capital stock of Aduromed have been offered, issued and sold
by Aduromed in compliance with applicable federal and state securities
laws.
3.3 Subsidiaries, Etc. Except as set forth in the First Closing
Disclosure Schedule, Aduromed has no subsidiaries and does not own or control,
directly or indirectly, any shares of capital stock of any other corporation or
limited liability company or any interest in any partnership, joint venture or
other non-corporate business enterprise.
3.4 Agreements. Set forth on Exhibit F-1 hereof is a true and complete
list of the stockholders of Aduromed, showing the number of shares of Aduromed
or other securities of Aduromed held by each stockholder as of the date of the
Original Purchase Agreement. Except as contemplated under the Original Purchase
Agreement or under the First Closing Related Agreements, there are no
agreements, written or oral, between Aduromed and any holder of its capital
stock, or, to Aduromed's knowledge, among any holders of its capital stock,
relating to the acquisition (including without limitation rights of first
refusal or preemptive rights), disposition, registration under the Securities
Act of 1933, as amended (the "Securities Act"), or voting of the capital stock
of Aduromed.
3.5 Sale, Issuance and Delivery of Aduromed Series A Preferred and
First Closing Aduromed Warrants.
(a) The issuance, sale and delivery of the Aduromed Series A
Preferred at the First Closing, and the issuance and delivery of the
Aduromed Conversion Shares issuable upon conversion of the Aduromed
Series A Preferred, has been duly authorized by all necessary
corporate action on the part of Aduromed, and all such shares have
been duly reserved for issuance. The Aduromed Series A Preferred when
so issued and delivered at the First Closing against delivery by the
Purchasers to Aduromed of the First Closing Purchase Price, and the
Aduromed Conversion Shares issuable upon conversion of the Aduromed
Series A Preferred, when issued upon such conversion, will be duly and
validly issued, fully paid and non-assessable.
(b) The sale and delivery of the First Closing Aduromed Warrants
at the First Closing have been duly authorized by all necessary
corporate action on the part of Aduromed. The First Closing Aduromed
Warrants, when so sold and delivered against payment therefor in
accordance with the provisions of the Original Purchase Agreement,
will constitute valid and binding obligations of Aduromed enforceable
in accordance with their terms, subject as to enforcement of remedies
to applicable bankruptcy, insolvency, reorganization or similar laws
affecting generally the enforcement of creditors' rights and subject
to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies.
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(c) The sale and delivery of the First Closing Aduromed Warrant
Shares issuable upon exercise of the First Closing Aduromed Warrants
have been duly authorized by all necessary corporate action on the
part of Aduromed, and all such shares have been duly reserved for
issuance. The First Closing Aduromed Warrant Shares, when so issued,
sold and delivered against payment therefor in accordance with the
provisions of the First Closing Aduromed Warrants, will be duly and
validly issued, fully paid and non-assessable.
3.6 Authority for Agreement; Effect of Transactions. The execution,
delivery and performance by Aduromed of the Original Purchase Agreement, the
Aduromed Series A Certificate of Designations, the First Closing Aduromed
Warrants, the Registration Rights Agreement (as defined in Section 6.1(f)
hereof) and the Stockholder Agreements (as defined in Section 6.1(g) hereof)
(the Aduromed Series A Certificate of Designations, the First Closing Aduromed
Warrants, the Registration Rights Agreement and the Stockholders Agreement are
sometimes hereinafter referred to collectively as the "First Closing Related
Agreements") and the consummation by Aduromed of the transactions contemplated
by the Original Purchase Agreement and the First Closing Related Agreements,
have been duly authorized by all necessary corporate action. The Original
Purchase Agreement and the First Closing Related Agreements have been duly
executed and delivered by Aduromed and constitute valid and binding obligations
of Aduromed enforceable in accordance with their respective terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency, reorganization or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The execution
of and performance of the transactions contemplated by the Original Purchase
Agreement and the First Closing Related Agreements and compliance with their
provisions by Aduromed will not (a) violate any provision of law or regulation
applicable to Aduromed and its subsidiaries or any of their respective assets,
(b) result in the creation of any lien upon any of the property of Aduromed or
any of its subsidiaries, or (c) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, or
require a consent or waiver under, Aduromed's certificate of incorporation or
by-laws (each as amended to date) or any indenture, lease, agreement or other
instrument to which Aduromed or any of its subsidiaries is a party or by which
it or any of their respective properties are bound, or any decree, judgment,
license, permit, order, statute, rule or regulation applicable to Aduromed or
any of its subsidiaries.
3.7 Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to Aduromed's knowledge, any
reasonable basis therefor or threat thereof, against Aduromed or any of its
subsidiaries which questions the validity of the Original Purchase Agreement or
the First Closing Related Agreements or the right of Aduromed to enter into any
of them, or which would reasonably be expected to result, either individually or
in the aggregate, in a First Closing Material Adverse Effect.
3.8 Property and Assets. Except as set forth in the First Closing
Disclosure Schedule, Aduromed and each of its subsidiaries has good and
marketable title to all of its material properties and assets, and none of such
properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge or encumbrance.
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3.9 Leasehold Interests. Each lease or agreement to which Aduromed or
any of its subsidiaries is a party under which it is a lessee of any property,
real or personal, is a valid and subsisting agreement, duly authorized and
entered into, without any default of Aduromed or any of its subsidiaries
thereunder and, to Aduromed's knowledge, without any default thereunder of any
other party thereto. No event has occurred and is continuing which, with due
notice or lapse of time or both, would constitute a default or event of default
by Aduromed or any of its subsidiaries under such lease or agreement or, to
Aduromed's knowledge, by any other party thereto. Aduromed's and its
subsidiaries' possession of such property has not been disturbed and, to
Aduromed's knowledge after due inquiry, no claim has been asserted against
Aduromed or any of its subsidiaries adverse to its rights in such leasehold
interests.
3.10 Financial Statements. Aduromed has furnished to the Purchasers
(i) the audited balance sheet of Aduromed as of December 31, 2003, and the
related statements of operations, stockholders' equity and cash flows for the
twelve month period then ended, and (ii) the audited balance sheet of Aduromed
as of December 31, 2004, and the related statements of operations, stockholders'
equity and cash flows for the twelve month period then ended (collectively, the
"Aduromed Financial Statements"). The Aduromed Financial Statements were
prepared in accordance with generally accepted accounting principles
consistently applied during the period covered thereby, and fairly presents the
financial position of Aduromed and its consolidated subsidiaries on the date of
such statement, except that the Aduromed Financial Statements may not contain
all footnotes required by generally accepted accounting principles.
3.11 Absence of Undisclosed Liabilities. Except as and to the extent
expressly disclosed in the balance sheet contained in the Aduromed Financial
Statements or in the First Closing Disclosure Schedule, or for liabilities that
may have arisen in the ordinary course of business consistent with past
practices and that individually or in the aggregate do not have and would not
reasonably be expected to have a First Closing Material Adverse Effect, neither
Aduromed nor any of its subsidiaries has any liabilities of a type required
under generally accepted accounting principles to be disclosed therein.
3.12 Absence of Certain Developments. Since December 31, 2004, there
has been (a) to Aduromed's knowledge, no event which would constitute or
reasonably be expected to have a First Closing Material Adverse Effect, (b) no
declaration, setting aside or payment of any dividend or other distribution with
respect to, or any direct or indirect redemption or acquisition of, any of the
capital stock or other equity interest of Aduromed, (c) no waiver of any
material right of Aduromed or any of its subsidiaries or cancellation of any
material debt or claim held by Aduromed or any of its subsidiaries, (d) no loan
by Aduromed or any of its subsidiaries to any officer, director, employee or
stockholder of Aduromed or any of its subsidiaries, or any agreement or
commitment therefor, (e) no increase, direct or indirect, in the compensation
paid or payable to any officer, director, employee, consultant or agent of
Aduromed or any of its subsidiaries, other than reasonable and customary
increases in compensation consistent with Aduromed's past practices, (f) no
material loss, destruction, forfeiture of or damage to any property of Aduromed
or any of its subsidiaries whether or not insured, (g) no labor disputes
involving Aduromed or any of its subsidiaries, and (h) no acquisition,
disposition or lease of any material assets (or any contract or arrangement
therefor).
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3.13 Tax Matters. Aduromed and each of its subsidiaries have timely
filed all foreign, federal, state and local income, excise or franchise tax
returns, real estate and personal property tax returns, sales and use tax
returns and other tax returns required to be filed by it and has paid all taxes
owed by it, except taxes which have not yet accrued or otherwise become due, or
for which adequate provision has, to the extent required by generally accepted
accounting principles, been made in the Aduromed Financial Statements. The
provision for taxes in the Aduromed Financial Statements is sufficient as of its
date for the payment of all accrued and unpaid federal, state, county and local
taxes of any nature of Aduromed and each of its subsidiaries, and any applicable
taxes owing to any foreign jurisdiction, whether or not assessed or disputed.
All taxes and other assessments and levies which Aduromed or any of its
subsidiaries is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities. With regard to
the income tax returns of Aduromed and its subsidiaries, neither Aduromed nor
any of its subsidiaries has received notice of any audit or of any proposed
deficiencies from any taxing authority, and no controversy with respect to taxes
of Aduromed or any of its subsidiaries of any type is pending or, to Aduromed's
knowledge, threatened. There are in effect no waivers of applicable statutes of
limitations with respect to any taxes owed by Aduromed or any of its
subsidiaries for any year.
3.14 Contracts and Commitments. The First Closing Disclosure Schedule
contains a complete and accurate list, and Aduromed has delivered to the
Purchasers true and complete copies, of all written or oral agreements,
instruments, undertakings, commitments or restrictions (collectively, "Aduromed
Contracts") (a) under which Aduromed or any of its subsidiaries has any rights
or any obligation or liability, or (b) by which Aduromed or any of its
subsidiaries, or any of their respective assets, are bound. Aduromed and each of
its subsidiaries and, to Aduromed's knowledge, each other party thereto have in
all material respects performed all the obligations required to be performed by
them to date under the Aduromed Contracts (or each non-performing party has
received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or lapse of time or both) under any Aduromed Contract.
3.15 Loans and Advances. Neither Aduromed nor any of its subsidiaries
has any outstanding loans or advances to any person and is not obligated to make
any such loans or advances, except, in each case, for advances to employees of
Aduromed in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for Aduromed.
3.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
Neither Aduromed nor any of its subsidiaries has assumed, guaranteed, endorsed
or otherwise become directly or contingently liable on any indebtedness of any
other person (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor, or otherwise to assure the creditor
against loss), except for guaranties by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business.
3.17 Transactions With Affiliates. Except as set forth in the First
Closing Disclosure Schedule, no director, officer, employee or stockholder of
Aduromed or any of its subsidiaries, or member of the family of any such person,
or any corporation, partnership, trust or other entity
10
in which any such person, or any member of the family of any such person, has a
substantial interest or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, is a party to any
transaction with Aduromed or any of its subsidiaries, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
services by, rental of real or personal property from or otherwise requiring
payments to any such person or firm, other than employment-at-will arrangements
in the ordinary course of business.
3.18 Proprietary Rights; Employee Restrictions. Set forth in the First
Closing Disclosure Schedule is a list and brief description of all patents,
copyrights, trademarks, trade names, service marks, and all applications for any
of the foregoing, logos, and other proprietary rights necessary for the conduct
of Aduromed's and its subsidiaries' business as presently conducted or
contemplated (collectively, "Aduromed Intellectual Property Rights"). Aduromed
owns or has the legal right to use all such Intellectual Property Rights and, to
Aduromed's knowledge, neither the present nor proposed business activities or
products of Aduromed or any of its subsidiaries infringe or misappropriate any
patents, copyrights, trademarks, trade names, service marks, logos or other
intellectual or tangible proprietary rights of others. Neither Aduromed nor any
of its subsidiaries has received any notice or other claim from any person
asserting that any of Aduromed's or any of its subsidiaries' present or proposed
activities infringe or misappropriate, or may infringe or misappropriate, any
intellectual property rights of any person. To Aduromed's knowledge, Aduromed
and its subsidiaries has the right to use, free and clear of claims or rights of
others, all trade secrets and know-how, including without limitation: customer
lists, manufacturing processes, hardware designs, programming processes,
software and other trade secrets or know-how required for or incident to its
products or its business as presently conducted or contemplated. Aduromed and
its subsidiaries have taken all steps reasonably required to establish and
preserve its ownership of all of the Aduromed Intellectual Property Rights,
including but not limited to requiring all employees and consultants to execute
a confidentiality and assignment of inventions agreement in favor of Aduromed
and its subsidiaries. Aduromed is not aware of any infringement or
misappropriation by others of any Aduromed Intellectual Property Rights of
Aduromed or any of its subsidiaries, or any violation of the confidentiality of
any of their respective proprietary information. Neither Aduromed nor any of its
subsidiaries is making unlawful use of any confidential information or trade
secrets of any past or present employees of Aduromed or any of its subsidiaries.
Neither Aduromed nor any of its subsidiaries has granted or assigned to any
other person or entity any right to manufacture, have manufactured, assemble or
sell the products or proposed products or to provide the services or proposed
services of Aduromed or any of its subsidiaries.
3.19 Proprietary Information of Third Parties. No third party has
claimed or, to Aduromed's knowledge, has reason to claim that any person
employed or engaged by Aduromed or any of its subsidiaries has (a) violated or
may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or (c) interfered
or may be interfering in the employment relationship between such third party
and any of its present or former employees. To Aduromed's knowledge, no person
employed by or affiliated with Aduromed or any of its subsidiaries has employed
or proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and to Aduromed's knowledge, no person
11
employed by or affiliated with Aduromed or any of its subsidiaries has violated
any confidential relationship which such person may have had with any third
party, in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of Aduromed or any of its subsidiaries. To Aduromed's knowledge, neither the
execution or delivery of the Original Purchase Agreement or the First Closing
Related Agreements, the carrying on of the business of Aduromed and its
subsidiaries as officers, employees or agents by any officer, director or key
employee of Aduromed or any of its subsidiaries, nor the conduct or proposed
conduct of the business of Aduromed or any of its subsidiaries, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any Aduromed Contract.
3.20 Business; Compliance with Laws. Except for those which would not
reasonably be expected to have a First Closing Material Adverse Effect, Aduromed
and each of its subsidiaries has all necessary franchises, permits, licenses and
other rights and privileges necessary to permit it to own its property and to
conduct its business as is presently conducted. Neither Aduromed nor any of its
subsidiaries is in violation of any law, regulation, authorization or order
material to the ownership of its properties or the carrying on of its business
as presently conducted.
3.21 Books and Records. The copies of records of Aduromed, as
furnished to the Purchasers, contain complete and accurate copies of Aduromed's
certificate of incorporation and by-laws and complete and accurate records, in
all material respects, of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock ledger
of Aduromed is complete in all material respects and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of Aduromed.
3.22 Environmental Compliance. Neither Aduromed nor any of its
subsidiaries (a) has ever violated, or is presently in noncompliance with, all
federal, state, and local environmental and health and safety laws, rules,
regulations, ordinances, guidelines, codes, orders, approvals and similar items
("Environmental Laws") applicable to its business and properties; (b) has
generated, manufactured, used, refined, transported, treated, stored, handled,
disposed of, transferred, produced, or processed any pollutant, toxic substance,
hazardous waste, hazardous substance, hazardous material, oil, or petroleum
product other than ordinary household cleaning and other similar products
("Hazardous Materials") as defined under any Environmental Law, or any solid
waste, and has any knowledge of the release or threat of release of any
Hazardous Materials from its products, properties or facilities except in
compliance with law; (c) has (i) entered into or been subject to any consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter relating to its business or any of its
properties or facilities, (ii) received notice under the citizen suit provision
of any Environmental Law in connection with its business or any of its
properties or facilities, (iii) received any request for information, notice,
demand letter, administrative inquiry, or formal or informal complaint or claim
with respect to any environmental or health and safety matter relating to its
business or any of its properties or facilities, or (iv) been subject to or
threatened with any governmental or citizen enforcement action with respect to
any environmental or health and safety matter relating to its business or any of
its properties or facilities, and has any reason to believe that any matters
described in clauses (i) through (iv) above will be forthcoming. No lien has
been imposed on any of the properties or facilities of Aduromed or any of its
subsidiaries by any governmental
12
agency at the federal, state, or local level in connection with the presence of
any Hazardous Materials.
3.23 Brokerage. Except as set forth in the First Closing Disclosure
Schedule, there are no, and will be no, claims for and no person is entitled to
any brokerage commissions, finder's fees or similar compensation in connection
with the transactions contemplated by the Original Purchase Agreement from
Aduromed or any of its subsidiaries or based on any arrangement or agreement
made by or on behalf of Aduromed or any of its subsidiaries.
3.24 Employee Benefit Plans.
(a) Except as set forth in the First Closing Disclosure Schedule,
neither Aduromed nor any of its subsidiaries maintains or contributes
to any employee benefit plans. Aduromed and each of its subsidiaries
is and has been in material compliance with the provisions of all laws
or rules or regulations applicable to any employee benefit plan
maintained or contributed to by Aduromed or any of its subsidiaries
for the benefit of its employees and, to Aduromed's knowledge, there
are no claims (other than routine claims for benefits) pending or
threatened with respect to any of such employee benefit plans. Neither
Aduromed nor any of its subsidiaries maintains or contributes to, or
has ever maintained or contributed to, any qualified retirement plan
that is subject to the minimum funding requirements of Xxxxxxx 000 xx
xxx Xxxxxx Xxxxxx Internal Revenue Code of 1986, as amended. There are
no unfunded obligations of Aduromed or any of its subsidiaries under
any retirement, pension, profit-sharing or deferred compensation plan
or program. Neither Aduromed nor any of its subsidiaries is required
to make any payments or contributions to any employee benefit plan
pursuant to any collective bargaining agreement. Neither Aduromed nor
any of its subsidiaries has ever maintained or contributed to any
employee benefit plan providing or promising any health or other
non-pension benefits to terminated employees. For purposes of this
Section 3.24, the "Aduromed" includes all entities that have
controlled, have been under the control of, or have been under common
control with, Aduromed.
(b) Aduromed has made available to the Purchasers a description
of the compensation Aduromed and each of its subsidiaries is currently
paying, and has agreed to pay in the future, to each of its employees
and consultants, including without limitation, salaries, fees, bonuses
and benefits.
3.25 Employee Agreements. Each of the officers of Aduromed and each of
its subsidiaries, each key employee and each other employee now employed by
Aduromed or any of its subsidiaries who has access to confidential information
of Aduromed or of any of its subsidiaries has executed a Confidentiality,
Assignment of Inventions and Non-Competition Agreement in a form previously
disclosed to the Purchasers, and such agreements are in full force and effect.
No officer or key employee of Aduromed or any of its subsidiaries has advised
Aduromed or any of its subsidiaries (orally or in writing) that he or she
intends to terminate employment with Aduromed or any of its subsidiaries.
3.26 Employees. Aduromed and each of its subsidiaries has complied in
all material respects with all applicable laws relating to the employment of
labor, including provisions
13
relating to wages, laws, equal opportunity, collective bargaining and the
payment of social security and other taxes. None of the employees of Aduromed or
any of its subsidiaries is represented by any labor union or covered by any
collective bargaining agreements; Aduromed is not aware of any effort to
establish a labor union or bargaining unit or similar organizational effort with
respect to its employees or the employees of any of its subsidiaries; and, to
Aduromed's knowledge, there is no labor strike or other labor trouble pending or
threatened and with respect to Aduromed or any of its subsidiaries. There are no
pending, or, to Aduromed's knowledge, threatened or anticipated (i) employment
discrimination charges or complaints against or involving Aduromed or any of its
subsidiaries before any federal, state or local commission or agency or (ii)
unfair labor practice charges or complaints, disputes or grievances involving
Aduromed or any of its subsidiaries.
3.27 No Solicitation or Advertisement. Neither Aduromed nor any person
acting on its behalf has engaged, in connection with the offering of the
Aduromed Series A Preferred, First Closing Aduromed Warrants, First Closing
Aduromed Warrant Shares or Aduromed Conversion Shares, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act.
3.28 Securities Act Registration. Assuming that the representations
and warranties of each of the Purchasers contained herein are true, it is not
necessary in connection with the offer, sale and delivery of the Aduromed Series
A Preferred, First Closing Aduromed Warrants, First Closing Aduromed Warrant
Shares and Aduromed Conversion Shares in the manner contemplated by the Original
Purchase Agreement to register any of the Aduromed Series A Preferred, First
Closing Aduromed Warrants, First Closing Aduromed Warrant Shares or Aduromed
Conversion Shares under the Securities Act or under applicable state securities
or Blue Sky laws regulating the issuance or sale of securities.
3.29 Investment Company Act. Aduromed is not an "investment company,"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
3.30 U.S. Real Property Holding Corporation. Aduromed is not now and
has never been a "United States real property holding corporation," as defined
in the Internal Revenue Code of 1986, as amended.
3.31 Information Supplied to Purchasers. Neither the Original Purchase
Agreement nor any First Closing Related Agreement nor any written agreement,
certificate or document furnished by management of Aduromed in connection with
the transactions contemplated herein, contain any untrue statement by Aduromed
of a material fact, or when taken as a whole omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
4. Second Closing Representations of Aduromed, GDI and the Surviving
Entity. For the purposes of this Amended and Restated Purchase Agreement, the
phrase "to the Company's knowledge" shall include facts, events or circumstances
that are actually known by, or should have reasonably been known (after
reasonable investigation) by, the Chief Executive Officer or Chief Financial
Officer of the any of the Companies. Except as disclosed in the First Cosing
14
Disclosure Schedule or the Second Closing Disclosure Schedule attached as
Exhibit N hereto (the "Second Closing Disclosure Schedule"), which Second
Closing Disclosure Schedule makes explicit reference to the particular
representation or warranty as to which exception is taken (provided, that
matters disclosed in any particular part of the First Closing Disclosure
Schedule or Second Closing Disclosure Schedule shall be deemed to have been
disclosed in the other parts of the Second Closing Disclosure Schedule
regardless of whether a specific cross reference is made provided the relevance
of the disclosed information with respect to such other parts would be
reasonably apparent, to a person experienced in corporate dealings of the nature
encompassed by this Amended and Restated Purchase Agreement and the Second
Closing Related Agreements, from the information disclosed), which exceptions
shall be deemed to be part of the representations and warranties made hereunder,
each of Aduromed, GDI and the Surviving Entity, jointly and severally, hereby
represents and warrants, as of the date of this Amended and Restated Purchase
Agreement and as of the Second Closing Date, to the Purchasers as follows:
4.1 Organization and Corporate Power. Each of the Companies and each
of their respective subsidiaries is duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
full power and authority to own its properties and to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Amended and Restated Purchase Agreement and the Second Closing
Related Agreements (as defined in Section 4.6 below), to carry out the
transactions contemplated by this Amended and Restated Purchase Agreement and
the Second Closing Related Agreements and to (a) issue and deliver the shares of
GDI Series A Preferred and First Closing GDI Warrants to be issued and delivered
to the Purchasers at the closing of the Merger in accordance with the terms of
the Merger Agreement, (b) issue, sell and deliver the shares of GDI Series B
Preferred to be sold and delivered to the Purchasers at the Second Closing, (c)
sell and deliver the Second Closing GDI Warrants to be sold and delivered to the
Purchasers at the Second Closing, (d) issue, sell and deliver the GDI Warrant
Shares upon exercise of the GDI Warrants and (e) issue, sell and deliver the
shares of GDI Common Stock issuable upon conversion of the shares of GDI Series
A Preferred and GDI Series B Preferred (the "GDI Conversion Shares"). Each of
the Companies and each of their respective subsidiaries is duly qualified to do
business as a foreign corporation in every jurisdiction in which the failure to
so qualify would reasonably be expected to have a Second Closing Material
Adverse Effect. For purposes of this Amended and Restated Purchase Agreement,
the term "Second Closing Material Adverse Effect" shall mean (i) a material
adverse effect on the results of operations, business, assets, liabilities or
condition (financial or otherwise) of the Companies and their respective
subsidiaries, taken as a whole, or (ii) any material limitation on the ability
of any Company to perform its obligations under, or the legality, validity or
enforceability of, this Amended and Restated Purchase Agreement or the Second
Closing Related Agreements. Each of the Companies has furnished to the
Purchasers true and complete copies of its certificate of incorporation and
by-laws, each as amended to date and presently in effect.
4.2 Capitalization.
(a) The authorized capital stock of Aduromed (as of the date of
this Amended and Restated Purchase Agreement and as of immediately
prior to the consummation of the Merger) consists of (i) 50,000,000
shares of Aduromed Common Stock, of which 10,585,600 shares are issued
and outstanding, and (ii) 20,000,000 shares of Preferred
15
Stock, of which 3,489,527 shares have been designated as Series A
Preferred Stock, of which 3,489,527 shares are issued and outstanding.
(b) The authorized capital stock of the Surviving Entity
(immediately following the consummation of the Merger) will consist of
1,000 shares of Common Stock, par value $0.01 per share, of which
1,000 shares will be issued and outstanding and held by GDI.
(c) The authorized capital stock of GDI (as of the date of this
Amended and Restated Purchase Agreement and as of immediately prior to
the consummation of the Merger) consists of (i) 100,000,000 shares of
GDI Common Stock, of which 1,259,585 shares are issued and
outstanding, and (ii) 40,000,000 shares of Preferred Stock, of which
(A) 6,263,702 shares have been designated as Series A Preferred Stock,
of which none are issued and outstanding and (B) 15,780,160 shares
have been designated as Series B Preferred Stock, of which none are
issued and outstanding.
(d) The authorized capital stock of GDI (as of immediately
following the consummation of the Merger and the issuance of the GDI
Series B Preferred at the Second Closing) will consist of (i)
100,000,000 shares of GDI Common Stock, of which 20,260,737 shares
will be issued and outstanding, and (ii) 40,000,000 shares of
Preferred Stock, of which (i) 6,263,702 shares will have been
designated as Series A Preferred Stock, of which 6,263,702 shares will
be issued and outstanding and (ii) 15,780,160 shares have been
designated as Series B Preferred Stock, of which 15,780,160 shares
will be issued and outstanding.
(e) Set forth on Exhibit N-1 hereof is a true and complete list
of the stockholders of each of the Companies as of immediately
following the consummation of the Merger and the transactions
contemplated to occur at the Second Closing pursuant to the terms of
this Amended and Restated Purchase Agreement, showing the number of
shares of each class and series of capital stock or other securities
of each Company to be held by each stockholder as of immediately
following the consummation of the Merger and the transactions
contemplated to occur at the Second Closing pursuant to the terms of
this Amended and Restated Purchase Agreement.
(f) All of the issued and outstanding shares of each of the
Companies' capital stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except as set forth in the
Second Closing Disclosure Schedule or as provided in this Amended and
Restated Purchase Agreement or in the Second Closing Related
Agreements, as of the date of this Amended and Restated Purchase
Agreement and as of the Second Closing, (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of any Company is
authorized or outstanding, (ii) no Company has any obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock, any evidences of
indebtedness or assets of any Company, and (iii) no Company has any
obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution
16
in respect thereof. All of the issued and outstanding shares of
capital stock of each of the Companies have been offered, issued and
sold by the Companies in compliance with applicable federal and state
securities laws.
4.3 Subsidiaries, Etc. Except as set forth in the Second Closing
Disclosure Schedule, each Company has no subsidiaries and does not own or
control, directly or indirectly, any shares of capital stock of any other
corporation or limited liability company or any interest in any partnership,
joint venture or other non-corporate business enterprise.
4.4 Agreements. Except as contemplated by this Amended and Restated
Purchase Agreement or under the Second Closing Related Agreements, there are no
agreements, written or oral, between any Company or any holder of any Company's
capital stock, or, to the Company's knowledge, among any holders of the capital
stock of any Company, relating to the acquisition (including without limitation
rights of first refusal or preemptive rights), disposition, registration under
the Securities Act or voting of the capital stock of any Company.
4.5 Sale, Issuance and Delivery of GDI Series A Preferred, GDI Series
B Preferred and GDI Warrants.
(a) The issuance and delivery of the GDI Series A Preferred to
the Purchasers at closing of the Merger in accordance with the Merger
Agreement, and the issuance and delivery of the GDI Conversion Shares
issuable upon conversion of the GDI Series A Preferred, has been duly
authorized by all necessary corporate action on the part of GDI, and
all such shares have been duly reserved for issuance. The GDI Series A
Preferred when so issued and delivered to the Purchasers at closing of
the Merger in accordance with the Merger Agreement, and the GDI
Conversion Shares issuable upon conversion of the GDI Series A
Preferred, when issued upon such conversion, will be duly and validly
issued, fully paid and non-assessable.
(b) The issuance and delivery of the First Closing GDI Warrants
to the Purchasers at closing of the Merger in accordance with the
Merger Agreement have been duly authorized by all necessary corporate
action on the part of GDI. The First Closing GDI Warrants, so when so
issued and delivered to the Purchasers at closing of the Merger in
accordance with the Merger Agreement, will constitute valid and
binding obligations of GDI enforceable in accordance with their terms,
subject as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies.
(c) The issuance, sale and delivery of the GDI Series B Preferred
at the Second Closing, and the issuance and delivery of the GDI
Conversion Shares issuable upon conversion of the GDI Series B
Preferred, will, as of the Second Closing, have been duly authorized
by all necessary corporate action on the part of GDI, and all such
shares will, as of the Second Closing, have been duly reserved for
issuance. The GDI Series B Preferred when so issued and delivered at
the Second Closing against delivery by the Purchasers to GDI of the
Second Closing Purchase Price, and the GDI Conversion Shares
17
issuable upon conversion of the GDI Series B Preferred, when issued
upon such conversion, will be duly and validly issued, fully paid and
non-assessable.
(d) The sale and delivery of the Second Closing GDI Warrants at
the Second Closing have been duly authorized by all necessary
corporate action on the part of GDI. The Second Closing GDI Warrants,
when so sold and delivered against payment therefor in accordance with
the provisions of this Amended and Restated Purchase Agreement, will
constitute valid and binding obligations of GDI enforceable in
accordance with their terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization or similar laws
affecting generally the enforcement of creditors' rights and subject
to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies.
(e) The sale and delivery of the GDI Warrant Shares issuable upon
exercise of the GDI Warrants have been duly authorized by all
necessary corporate action on the part of GDI, and all such shares
have been duly reserved for issuance. The GDI Warrant Shares, when so
issued, sold and delivered against payment therefor in accordance with
the provisions of the GDI Warrants, will be duly and validly issued,
fully paid and non-assessable.
4.6 Authority for Agreement; Effect of Transactions. The execution,
delivery and performance by each of the Companies of this Amended and Restated
Purchase Agreement, the GDI Series A Certificate of Designations, the GDI Series
B Certificate of Designations, the GDI Warrants, the Amended and Restated
Registration Rights Agreement (as defined in Section 6.2(j) hereof), the Amended
and Restated Stockholder Agreement (as defined in Section 6.2(k) hereof) and the
Merger Agreement (the GDI Series A Certificate of Designations, the GDI Series B
Certificate of Designations, the GDI Warrants, the Amended and Restated
Registration Rights Agreement, the Amended and Restated Stockholders Agreement
and the Merger Agreement are sometimes hereinafter referred to collectively as
the "Second Closing Related Agreements") and the consummation by the Companies
of the transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action on behalf of each of the Companies. This
Amended and Restated Purchase Agreement and the Second Closing Related
Agreements have been duly executed and delivered by each of the Companies party
thereto and constitute valid and binding obligations of each of the Companies
party thereto enforceable in accordance with their respective terms, subject as
to enforcement of remedies to applicable bankruptcy, insolvency, reorganization
or similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The execution
of and performance of the transactions contemplated by this Amended and Restated
Purchase Agreement and the Second Closing Related Agreements and compliance with
their provisions by each of the Companies party thereto will not (a) violate any
provision of law or regulation applicable to any Company or any of their
respective subsidiaries or any of their respective assets, (b) result in the
creation of any lien upon any of the property of any Company or any of their
respective subsidiaries, or (c) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, or
require a consent or waiver under, any Company's certificate of incorporation or
by-laws (each as amended to date) or any indenture, lease, agreement or other
instrument to which any Company or any of their respective subsidiaries is a
party or by which it or any of
18
their respective properties are bound, or any decree, judgment, license, permit,
order, statute, rule or regulation applicable to any Company or any of their
respective subsidiaries.
4.7 Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the Company's knowledge,
any reasonable basis therefor or threat thereof, against any Company or any of
their respective subsidiaries which questions the validity of this Amended and
Restated Purchase Agreement or the Second Closing Related Agreements or the
right of any Company to enter into any of them, or which would reasonably be
expected to result, either individually or in the aggregate, in a Second Closing
Material Adverse Effect.
4.8 Property and Assets. Except as set forth in the Second Closing
Disclosure Schedule, each Company and each of their respective subsidiaries has
good and marketable title to all of its material properties and assets, and none
of such properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge or encumbrance.
4.9 Leasehold Interests. Each lease or agreement to which any Company
or any of their respective subsidiaries is a party under which it is a lessee of
any property, real or personal, is a valid and subsisting agreement, duly
authorized and entered into, without any default of any Company or any of their
respective subsidiaries thereunder and, to the Company's knowledge, without any
default thereunder of any other party thereto. No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
default or event of default by any Company or any of their respective
subsidiaries under such lease or agreement or, to the Company's knowledge, by
any other party thereto. Each Company's and each of their respective
subsidiaries' possession of such property has not been disturbed and, to the
Company's knowledge after due inquiry, no claim has been asserted against any
Company or any of their respective subsidiaries adverse to its rights in such
leasehold interests.
4.10 Financial Statements; SEC Reports.
(a) Aduromed has furnished to the Purchasers the Aduromed
Financial Statements. The Aduromed Financial Statements were prepared
in accordance with generally accepted accounting principles
consistently applied during the period covered thereby, and fairly
presents the financial position of Aduromed and its consolidated
subsidiaries on the date of such statement, except that the Aduromed
Financial Statements may not contain all footnotes required by
generally accepted accounting principles.
(b) GDI has filed all reports, schedules, forms, statements and
other documents required to be filed by GDI with the United States
Securities and Exchange Commission (the "SEC") since January 1, 2003
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations of the SEC (the "SEC
Documents").
(c) As of its respective filing date, each SEC Document complied
in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Document, and did not contain any untrue statement of a
material fact or omit to state a material fact required to
19
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the SEC Documents contains any untrue statement of
a material fact or omits to state any 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 consolidated financial statements of GDI included in
the SEC Documents (the "GDI Financial Statements") comply as to form
in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles consistently applied (except, in the case of unaudited
statements, as permitted by the rules and regulations of the SEC)
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the
consolidated financial position of GDI and its consolidated
subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods shown (subject, in the
case of unaudited statements, to normal year-end audit adjustments)
4.11 Absence of Undisclosed Liabilities. Except as and to the extent
expressly disclosed in the balance sheet contained in the Aduromed Financial
Statements, in the most recent audited GDI Financial Statement or in the Second
Closing Disclosure Schedule, or for liabilities that may have arisen in the
ordinary course of business consistent with past practices and that individually
or in the aggregate do not have and would not reasonably be expected to have a
Second Closing Material Adverse Effect, none of the Companies nor any of their
respective subsidiaries has any liabilities of a type required under generally
accepted accounting principles to be disclosed therein.
4.12 Absence of Certain Developments. Since December 31, 2004, there
has been (a) to the Company's knowledge, no event which would constitute or
reasonably be expected to have a Second Closing Material Adverse Effect, (b) no
declaration, setting aside or payment of any dividend or other distribution with
respect to, or any direct or indirect redemption or acquisition of, any of the
capital stock or other equity interest of any Company, (c) no waiver of any
material right of any Company or any of their respective subsidiaries or
cancellation of any material debt or claim held by any Company or any of their
respective subsidiaries, (d) no loan by any Company or any of their respective
subsidiaries to any officer, director, employee or stockholder of any Company or
any of their respective subsidiaries, or any agreement or commitment therefor,
(e) no increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee, consultant or agent of any Company or any of their
respective subsidiaries, other than reasonable and customary increases in
compensation consistent with the Companies' past practices, (f) no material
loss, destruction, forfeiture of or damage to any property of any Company or any
of their respective subsidiaries whether or not insured, (g) no labor disputes
involving any Company or any of their respective subsidiaries, and (h) no
acquisition, disposition or lease of any material assets (or any contract or
arrangement therefor).
4.13 Tax Matters. Each Company and each of their respective
subsidiaries have timely filed all foreign, federal, state and local income,
excise or franchise tax returns, real estate and personal property tax returns,
sales and use tax returns and other tax returns required to be filed by it and
has paid all taxes owed by it, except taxes which have not yet accrued or
otherwise become due, or for which adequate provision has, to the extent
required by generally accepted
20
accounting principles, been made in the Aduromed Financial Statements or the
most recent audited GDI Financial Statement, as applicable. The provision for
taxes in the Aduromed Financial Statements and the most recent audited GDI
Financial Statement are sufficient as of their date for the payment of all
accrued and unpaid federal, state, county and local taxes of any nature of any
Company and each of their respective subsidiaries, and any applicable taxes
owing to any foreign jurisdiction, whether or not assessed or disputed. All
taxes and other assessments and levies which any Company or any of their
respective subsidiaries is required to withhold or collect have been withheld
and collected and have been paid over to the proper governmental authorities.
With regard to the income tax returns of each Company and each of their
respective subsidiaries, none of the Companies nor any of their respective
subsidiaries has received notice of any audit or of any proposed deficiencies
from any taxing authority, and no controversy with respect to taxes of any
Company or any of their respective subsidiaries of any type is pending or, to
the Company's knowledge, threatened. There are in effect no waivers of
applicable statutes of limitations with respect to any taxes owed by any Company
or any of their respective subsidiaries for any year.
4.14 Contracts and Commitments. The Second Closing Disclosure Schedule
contains a complete and accurate list, and the Companies have delivered to the
Purchasers true and complete copies, of all written or oral agreements,
instruments, undertakings, commitments or restrictions (collectively, "Company
Contracts") (a) under which any Company or any of their respective subsidiaries
has any rights or any obligation or liability, or (b) by which any Company or
any of their respective subsidiaries, or any of their respective assets, are
bound. Each Company and each of their respective subsidiaries and, to the
Company's knowledge, each other party thereto have in all material respects
performed all the obligations required to be performed by them to date under the
Company Contracts (or each non-performing party has received a valid,
enforceable and irrevocable written waiver with respect to its non-performance),
have received no notice of default and are not in default (with due notice or
lapse of time or both) under any Company Contract.
4.15 Loans and Advances. No Company nor any of their respective
subsidiaries has any outstanding loans or advances to any person and is not
obligated to make any such loans or advances, except, in each case, for advances
to employees of a Company in respect of reimbursable business expenses
anticipated to be incurred by them in connection with their performance of
services for such Company.
4.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
No Company nor any of their respective subsidiaries has assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on any indebtedness
of any other person (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor, or otherwise to assure the
creditor against loss), except for guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
4.17 Transactions With Affiliates. Except as set forth in the Second
Closing Disclosure Schedule, no director, officer, employee or stockholder of
any Company or any of their respective subsidiaries, or member of the family of
any such person, or any corporation, partnership, trust or other entity in which
any such person, or any member of the family of any
21
such person, has a substantial interest or is an officer, director, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof, is a
party to any transaction with any Company or any of their respective
subsidiaries, including any contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such person or firm, other
than employment-at-will arrangements in the ordinary course of business.
4.18 Proprietary Rights; Employee Restrictions. Set forth in the
Second Closing Disclosure Schedule is a list and brief description of all
patents, copyrights, trademarks, trade names, service marks, and all
applications for any of the foregoing, logos, and other proprietary rights
necessary for the conduct of each Company's and each of their respective
subsidiaries' business as presently conducted or contemplated (collectively,
"Company Intellectual Property Rights"). Each Company owns or has the legal
right to use all such Company Intellectual Property Rights and, to the Company's
knowledge, neither the present nor proposed business activities or products of
any Company or any of their respective subsidiaries infringe or misappropriate
any patents, copyrights, trademarks, trade names, service marks, logos or other
intellectual or tangible proprietary rights of others. No Company nor any of
their respective subsidiaries has received any notice or other claim from any
person asserting that any of the Companies' or any of their respective
subsidiaries' present or proposed activities infringe or misappropriate, or may
infringe or misappropriate, any intellectual property rights of any person. To
the Company's knowledge, each Company and each of their respective subsidiaries
has the right to use, free and clear of claims or rights of others, all trade
secrets and know-how, including without limitation: customer lists,
manufacturing processes, hardware designs, programming processes, software and
other trade secrets or know-how required for or incident to its products or its
business as presently conducted or contemplated. Each Company and each of their
respective subsidiaries have taken all steps reasonably required to establish
and preserve its ownership of all of the Company Intellectual Property Rights,
including but not limited to requiring all employees and consultants to execute
a confidentiality and assignment of inventions agreement in favor of the
applicable Company and its subsidiaries. No Company is aware of any infringement
or misappropriation by others of any Company Intellectual Property Rights of
such Company or any of its subsidiaries, or any violation of the confidentiality
of any of their respective proprietary information. No Company nor any of their
respective subsidiaries is making unlawful use of any confidential information
or trade secrets of any past or present employees of such Company or any of its
subsidiaries. No Company nor any of their respective subsidiaries has granted or
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of such Company or any of its subsidiaries.
4.19 Proprietary Information of Third Parties. No third party has
claimed or, to the Company's knowledge, has reason to claim that any person
employed or engaged by any Company or any of their respective subsidiaries has
(a) violated or may be violating any of the terms or conditions of his
employment, non-competition or non-disclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. To the Company's
knowledge, no person employed by or affiliated with any Company or any of their
respective subsidiaries has employed or proposes to employ any trade
22
secret or any information or documentation proprietary to any former employer,
and to the Company's knowledge, no person employed by or affiliated with any
Company or any of their respective subsidiaries has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of any Company or any
of their respective subsidiaries. To the Company's knowledge, neither the
execution or delivery of this Amended and Restated Purchase Agreement or the
Second Closing Related Agreements, the carrying on of the business of each
Company and each of their respective subsidiaries as officers, employees or
agents by any officer, director or key employee of such Company or any of its
subsidiaries, nor the conduct or proposed conduct of the business of any Company
or any of their respective subsidiaries, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under
any Company Contract.
4.20 Business; Compliance with Laws. Except for those which would not
reasonably be expected to have a Second Closing Material Adverse Effect, each
Company and each of their respective subsidiaries has all necessary franchises,
permits, licenses and other rights and privileges necessary to permit it to own
its property and to conduct its business as is presently conducted. No Company
nor any of their respective subsidiaries is in violation of any law, regulation,
authorization or order material to the ownership of its properties or the
carrying on of its business as presently conducted.
4.21 Books and Records. The copies of records of each Company, as
furnished to the Purchasers, contain complete and accurate copies of such
Company's certificate of incorporation and by-laws and complete and accurate
records, in all material respects, of all meetings and other corporate actions
of its stockholders and its Board of Directors and committees thereof. The stock
ledger of each Company is complete in all material respects and reflects all
issuances, transfers, repurchases and cancellations of shares of capital stock
of such Company.
4.22 Environmental Compliance. No Company nor any of their respective
subsidiaries (a) has ever violated, or is presently in noncompliance with, all
Environmental Laws applicable to its business and properties; (b) has generated,
manufactured, used, refined, transported, treated, stored, handled, disposed of,
transferred, produced, or processed any Hazardous Materials, or any solid waste,
and has any knowledge of the release or threat of release of any Hazardous
Materials from its products, properties or facilities except in compliance with
law; (c) has (i) entered into or been subject to any consent decree, compliance
order, or administrative order with respect to any environmental or health and
safety matter relating to its business or any of its properties or facilities,
(ii) received notice under the citizen suit provision of any Environmental Law
in connection with its business or any of its properties or facilities, (iii)
received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim with respect to any
environmental or health and safety matter relating to its business or any of its
properties or facilities, or (iv) been subject to or threatened with any
governmental or citizen enforcement action with respect to any environmental or
health and safety matter relating to its business or any of its properties or
facilities, and has any reason to believe that any matters described in clauses
(i) through (iv) above will be forthcoming. No lien has been imposed on any of
the properties or facilities of any Company or any of their respective
subsidiaries by any governmental agency at the federal, state, or local level in
connection with the presence of any Hazardous Materials.
23
4.23 Brokerage. Except as set forth in the Second Closing Disclosure
Schedule, there are no, and will be no, claims for and no person is entitled to
any brokerage commissions, finder's fees or similar compensation in connection
with the transactions contemplated by this Amended and Restated Purchase
Agreement from any Company or any of their respective subsidiaries or based on
any arrangement or agreement made by or on behalf of any Company or any of their
respective subsidiaries.
4.24 Employee Benefit Plans.
(a) Except as set forth in the Second Closing Disclosure
Schedule, no Company nor any of their respective subsidiaries
maintains or contributes to any employee benefit plans. Each Company
and each of their respective subsidiaries is and has been in material
compliance with the provisions of all laws or rules or regulations
applicable to any employee benefit plan maintained or contributed to
by such Company or any of its subsidiaries for the benefit of its
employees and, to the Company's knowledge, there are no claims (other
than routine claims for benefits) pending or threatened with respect
to any of such employee benefit plans. No Company nor any of their
respective subsidiaries maintains or contributes to, or has ever
maintained or contributed to, any qualified retirement plan that is
subject to the minimum funding requirements of Xxxxxxx 000 xx xxx
Xxxxxx Xxxxxx Internal Revenue Code of 1986, as amended. There are no
unfunded obligations of any Company or any of their respective
subsidiaries under any retirement, pension, profit-sharing or deferred
compensation plan or program. No Company nor any of their respective
subsidiaries is required to make any payments or contributions to any
employee benefit plan pursuant to any collective bargaining agreement.
No Company nor any of their respective subsidiaries has ever
maintained or contributed to any employee benefit plan providing or
promising any health or other non-pension benefits to terminated
employees. For purposes of this Section 4.24, the term "Company"
includes all entities that have controlled, have been under the
control of, or have been under common control with, any Company.
(b) Each Company has made available to the Purchasers a
description of the compensation such Company and each of its
subsidiaries is currently paying, and has agreed to pay in the future,
to each of its employees and consultants, including without
limitation, salaries, fees, bonuses and benefits.
4.25 Employee Agreements. Each of the officers of each Company and
each of their respective subsidiaries, each key employee and each other employee
now employed by any Company or any of their respective subsidiaries who has
access to confidential information of any Company or of any of their respective
subsidiaries has executed a Confidentiality, Assignment of Inventions and
Non-Competition Agreement in a form previously disclosed to the Purchasers, and
such agreements are in full force and effect. No officer or key employee of any
Company or any of their respective subsidiaries has advised any Company or any
of their respective subsidiaries (orally or in writing) that he or she intends
to terminate employment with any Company or any of their respective
subsidiaries.
4.26 Employees. Each Company and each of their respective subsidiaries
has complied in all material respects with all applicable laws relating to the
employment of labor,
24
including provisions relating to wages, laws, equal opportunity, collective
bargaining and the payment of social security and other taxes. None of the
employees of any Company or any of their respective subsidiaries is represented
by any labor union or covered by any collective bargaining agreements; no
Company is aware of any effort to establish a labor union or bargaining unit or
similar organizational effort with respect to its employees or the employees of
any of its subsidiaries; and, to the Company's knowledge, there is no labor
strike or other labor trouble pending or threatened and with respect to any
Company or any of their respective subsidiaries. There are no pending, or, to
the Company's knowledge, threatened or anticipated (i) employment discrimination
charges or complaints against or involving any Company or any of their
respective subsidiaries before any federal, state or local commission or agency
or (ii) unfair labor practice charges or complaints, disputes or grievances
involving any Company or any of their respective subsidiaries.
4.27 No Solicitation or Advertisement. No Company nor any person
acting on behalf of any Company has engaged, in connection with the offering of
the GDI Series A Preferred, GDI Series B Preferred, GDI Warrants, GDI Warrant
Shares or GDI Conversion Shares, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act.
4.28 Securities Act Registration. Assuming that the representations
and warranties of each of the Purchasers contained herein are true, it is not
necessary in connection with the offer, sale and delivery of the GDI Series A
Preferred, GDI Series B Preferred, GDI Warrants, GDI Warrant Shares and GDI
Conversion Shares in the manner contemplated by the Merger Agreement and this
Amended and Restated Purchase Agreement to register any of the GDI Series A
Preferred, GDI Series B Preferred, GDI Warrants, GDI Warrant Shares or GDI
Conversion Shares under the Securities Act or under applicable state securities
or Blue Sky laws regulating the issuance or sale of securities.
4.29 Investment Company Act. Each Company is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.30 U.S. Real Property Holding Corporation. Each Company is not now
and has never been a "United States real property holding corporation," as
defined in the Internal Revenue Code of 1986, as amended.
4.31 Information Supplied to Purchasers. Neither this Amended and
Restated Purchase Agreement nor any Second Closing Related Agreement nor any
written agreement, certificate or document furnished by management of any
Company in connection with the transactions contemplated herein, contain any
untrue statement by any Company of a material fact, or when taken as a whole
omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
4.32 OTC-BB Quotation. The GDI Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and is quoted on the Over the Counter Bulletin
Board (the "OTC-BB"), and GDI has taken no action designed to, or likely to have
the effect of, terminating the registration of the GDI Common Stock under the
Exchange Act or terminating the quotation of
25
the GDI Common Stock from the OTC-BB, nor to the Company's knowledge is the
OTC-BB currently contemplating terminating such quotation. GDI and the GDI
Common Stock meet and GDI will use best efforts to ensure that GDI and the GDI
Common Stock continue to meet the criteria for continued quotation on the
OTC-BB.
4.33 No Change in Conversion Price or Exercise Price. No transaction
or other event has occurred since the First Closing that has the effect of, and
no transaction or other event will occur prior to the Second Closing that will
have the effect of, requiring a change to be made to either (a) the "Series A
Conversion Price" pursuant to Section 4 of the Aduromed Series A Certificate of
Designations or (b) the "Exercise Price" or "Warrant Shares Number" pursuant to
Section 4 or 5 of the First Closing Aduromed Warrants.
4.34 Disclosure. Each Company confirms that neither it, its employees,
officers or directors, nor, to its knowledge, any person or entity acting on its
behalf has provided any of the Purchasers or their agents or counsel with any
information that any Company believes constitutes material, non-public
information, except for the material terms embodied in this Amended and Restated
Purchase Agreement and the Second Closing Related Agreements (which will be
disclosed as provided in Section 5.11). Each Company understands and confirms
that the Purchasers will rely on the foregoing representations in effecting
transactions in securities of the Companies.
5. Representations of the Purchasers. Each of the Purchasers, severally and
not jointly, represents and warrants to each Company as follows:
5.1 Authority. Such Purchaser is duly organized, validly existing and
in good standing under the laws of its state of organization. Such Purchaser has
now, and will have at each Closing, all requisite power to enter into this
Amended and Restated Purchase Agreement and the Second Closing Related
Agreements to which it is a party and the transactions contemplated hereby and
thereby and to perform its obligations under the terms of this Amended and
Restated Purchase Agreement and each of the Second Closing Related Agreements to
which it is a party.
5.2 Validity. This Amended and Restated Purchase Agreement and each of
the Second Closing Related Agreements to which it is a party, when executed and
delivered by such Purchaser and each of the other parties thereto, will
constitute a valid and legally binding obligation of such Purchaser, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights.
5.3 Purchase Entirely for Own Account. Such Purchaser hereby confirms
that the GDI Series A Preferred, GDI Series B Preferred and GDI Warrants to be
purchased by or issued to such Purchaser at the Second Closing and the closing
of the Merger will be acquired for investment for such Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof. By executing this Amended and Restated Purchase Agreement,
such Purchaser further represents that such Purchaser does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to
26
such person or to any third person, with respect to any such GDI Series A
Preferred, GDI Series B Preferred or GDI Warrants.
5.4 Reliance Upon Purchaser's Representations. Such Purchaser
understands that the GDI Series A Preferred, GDI Series B Preferred and GDI
Warrants are not currently, and any GDI Warrant Shares and GDI Conversion Shares
acquired on the exercise or conversion of any of the GDI Series A Preferred, GDI
Series B Preferred or GDI Warrants at the time of issuance may not be,
registered under the Securities Act, and that GDI's reliance on such exemption
is predicated on each Purchaser's representations set forth herein.
5.5 Restricted Securities. Such Purchaser understands that the GDI
Series A Preferred, GDI Series B Preferred and GDI Warrants (and any GDI Warrant
Shares and GDI Conversion Shares issued on exercise or conversion of any of the
GDI Series A Preferred, GDI Series B Preferred or GDI Warrants) may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the GDI Series A Preferred, GDI Series B
Preferred and GDI Warrants (or any GDI Warrant Shares and GDI Conversion Shares
issued on exercise or conversion of any of the GDI Series A Preferred, GDI
Series B Preferred or GDI Warrants) or an available exemption from registration
under the Securities Act, the GDI Series A Preferred, GDI Series B Preferred and
GDI Warrants (and any GDI Warrant Shares and GDI Conversion Shares issued on
exercise or conversion of any of the GDI Series A Preferred, GDI Series B
Preferred or GDI Warrants) must be held indefinitely. Each Purchaser understands
that no public market now exists for any of the GDI Series A Preferred or GDI
Series B Preferred, and that GDI has made no assurances that a public market
will ever exist for the GDI Series A Preferred, the GDI Series B Preferred or
the GDI Warrants.
5.6 Economic Risk: Sophistication. Such Purchaser is able to bear the
economic risk of an investment in the GDI Series A Preferred, GDI Series B
Preferred and GDI Warrants acquired by it pursuant to this Amended and Restated
Purchase Agreement and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
proposed investment and therefore has the capacity to protect its own interests
in connection with such purchase and such conversion.
5.7 Accredited Investor. Such Purchaser meets the criteria of an
"accredited investor" as defined in Rule 501(a) of Regulation D adopted under
the Securities Act.
5.8 Legend. Each of the Purchasers understands that the GDI Series A
Preferred, GDI Series B Preferred, the GDI Conversion Shares and the GDI Warrant
Shares, may bear one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM
27
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933."
(b) Any legend required by the securities laws of any state to
the extent such laws are applicable to the GDI Series A Preferred, GDI
Series B Preferred, GDI Conversion Shares or GDI Warrant Shares
represented by the certificate so legended.
(c) If any of the GDI Series A Preferred, GDI Series B Preferred,
GDI Conversion Shares or GDI Warrant Shares are freely tradeable
pursuant to Rule 144(k) of the Securities Act or (ii) sold pursuant to
an effective registration statement under the Securities Act, GDI
shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such securities without the legend
required by this Section 5.8 endorsed thereon.
5.9 Disclosure of Information. The Purchasers, or their
representatives, have had the opportunity to discuss the Companies' business,
management, financial affairs and the terms and conditions of the offering of
the securities covered by this Amended and Restated Purchase Agreement with the
Companies' management and have had an opportunity to visit and review the
Companies' facilities.
5.10 Non-Public Information. Each Company covenants and agrees that
neither it nor any other person or entity acting on its behalf has provided or
will provide any Purchaser with any information that such Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. Each Company understands and confirms that each Purchaser
shall be relying on the foregoing covenant in effecting transactions in
securities of the Companies. In the event of a breach of the foregoing covenant
by a Company or any person or entity acting on its behalf, GDI shall, upon
written notice of such breach, make public disclosure of such material
non-public information; provided that GDI shall not be required to make public
disclosure of any such material non-public information which the Board of
Directors of GDI reasonably determines not to be in the best interests of GDI to
disclose. In the event that GDI has not made such public disclosure as required
pursuant to the foregoing sentence within two (2) business days of such written
notice, in addition to any other remedy provided herein or in the Second Closing
Related Agreements or otherwise available, a Purchaser shall have the right to
make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material non-public information without the prior approval
by any Company or any person or entity acting on its or their behalf. No
Purchaser shall have any liability to any Company or any person or entity acting
on its or their behalf for any such disclosure.
5.11 Audited Financial Statements and Form 10 Disclosure. GDI
covenants and agrees that it will comply with its obligation to file with the
SEC a current report on Form 8-K within four (4) days following the Second
Closing containing the requisite audited consolidated financial statements of
Aduromed and the requisite Form 10-type disclosure regarding the Aduromed. The
Form 8-K to be filed by GDI pursuant to this Section 5.11 will disclose all
material terms of the transactions contemplated hereby and by the Second Closing
Related Agreements (and attach as exhibits thereto the this Amended and Restated
Purchase Agreement and the Second Closing Related Agreements) in accordance with
the applicable SEC rules and
28
regulations. In addition, GDI will make such other filings and notices in the
manner and time required by the SEC and the OTC-BB. Notwithstanding the
foregoing, no Company shall publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the SEC or any regulatory
agency or securities exchange or the OTC-BB, without the prior written consent
of such Purchaser, except to the extent such disclosure is required by law or
OTC-BB regulations, in which case such Company shall provide the Purchasers with
prior notice of such disclosure. Each Purchaser shall provide to the Companies
in a reasonably timely fashion such information regarding itself and its
affiliates as is reasonably requested from time to time by the Companies to
satisfy the requirements under the SEC's rules and regulations applicable to the
transactions contemplated hereunder and under the Second Closing Related
Agreements.
6. Conditions to the Obligations of the Purchasers.
6.1 Conditions to the Obligations of the Purchasers at the First
Closing. The obligation of each of the Purchasers to purchase the Aduromed
Series A Preferred and First Closing Aduromed Warrants at the First Closing is
subject to the fulfillment, or the waiver by such Purchaser, of each of the
following conditions on or before the First Closing Date:
(a) Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on
and as of the First Closing Date with the same effect as though such
representation and warranty had been made on and as of such date
(except representations and warranties, if any, which speak as of a
date certain, which shall be true and correct as of such date on the
First Closing Date).
(b) Performance. Aduromed shall have performed and complied in
all material respects with the agreements and conditions contained in
the Original Purchase Agreement and the First Closing Related
Agreements required to be performed or complied with by Aduromed prior
to or at the First Closing.
(c) Opinion of Counsel. The Purchasers shall have received an
opinion from counsel for Aduromed, dated as of the First Closing Date,
addressed to the Purchasers at the First Closing, in the form attached
hereto as Exhibit G.
(d) Certificates and Documents. On or prior to the First Closing
Date, Aduromed shall have delivered to each of the Purchasers each of
the certificates and documents referred to in Section 6.3(a).
(e) Effectiveness of Aduromed Series A Certificate of
Designations. The Aduromed Series A Certificate of Designations shall
have been made effective by filing such Aduromed Series A Certificate
of Designations with the Secretary of State of the State of Delaware.
(f) Registration Rights Agreement. The Registration Rights
Agreement, dated as of the date of the Original Purchase Agreement,
among Aduromed and the Purchasers, in the form attached hereto as
Exhibit H (the "Registration Rights Agreement"), shall have been
executed by Aduromed and the Purchasers.
29
(g) Stockholders Agreement. The Stockholders Agreement, dated as
of the date of the Original Purchase Agreement, among Aduromed, the
Purchasers and certain of the other stockholders of Aduromed, in the
form attached hereto as Exhibit I (the "Stockholders Agreement"),
shall have been executed by Aduromed, the Purchasers and each of the
other stockholders of Aduromed.
(h) Blue Sky Approvals. Aduromed shall have received the
requisite approvals of the securities commissioners of all states in
which prior approvals are required and such approvals shall be in full
force and effect on the First Closing Date.
(i) Other Matters. All corporate, legal, governmental,
administrative and other proceedings in connection with the
transactions contemplated by the Original Purchase Agreement and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers, and
the Purchasers shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably
request.
6.2 Conditions to the Obligations of the Purchasers at the Second
Closing. The obligation of each of the Purchasers to purchase the GDI Series B
Preferred and Second Closing GDI Warrants at the Second Closing is subject to
the fulfillment, or the waiver by such Purchaser, of each of the following
conditions on or before the Second Closing Date:
(a) Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 4 shall be true on
and as of the Second Closing Date with the same effect as though such
representation and warranty had been made on and as of such date
(except representations and warranties, if any, which speak as of a
date certain, which shall be true and correct as of such date on the
Second Closing Date).
(b) Performance. Each Company shall have performed and complied
in all material respects with the agreements and conditions contained
in this Amended and Restated Purchase Agreement, the First Closing
Related Agreements and the Second Closing Related Agreements required
to be performed or complied with by such Company prior to or at the
Second Closing.
(c) Opinions of Counsel.
(i) The Purchasers shall have received an opinion from
counsel for Aduromed, dated as of the Second Closing Date,
addressed to the Purchasers at the Second Closing, in the form
attached hereto as Exhibit J-I.
(ii) The Purchasers shall have received an opinion from
counsel for GDI, dated as of the Second Closing Date, addressed
to the Purchasers at the Second Closing, in the form attached
hereto as Exhibit J-II.
(d) Certificates and Documents. On or prior to the Second Closing
Date, Aduromed and GDI shall have delivered to each of the Purchasers
each of the certificates and documents referred to in Section 6.3(b).
30
(e) Blue Sky Approvals. Each Company shall have received the
requisite approvals of the securities commissioners of all states in
which prior approvals are required and such approvals shall be in full
force and effect on the Second Closing Date.
(f) Public Company Merger. Each of the following shall have
occurred:
(i) The holders of a majority of the outstanding shares of
Aduromed Series A Preferred shall have approved the Merger and
the Merger Agreement in accordance with the provisions of the
Aduromed Series A Certificate of Designations; and
(ii) The Merger shall have been consummated immediately
prior to the consummation of the Second Closing.
(g) Effectiveness of GDI Series A Certificate of Designations.
The GDI Series A Certificate of Designations shall have been made
effective by filing such Series A Certificate of Designations with the
Secretary of State of the State of Delaware.
(h) Effectiveness of GDI Series B Certificate of Designations.
The GDI Series B Certificate of Designations shall have been made
effective by filing such Series B Certificate of Designations with the
Secretary of State of the State of Delaware.
(i) Certified Public Transaction Agreement. Aduromed and GDI
shall have delivered to the Purchasers a true and accurate copy of the
Merger Agreement as in effect as of the Second Closing, certified as
such by the Secretary of each of Aduromed and GDI.
(j) Amended and Restated Registration Rights Agreement. The
Amended and Restated Registration Rights Agreement, dated as of the
date of the Second Closing, among Aduromed and the Purchasers, in the
form attached hereto as Exhibit O (the "Amended and Restated
Registration Rights Agreement"), shall have been executed by GDI, the
Surviving Entity and the Purchasers.
(k) Amended and Restated Stockholders Agreement. The Amended and
Restated Stockholders Agreement, dated as of the date of the Second
Closing, among GDI, the Surviving Entity, the Purchasers and certain
of the other stockholders of GDI, in the form attached hereto as
Exhibit P (the "Amended and Restated Stockholders Agreement"), shall
have been executed by GDI, the Surviving Entity, the Purchasers and
each of the other stockholders of GDI party thereto.
(l) Other Matters. All corporate, legal, governmental,
administrative and other proceedings in connection with the
transactions contemplated by this Amended and Restated Purchase
Agreement and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to
the Purchasers, and the Purchasers shall have received all such
counterpart originals or certified or other copies of such documents
as they may reasonably request.
6.3 Certificates and Documents to be Delivered at each Closing.
31
(a) On or prior to the First Closing Date, Aduromed shall deliver
to each of the Purchasers:
(i) the certificate of incorporation of Aduromed, as in
effect as of the First Closing Date, certified by the Secretary
of State of the State of Delaware;
(ii) certificates, dated no more than five days prior to the
First Closing Date, as to the corporate good standing of Aduromed
issued by the Secretary of State of the State of Delaware and any
other jurisdiction where Aduromed is qualified to do business;
(iii) the by-laws of Aduromed, as in effect as of the First
Closing Date, certified by its Secretary or Assistant Secretary
as of the First Closing Date;
(iv) a certificate of incumbency of Aduromed's principal
officers, certified by its Secretary or Assistant Secretary as of
the First Closing Date;
(v) resolutions of the Board of Directors of Aduromed,
authorizing and approving all matters in connection with the
Original Purchase Agreement and the First Closing Related
Agreements and the transactions contemplated hereby and thereby,
certified by the Secretary or Assistant Secretary of Aduromed as
of the First Closing Date; and
(vi) a certificate by the President of Aduromed evidencing
compliance with conditions set forth in Sections 6.1(a) and (b).
(b) On or prior to the Second Closing Date, Aduromed and GDI
shall deliver to each of the Purchasers:
(i) the certificate of incorporation of GDI, as in effect as
of the Second Closing Date, certified by the Secretary of State
of the State of Delaware;
(ii) the certificate of incorporation of Surviving Entity,
as in effect as of the Second Closing Date, certified by the
Secretary of State of the State of Delaware;
(iii) the certificate of merger in connection with the
Merger, as in effect as of the Second Closing Date, certified by
the Secretary of State of the State of Delaware;
(iv) certificates, dated no more than five days prior to the
Second Closing Date, as to the corporate good standing of
Aduromed, GDI and MergerSub issued by the Secretary of State of
the State of Delaware and any other jurisdiction where Aduromed,
GDI or MergerSub, as applicable, is qualified to do business;
(v) the by-laws of GDI, as in effect as of the Second
Closing Date, certified by its Secretary or Assistant Secretary
as of the Second Closing Date;
32
(vi) the by-laws of the Surviving Entity, as in effect as of
the First Closing Date, certified by its Secretary or Assistant
Secretary as of the First Closing Date;
(vii) a certificate of incumbency of GDI's principal
officers, certified by its Secretary or Assistant Secretary as of
the Second Closing Date;
(viii) a certificate of incumbency of the Surviving Entity's
principal officers, certified by its Secretary or Assistant
Secretary as of the Second Closing Date;
(ix) resolutions of the Board of Directors of Aduromed,
authorizing and approving all matters in connection with this
Amended and Restated Purchase Agreement and the Second Closing
Related Agreements and the transactions contemplated hereby and
thereby, certified by the Secretary or Assistant Secretary of
Aduromed as of the Second Closing Date;
(x) resolutions of the Board of Directors of GDI,
authorizing and approving all matters in connection with this
Amended and Restated Purchase Agreement and the Second Closing
Related Agreements and the transactions contemplated hereby and
thereby, certified by the Secretary or Assistant Secretary of GDI
as of the Second Closing Date; and
(xi) a certificate by the President of each of GDI and the
Surviving Entity evidencing compliance with conditions set forth
in Sections 6.2(a) and (b).
7. Conditions to the Obligations of the Company. The obligations of (i)
Aduromed to sell the Aduromed Series A Preferred and First Closing Aduromed
Warrants to the Purchasers at the First Closing on the First Closing Date, and
(ii) GDI to sell the GDI Series B Preferred and Second Closing GDI Warrants to
the Purchasers at the Second Closing on the Second Closing Date are subject to
fulfillment, or the waiver, of each of the following conditions on or before the
applicable Closing Date:
7.1 Accuracy of Representations and Warranties. The representations
and warranties of the Purchasers contained in Section 5 shall be true on and as
of the applicable Closing Date with the same effect as though such
representations and warranties had been made on and as of that date.
7.2 Performance. The Purchasers shall have performed and complied with
all agreements and conditions contained in this Amended and Restated Purchase
Agreement required to be performed and complied with by them prior to or at the
applicable Closing.
7.3 Purchase Price. The Purchasers shall have delivered, as
applicable, (a) to Aduromed the First Closing Purchase Price or (b) to GDI,
Second Closing Purchase Price.
8. Covenants.
33
8.1 Efforts to Effect Public Transaction. Aduromed and GDI shall use
their respective best efforts to consummate the Merger as practicable following
the First Closing, but in any event on or prior to February 28, 2006.
8.2 Repurchase of Shares and Warrants.
(a) In the event that any Purchaser shall deliver written notice
to Aduromed of its election to seek redemption pursuant to this
Section 8.2(a) at any time prior to the Second Closing when the First
Closing Aduromed Warrant Shares or Aduromed Conversion Shares then
held by such Purchaser shall not then be covered by an effective
registration statement under the Securities Act, Aduromed agrees that
it will, within 20 days of receipt of such written notice, repurchase
the Aduromed Series A Preferred and First Closing Aduromed Warrants
then held by such Purchaser for an aggregate repurchase price of $100
in cash.
(b) In the event that any Purchaser shall deliver written notice
to GDI of its election to seek redemption pursuant to this Section
8.2(b) at any time after the Second Closing when the GDI Warrant
Shares or GDI Conversion Shares then held by such Purchaser shall not
then be covered by an effective registration statement under the
Securities Act, GDI agrees that it will, within 20 days of receipt of
such written notice, repurchase the GDI Series A Preferred, GDI Series
B Preferred and GDI Warrants then held by such Purchaser for an
aggregate repurchase price of $100 in cash.
8.3 Notification. Prior to the Second Closing Date, Aduromed and GDI
will promptly notify Purchasers in writing if it becomes aware of any fact or
condition that causes or constitutes a breach of any of the representations and
warranties set forth in Section 4 as of the date of this Amended and Restated
Purchase Agreement, or if Aduromed or GDI becomes aware of the occurrence after
the date of this Amended and Restated Purchase Agreement of any fact or
condition that would (except as expressly contemplated by this Amended and
Restated Purchase Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition.
9. Miscellaneous.
9.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated; provided, however, that Aduromed shall, at
each Closing, pay the reasonable fees and out-of-pocket expenses of the
Purchasers (including the reasonable fees and expenses of Purchasers' counsel,
Mayer, Brown, Xxxx & Maw LLP) in connection with such transactions in an amount
not to exceed $50,000 in the aggregate.
9.2 Survival of Representations and Warranties. With respect to each
Purchaser, all agreements, covenants, representations and warranties contained
herein shall survive the execution and delivery of this Amended and Restated
Purchase Agreement, and the respective closings of the transactions contemplated
hereby, until the first to occur of (a) all of the Registrable Securities (as
defined in the Amended and Restated Registration Rights Agreement)
34
of such Purchaser shall have been sold by such Purchaser pursuant to the
Required Registration Statement (as defined in the Amended and Restated
Registration Rights Agreement) and (b) the second anniversary of the Second
Closing Date, whereupon all such covenants, representations and warranties shall
expire and terminate and shall be of no further force or effect.
9.3 Notices. Any notice required or permitted under this Amended and
Restated Purchase Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or sent by
electronic facsimile transmission with a copy in either case sent by United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified or by overnight or international courier,
as follows:
If to Aduromed, at Aduromed Corporation, 000 Xxxxxxxxx Xxxxxx, Xxxxx
00-00, Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxx, President, or at such
other address or addresses as may have been furnished in writing by Aduromed to
the Purchasers, with a copy (which shall not constitute notice) to Stairs
Xxxxxxxxxx Xxxxxx, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000,
Attention: Xxxxx X. Xxx, Esq.; or
If to GDI, at General Devices, Inc., 000 Xxxxxxxxx Xxxxxx, Xxxxx
00-00, Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxx, President, or at such
other address or addresses as may have been furnished in writing by GDI to the
Purchasers, with a copy (which shall not constitute notice) to Stairs Xxxxxxxxxx
Xxxxxx, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxx X.
Xxx, Esq.;
If to a Purchaser, at such Purchaser's respective address set forth on
Exhibit A-III, or at such other address or addresses as may have been furnished
to Aduromed in writing by such Purchaser.
Notices provided in accordance with this Section 9.3 shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
9.4 Successor and Assigns. The provisions of this Amended and Restated
Purchase Agreement shall bind and inure to the benefit of the respective
successors, assigns, heirs, executors and administrators of the parties hereto.
9.5 Entire Agreement. This Amended and Restated Purchase Agreement
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, whether written or oral, relating to such subject matter.
9.6 Amendments and Waivers.
(a) Amendments to this Agreement. Except as otherwise expressly
set forth in this Amended and Restated Purchase Agreement, any term of
this Amended and Restated Purchase Agreement may be amended with
respect to all Purchasers and the observance of any term of this
Amended and Restated Purchase Agreement may be waived with respect to
all Purchasers (either generally or in a particular instance and
either retroactively or prospectively), with the written consent of
Aduromed, GDI and the
35
holders of at least a majority of the aggregate number of shares of
GDI Common Stock issued or issuable upon exercise of the GDI Warrants
and upon conversion of the GDI Series A Preferred and GDI Series B
Preferred (calculated on an as converted into GDI Common Stock basis).
(b) General. Any amendment or waiver effected in accordance with
this Section 9.6 shall be binding upon Aduromed, GDI and each
Purchaser. No waivers of or exceptions to any term, condition or
provision of this Amended and Restated Purchase Agreement or any
Second Closing Related Agreement, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of
any such term, condition or provision.
9.7 Counterparts; Facsimile Signatures. This Amended and Restated
Purchase Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall be one and the same document.
This Amended and Restated Purchase Agreement may be executed by facsimile
signatures.
9.8 Press Releases; Publicity. The Purchasers, GDI and Aduromed will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to this Amended and Restated Purchase Agreement or any other Second
Closing Related Agreement and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. Notwithstanding anything to the
contrary set forth herein, without the prior written consent of the applicable
Purchaser, none of Aduromed, the Surviving Entity or GDI shall not disclose the
name of any Purchaser or otherwise identify any such Purchaser as a stockholder
of any Company except as may be required by applicable law, court process or
obligations pursuant to any listing agreement with any national securities
exchange.
9.9 Section Headings. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
9.10 Severability. The invalidity or unenforceability of any provision
of this Amended and Restated Purchase Agreement shall not affect the validity or
enforceability of any other provision of this Amended and Restated Purchase
Agreement.
9.11 Governing Law. This Amended and Restated Purchase Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without reference to the principles thereof relating to the conflict of
laws.
[Remainder of Page Intentionally Left Blank]
36
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Securities Purchase Agreement as of the day and year first above
written.
ADUROMED:
ADUROMED CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
GDI:
GENERAL DEVICES, INC.
By: /s/ Xxxxx Xxxxxx, Xx.
------------------------------------
Name: Xxxxx Xxxxxx, Xx.
Title: President
PURCHASERS:
PEQUOT SCOUT FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: CFO
PEQUOT MARINER MASTER
FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: CFO
PEQUOT NAVIGATOR OFFSHORE FUND, INC.
By: Pequot Capital Management, Inc.,
its Investment Advisor
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: CFO
PEQUOT DIVERSIFIED MASTER FUND, LTD.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: CFO
PREMIUM SERIES PCC LIMITED
CELL 33
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Attorney in Fact
SHERLEIGH ASSOCIATES INC.
DEFINED BENEFIT PENSION PLAN
By: /s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Title: Trustee
EXHIBITS A-I AND A-II
Series A First Closing Series B Second Closing
Preferred Warrants Preferred Warrants
--------- ------------- ---------- --------------
Pequot Scout Fund, L.P. 2,031,701 2,031,701.27 4,921,075 4,921,075
Pequot Mariner Master Fund, L.P. 1,025,484 1,025,483.50 2,784,731 2,784,731
Pequot Navigator Offshore Fund, Inc. 837,547 837,547.00 2,101,065 2,101,065
Pequot Diversified Master Fund, Ltd. 50,260 50,260.00 133,649 133,649
Premium Series PCC Limited Cell 33 81,673 81,672.50 203,869 203,869
TOTAL 4,026,665 4,026,664.27 10,144,389 10,144,389
Sherleigh Assoc., Inc., Defin. Ben. Plan 2,237,037 2,237,036.70 5,635,771 5,635,771
EXHIBIT B
CERTIFICATE OF DESIGNATION OF SERIES A PREFERRED STOCK
ADUROMED CORPORATION
CERTIFICATE OF DESIGNATION OF SERIES A PREFERRED STOCK
Aduromed Corporation, a Delaware company (the "Company"), hereby
certifies that the following resolution has been duly adopted by the board of
directors of the Company:
RESOLVED, that pursuant to the authority granted to and vested in the
board of directors of the Company (the "Board") by the provisions of the
certificate of in Company of the Company, there is created a series of preferred
stock, par value $0.01 per share, and that the voting powers, designation and
number of shares thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
1. Designation and Number; Rank; Prohibited Payments.
(a) The shares of this series shall be designated as Series A
Preferred Stock. The number of shares initially constituting the Series A
Preferred Stock shall be 3,489,527, which number may, subject to any
consent right of the holders of any capital stock of the Company, be
increased or decreased by the Board; provided, however, that such number
may not be decreased below the number of the then outstanding shares of
Series A Preferred Stock.
(b) The Series A Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding up, rank:
(i) junior to all classes and series of any hereafter authorized
capital stock of the Company ranking senior (as to dividend rights,
redemption rights and rights upon liquidation, dissolution or winding
up) to the Series A Preferred Stock ("Senior Stock");
(ii) pari passu with all classes and series of any now or
hereafter authorized capital stock of the Company ranking on a par (as
to dividend rights, redemption rights and rights upon liquidation,
dissolution or winding up) with the Series A Preferred Stock ("Parity
Stock"), including, but not limited to, the Company's Series B
Preferred Stock (the "Series B Preferred Stock") to the extent that
such Series B Preferred Stock is issued after the Initial Issuance
Date (as defined below) pursuant to that certain Securities Purchase
Agreement, dated as of September 30, 2005 (the "Securities Purchase
Agreement"), by and among the Company and the purchasers named
therein; and
(iii) senior to all classes and series of any now or hereafter
authorized capital stock of the Company ranking junior (as to dividend
rights, redemption rights and rights upon liquidation, dissolution or
winding up) to the Series A
Preferred Stock, including, without limitation, any class of the
Company's common stock, par value $0.01 per share ("Common Stock")
(such classes and series are referred to as "Junior Stock").
2. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive preferential dividends at an annual rate equal to the
Series A Applicable Dividend Rate (as defined below) as of the applicable
date of determination, times the Original Issue Price (as defined below)
for each share of Series A Preferred Stock held by such holders, and such
dividends shall be payable in cash to the holders of record at the close of
business on each March 15 and September 15 of each year. Dividends on
shares of the Series A Preferred Stock shall accumulate on a daily basis
from the date on which such shares are issued and, to the extent they are
not paid in cash when due, shall compound on a semi-annual basis on each
March 15 and September 15 of each year, whether or not the Company has
earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
For the purposes of this clause (a), the term "Series A Applicable Dividend
Rate", as of an applicable date of determination, shall be calculated as
follows:
(i) if such date of determination occurs prior to the
consummation of an Approved Public Transaction (as defined below):
(A) if such date of determination is on or prior to the 70th
calendar day following the Initial Issuance Date (as defined
below) (such 70th day, the "Trigger Date"), the Series A
Applicable Dividend Rate shall equal 8% per annum; and
(B) if such date of determination is after the Trigger Date,
the Series A Applicable Dividend Rate shall equal the sum of (x)
8% per annum, plus (y) 1% per annum for each calendar month (or
portion thereof) that shall have elapsed since the Trigger Date;
and
(C) if such date of determination occurs from and after the
consummation of an Approved Public Transaction, the Series A
Applicable Dividend Rate shall equal the difference of (x) the
Series A Applicable Dividend Rate as in effect immediately prior
to the consummation of such Approved Public Transaction (as
calculated pursuant to clause (i) above), minus (y) 2% per annum.
(b) Upon conversion of any share of Series A Preferred Stock into
Common Stock pursuant to Section 4, the holder of such Series A Preferred
Stock shall be entitled to receive payment of all accrued and unpaid
dividends thereon, at the option of the holder thereof, (i) in cash or (ii)
in the form of such number of additional shares of Common Stock equal to
(x) the amount of such accrued and unpaid dividends, divided by (y) the
then applicable Series A Conversion Price.
2
(c) In no event may any dividends be paid on the Series A Preferred
Stock unless, at the time of such payment, any and all dividends then
accrued and payable on the shares of any Senior Stock shall have been paid
in full. If dividends are paid on the shares of Series A Preferred Stock
and shares of Parity Stock in an amount less than the total amount of such
dividends at the time accrued and payable on all of such shares, such
dividends shall be allocated pro rata (in proportion to the respective
amounts due with respect thereto) among all such shares of Series A
Preferred Stock and shares of Parity Stock at the time outstanding based on
the amount of dividends then due with respect to each such share. In no
event may any dividends be paid on any Junior Stock unless, at the time of
such payment, any and all dividends then accrued and payable on the shares
of the Series A Preferred Stock have been paid in full.
3. Preference on Liquidation.
(a) Upon the liquidation or dissolution of the Company ("Liquidation
Event"), the holders of Series A Preferred Stock shall be entitled to
receive out of the Company's assets, for each share of Series A Preferred
Stock outstanding at the time thereof, distributions in the amount of $0.57
(subject to adjustment from time to time as a result of a stock split,
stock combination or any other similar event affecting the outstanding
number of shares of Series A Preferred Stock) (as adjusted from time to
time, the "Original Issue Price") plus an amount equal to all accumulated
but unpaid dividends thereon, whether or not declared (the Original Issue
Price together with such dividends, the "Liquidation Preference").
(b) Distributions of the Company's cash, securities and other assets
pursuant to this Section 3 shall be made to the holders of shares of Series
A Preferred Stock and all other Parity Stock in proportion to the total
amounts to which the holders of all shares of Series A Preferred Stock and
all other Parity Stock are entitled upon a Liquidation Event.
(c) No payment or distribution shall be made in respect of any shares
of Series A Preferred Stock pursuant to Section 3(a) unless, at the time of
such distribution, all amounts due in respect of any shares of Senior Stock
have been paid in full.
(d) No payment or distribution shall be made in respect of any shares
of Junior Stock unless, at the time of such distribution, the holders of
shares of Series A Preferred Stock shall have received the Liquidation
Preference with respect to each share.
(e) Upon the payment in full of all amounts due to a holder of Series
A Preferred Stock pursuant to this Section 3, such holder shall not be
entitled to any further participation in the assets of the Company.
4. Conversion.
4.1 Right to Convert.
(a) Each share of Series A Preferred Stock shall be convertible, at
the option of the holder thereof upon exercise in accordance with Section
4.1(b), without the payment of additional consideration, into such number
of fully paid and nonassessable
3
shares of Common Stock as is determined by dividing the Original Issue
Price by the Series A Conversion Price (as defined below) in effect at the
time of conversion. The "Series A Conversion Price" shall initially be
equal to $0.57. Such initial Series A Conversion Price, and the rate at
which shares of Series A Preferred Stock may be converted into shares of
Common Stock, shall be subject to adjustment as provided below.
(b) A record holder of shares of Series A Preferred Stock may effect
the optional conversion thereof in accordance with Section 4.1(a) by making
a written demand for such conversion (a "Series A Conversion Demand") upon
the Company at its principal executive offices that sets forth (i) the
number of shares of Series A Preferred Stock to be converted; and (ii) the
proposed date of such conversion, which shall be a Business Day not less
than 5 Business Days after the date of such Series A Conversion Demand (the
"Series A Conversion Date"). The Series A Conversion Demand shall be
accompanied by the certificate representing such shares or, if such
certificate has been lost or stolen, a lost stock certificate affidavit and
indemnification agreement in form and substance satisfactory to the Company
and, if the Company shall so request, evidence that such holder shall have
posted a bond satisfactory to the Company. As soon as practicable after the
Series A Conversion Date, the Company shall issue and deliver to such
holder a certificate for the number of shares of Common Stock issuable upon
such conversion in accordance with the provisions hereof (rounded down to
the nearest whole share). Upon surrender of a certificate representing
Series A Preferred Stock to be converted in part, the Company shall after
the Series A Conversion Date issue a certificate representing the number of
full shares of Series A Preferred Stock not so converted.
(c) All outstanding shares of Series A Preferred Stock to be converted
pursuant to the Series A Conversion Demand shall, on the Series A
Conversion Date, be converted into Common Stock for all purposes. On and
after the Series A Conversion Date, (i) no such shares of Series A
Preferred Stock shall be deemed to be outstanding or be transferable on the
books of the Company or the stock transfer agent, if any, for such shares
of Series A Preferred Stock, and (ii) the holder of such shares, as such,
shall not be entitled to receive any dividends or other distributions, to
receive notices or to vote such shares or to exercise or to enjoy any other
powers, preferences or rights in respect thereof, other than the right,
upon surrender of the certificate representing such shares, to receive a
certificate for the number of shares of Common Stock into which such shares
shall have been converted.
4.2 Adjustments to Series A Conversion Price.
(a) Definitions. For the purposes of this Section 4, the following
terms shall have the following meanings ascribed thereto:
(i) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or deemed to be issued pursuant to clause (b)
below) by the Company after the Initial Issuance Date, but shall not
include up to 2,346,406 shares of Common Stock issuable upon exercise
of options granted by the
4
Company pursuant to a statutory employee option plan approved in
accordance with Section 7 below.
(ii) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding
Options.
(iii) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, but shall not include options to purchase up
to 2,346,406 shares of Common Stock granted by the Company pursuant to
a statutory employee option plan approved in accordance with Section 7
below.
(b) Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the initial issuance of shares of Series A Preferred Stock
(the "Initial Issuance Date") shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been
fixed, as of the close of business on such record date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Series A Conversion
Price pursuant to the terms of Section 4.2(c) below, are revised
(either automatically pursuant to the provisions contained therein or
as a result of an amendment to such terms) to provide for either (1)
any increase or decrease in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such Option
or Convertible Security or (2) any increase or decrease in the
consideration payable to the Company upon such exercise, conversion or
exchange, then, effective upon such increase or decrease becoming
effective, the Series A Conversion Price computed upon the original
issue of such Option or Convertible Security (or upon the occurrence
of a record date with respect thereto) shall be readjusted to such
Series A Conversion Price as would have obtained had such revised
terms been in effect upon the original date of issuance of such Option
or Convertible Security. Notwithstanding the foregoing, no adjustment
pursuant to this clause (ii) shall have the effect of increasing the
Series A Conversion Price to an amount which exceeds the lower of (i)
the Series A Conversion Price on the original adjustment date, or (ii)
the Series A Conversion
5
Price that would have resulted from any issuances of Additional Shares
of Common Stock between the original adjustment date and such
readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Series A
Conversion Price pursuant to the terms of Section 4.2(c) below (either
because the consideration per share of the Additional Shares of Common
Stock subject thereto was equal to or greater than the Series A
Conversion Price then in effect, or because such Option or Convertible
Security was issued before the Initial Issuance Date), are revised
after the Initial Issuance Date (either automatically pursuant to the
provisions contained therein or as a result of an amendment to such
terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the
Company upon such exercise, conversion or exchange, then such Option
or Convertible Security, as so amended, and the Additional Shares of
Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted
(either upon its original issuance or upon a revision of its terms) in
an adjustment to the Series A Conversion Price pursuant to the terms
of Section 4.2(c) below, the Series A Conversion Price shall be
readjusted to such Series A Conversion Price as would have obtained
had such Option or Convertible Security never been issued.
(c) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Company shall at any
time after the Initial Issuance Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.2(b)), without consideration or for a consideration
per share less than the applicable Series A Conversion Price in effect
immediately prior to such issue, then the Series A Conversion Price shall
be reduced, concurrently with such issue, to a price (calculated to the
nearest one-hundredth of a cent) determined in accordance with the
following formula:
CP(2) = CP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
(A) "CP(2)" shall mean the Series A Conversion Price in effect
immediately after such issue of Additional Shares of Common
Stock;
(B) "CP(1)" shall mean the Series A Conversion Price in effect
immediately prior to such issue of Additional Shares of
Common Stock;
6
(C) "A" shall mean the number of shares of Common Stock
outstanding and deemed outstanding immediately prior to such
issue of Additional Shares of Common Stock (treating for
this purpose as outstanding all shares of Common Stock
issuable upon exercise of Options outstanding immediately
prior to such issue or upon conversion of Convertible
Securities (including the Series A Preferred Stock)
outstanding immediately prior to such issue);
(D) "B" shall mean the number of shares of Common Stock that
would have been issued if such Additional Shares of Common
Stock had been issued at a price per share equal to CP(1)
(determined by dividing the aggregate consideration received
by the Company in respect of such issue by CP(1); and
(E) "C" shall mean the number of such Additional Shares of
Common Stock issued in such transaction.
(d) Determination of Consideration. For purposes of this Section 4.2,
the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4.2(b), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of
7
such consideration) payable to the Company upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(e) Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Series A Conversion Price pursuant to the terms of
Section 4.2(c) above then, upon the final such issuance, the Series A
Conversion Price shall be readjusted to give effect to all such issuances
as if they occurred on the date of the first such issuance (and without
additional giving effect to any adjustments as a result of any subsequent
issuances within such period).
(f) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Initial Issuance Date effect a
subdivision of the outstanding Common Stock without a comparable
subdivision of the Series A Preferred Stock or combine the outstanding
shares of Series A Preferred Stock without a comparable combination of the
Common Stock, the Series A Conversion Price in effect immediately before
that subdivision or combination shall be proportionately decreased so that
the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding. If the Company
shall at any time or from time to time after the Initial Issuance Date
combine the outstanding shares of Common Stock without a comparable
combination of the Series A Preferred Stock or effect a subdivision of the
outstanding shares of Series A Preferred Stock without a comparable
subdivision of the Common Stock, the Series A Conversion Price in effect
immediately before the combination or subdivision shall be proportionately
increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to
such decrease in the aggregate number of shares of Common Stock
outstanding. Any adjustment under this subsection shall become effective at
the close of business on the date the subdivision or combination becomes
effective.
4.3 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable on the Common Stock in additional shares of Common
Stock, then and in each such event the Series A Conversion Price in effect
immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of
the close of business on
8
such record date, by multiplying the Series A Conversion Price then in
effect by a fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series A Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter
the Series A Conversion Price shall be adjusted pursuant to this subsection
as of the time of actual payment of such dividends or distributions; and
provided further, however, that no such adjustment shall be made if the
holders of Series A Preferred Stock simultaneously receive (i) a dividend
or other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if all
outstanding shares of Series A Preferred Stock had been converted into
Common Stock on the date of such event or (ii) a dividend or other
distribution of shares of Series A Preferred Stock which are convertible,
as of the date of such event, into such number of shares of Common Stock as
is equal to the number of additional shares of Common Stock being issued
with respect to each share of Common Stock in such dividend or
distribution.
4.4 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of capital stock of the Company entitled to receive, a dividend or
other distribution payable in securities of the Company (other than a
distribution of shares of Common Stock in respect of outstanding shares of
Common Stock) or in other property, then and in each such event the holders
of Series A Preferred Stock shall receive, simultaneously with the
distribution to the holders of such capital stock, a dividend or other
distribution of such securities or other property in an amount equal to the
amount of such securities or other property as they would have received if
all outstanding shares of Series A Preferred Stock had been converted into
Common Stock on the date of such event.
4.5 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or
merger involving the Company in which the Common Stock (but not the Series
A Preferred Stock) is converted into or exchanged for securities, cash or
other property (other than a transaction covered by Sections 4.3 or 4.4),
then, following any such reorganization, recapitalization,
reclassification, consolidation or merger, each share of Series A Preferred
Stock shall thereafter be convertible in lieu of the Common Stock into
which it was convertible prior to such event into the kind and amount of
securities, cash or other
9
property which a holder of the number of shares of Common Stock of the
Company issuable upon conversion of one share of Series A Preferred Stock
immediately prior to such reorganization, recapitalization,
reclassification, consolidation or merger would have been entitled to
receive pursuant to such transaction; and, in such case, appropriate
adjustment (as determined in good faith by the Board) shall be made in the
application of the provisions in this Section 4 with respect to the rights
and interests thereafter of the holders of the Series A Preferred Stock, to
the end that the provisions set forth in this Section 4 (including
provisions with respect to changes in and other adjustments of the Series A
Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any securities or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock.
4.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to
this Section 5, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred Stock a certificate setting
forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property into which the Series A Preferred Stock
is convertible) and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, as promptly as reasonably
practicable after the written request at any time of any holder of Series A
Preferred Stock (but in any event not later than 10 days thereafter),
furnish or cause to be furnished to such holder a certificate setting forth
(i) the Series A Conversion Price then in effect, and (ii) the number of
shares of Common Stock and the amount, if any, of other securities, cash or
property which then would be received upon the conversion of Series A
Preferred Stock.
4.7 Notice of Record Date. In the event:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time issuable upon conversion of the
Series A Preferred Stock) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will send or cause to be sent to
the holders of the Series A Preferred Stock a notice specifying, as the
case may be, (i) the record date for such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
proposed to take place, and the time, if any is to be fixed, as of which
the holders of
10
record of Common Stock (or such other stock or securities at the time
issuable upon the conversion of the Series A Preferred Stock) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and
character of such exchange applicable to the Series A Preferred Stock and
the Common Stock. Such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice. Any
notice required by the provisions hereof to be given to a holder of shares
of Preferred Stock shall be deemed sent to such holder if deposited in the
United States mail, postage prepaid, and addressed to such holder at his,
her or its address appearing on the books of the Company.
4.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of
Series A Preferred Stock. Any fractional interest in a share of Common
Stock resulting from conversion of one or more shares of Series A Preferred
Stock shall be paid in cash (computed to the nearest cent) equal to such
fraction equal to the fair market value of a share of Common Stock as of
the date of such conversion, as reasonably determined by the Company.
4.9 Reserved Common Stock. The Company will at all times when any
shares of Series A Preferred Stock are outstanding, reserve and keep
available out of its authorized but unissued stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock.
4.10 Provisional Conversion at the Option of the Corporation.
(a) The Company may, at its option, cause the conversion of all, but
not less than all, of the shares of the Series A Preferred Stock then
outstanding into such number of fully paid and nonassessable shares of
Common Stock, per share of Series A Preferred Stock so converted, as is
determined by dividing the Original Issue Price by the Series A Conversion
Price in effect at the time of conversion, if (x) the Closing Price (as
defined below) of the Common Stock has exceeded 400% of the then effective
Series A Conversion Price for at least 20 Trading Days (as defined below)
within a period of 30 consecutive Trading Days ending on the Trading Day
prior to the date on which the Company notifies the holders of the Series A
Preferred Stock (pursuant to Section 4.10(b) below) that it is exercising
its option to cause the conversion of the Series A Preferred Stock pursuant
to this Section 4.10 (the "Provisional Conversion Notice Date") and (y) the
actual average daily trading volume of the Common Stock, on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed, during the 30 consecutive
Trading Day period referred to in clause (x) above is at least 100,000
shares of Common Stock (subject to adjustment from time to time as a result
of a stock split, stock combination or any other similar event affecting
the outstanding number of shares of Common Stock).
(b) In order for the Company to exercise its rights to cause the
conversion of all of the Series A Preferred Stock pursuant to this Section
4.10, a written notice (the
11
"Provisional Conversion Notice") shall be sent by or on behalf of the
Company, by first class mail, postage prepaid, to the holders of record of
the Series A Preferred Stock as they appear on the stock register of the
Company on the Provisional Conversion Notice Date notifying such holders of
the election of the Company to cause the conversion of all of the Series A
Preferred Stock and of the Provisional Conversion Date (as defined below),
which date shall not be less than 5 days nor be more than 10 days after the
Provisional Conversion Notice Date.
(c) If a Provisional Conversion Notice shall have been given as
hereinbefore provided, then each holder of the Series A Preferred Stock
shall be entitled to all preferences and relative, participating, optional
and other special rights accorded by this certificate until and including
the Provisional Conversion Date. From and after the Provisional Conversion
Date, upon delivery by the Company of the Common Stock issuable upon
conversion of the Series A Preferred Stock, together with payment in full
of all accrued and unpaid dividends thereon as provided in Section 2(b),
the Series A Preferred Stock shall no longer be deemed to be outstanding,
and all rights of the holders of such Series A Preferred Stock (in their
capacity as holders of Series A Preferred Stock) shall cease and terminate.
(d) For purpose of this Section 4.10, following definitions shall
apply:
(i) "Closing Price" means, on any date of determination, the
closing price (or, if no closing price is reported, the last reported
sale price) per share reported by the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common
Stock is listed.
(ii) "Provisional Conversion Date" means the date fixed for
conversion of shares of Series A Preferred Stock pursuant to this
Section 4.10.
(iii) "Trading Day" means a day on which the Common Stock (i) is
not suspended from trading on the Over-The-Counter Bulletin Board or
any other stock quotation system or exchange upon which the Common
Stock is listed and (ii) has traded at least once on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed.
5. Redemption at the Option of the Holders of Series A Preferred Stock.
(a) In the event that the Company shall not have consummated an
Approved Public Transaction on or prior to February 28, 2006, then each
holder of Series A Preferred Stock shall have the right, but not the
obligation, exercisable by such holder from time to time at any time after
February 28, 2006 by delivery of written notice thereof to the Company (a
"Redemption Notice"), to require the Company to redeem all or any portion
of such holder's shares of Series A Preferred Stock at a redemption price
per share of Series A Preferred Stock equal to the Liquidation Preference
thereof through the date of payment thereof, which shall in no event by
more than ten (10) calendar days following the Company's receipt of the
applicable Redemption Notice.
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(b) From and after the delivery of Redemption Notice to the Company by
a holder of shares of Series A Preferred Stock, (i) the Series A Preferred
Stock to which such Redemption Notice relates shall no longer be deemed
outstanding; (ii) all rights of the holder of such shares of Series A
Preferred Stock to be redeemed or to receive any amounts in respect of any
liquidation, dissolution, winding up or otherwise shall cease and
terminate, excepting only the right to receive the redemption price through
the date of payment of the applicable redemption price for each such share.
For the avoidance of doubt, dividends on the Series A Preferred Stock shall
continue to accrue from and after the date of a redemption until the
payment of the applicable redemption price in respect thereof.
6. Reacquired Shares. Any shares of Series A Preferred Stock converted,
exchanged, redeemed, purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares of Series A Preferred Stock shall upon their
cancellation become authorized but unissued shares of the Company's preferred
stock, par value $0.01 per share, and, upon the filing of an appropriate
Certificate of Designation with the Secretary of State of the State of Delaware,
may be reissued as part of another class or series of the Company's preferred
stock, par value $0.01 per share, including, without limitation, Series A
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth herein.
7. Voting Rights.
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to vote, in person, by proxy or at a special or annual meeting of
the stockholders of the Company, on all matters voted on by holders of
Common Stock, voting together as a single class with the holders of the
Common Stock and all other shares entitled to vote thereon as a single
class with the Common Stock. With respect to any such matters as to which
holders of the Series A Preferred Stock shall be entitled to vote, each
issued and outstanding share of Series A Preferred Stock shall entitle the
holder thereof to cast that number of votes per share as is equal to the
number of shares of Common Stock issuable upon conversion thereof.
(b) The Company shall not, without the prior affirmative vote or
written consent of the Requisite Preferred Majority (as defined below):
(i) adversely alter or change, or engage in any action that would
result in any adverse alteration of or change to, the rights,
preferences or privileges of the Series A Preferred Stock or the
Series B Preferred Stock;
(ii) increase the authorized number of shares of the Series A
Preferred Stock or the Series B Preferred Stock;
(iii) create, authorize, sell or issue any new class or series of
the Company's capital stock or any bonds, notes or other obligations
convertible into, exchangeable for or having option rights to purchase
shares of such new class or series or reclassify any class or series
of the Company's capital stock;
(iv) increase the authorized number of members of the Board;
13
(v) amend or repeal any provision of, or add any provision to,
the Company's certificate of incorporation, certificates of
designations or bylaws (in any such case, whether by merger,
consolidation or otherwise) in a manner that adversely affects the
rights of the Series A Preferred Stock, the Series B Preferred Stock
or the holders thereof;
(vi) pay or set aside funds for the payment of any dividends or
make any distributions on any of the Company's capital stock (other
than the Series A Preferred Stock or the Series B Preferred Stock);
(vii) engage in any transaction with an affiliate of the Company,
or an affiliate of any such person;
(viii) make any material change, directly or indirectly, in the
nature of the Company's business;
(ix) incur or become liable for, through guarantees or otherwise,
directly or indirectly, any indebtedness in excess of $5 million in
the aggregate at any one time outstanding;
(x) for so long as the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock shall collectively represent 5% of
the outstanding shares of capital stock of the Company or any
successor entity thereto (calculated on a fully diluted basis), engage
in any merger, consolidation, acquisition, recapitalization, joint
venture or partnership;
(xi) directly or indirectly dispose of all of the equity
interests in any of its direct or indirect subsidiaries or directly or
indirectly dispose of all or substantially all of the assets of the
Company or any of its direct or indirect subsidiaries;
(xii) authorize, approve or implement any employee option plan or
similar employee equity program (it being understood that (x) the
Company contemplates authorizing a 2005 Management Stock Option Plan
providing for the issuance of options for up to 2,346,406 shares of
Common Stock and (y) the Requisite Preferred Majority shall have the
right to approve the form and substance of such 2005 Management Stock
Option Plan pursuant to this clause (xii)); or
(xiii) enter into any Public Transaction Agreement (as defined in
the Securities Purchase Agreement) or engage in any Public Transaction
(as defined in the Securities Purchase Agreement) (any Public
Transaction approved by the Requisite Preferred Majority in accordance
with this clause (xiii) is herein referred to as an "Approved Public
Transaction").
(c) For the purposes hereof, the term "Requisite Preferred Majority"
shall mean (i) prior to the initial issuance of Series B Preferred Stock
pursuant to the Securities Purchase Agreement, the holders of more than 50%
of the outstanding shares of Series A
14
Preferred Stock, voting separately as a single class, and (ii) from and after
the initial issuance of Series B Preferred Stock pursuant to the Securities
Purchase Agreement, the holders of more than 50% of the outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as-converted basis.
8. No Impairment. The Company will not, through any reorganization,
transfer of assets, 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 to be observed or performed hereunder by the Company but will
at all times in good faith assist in the carrying out of all the provisions
hereunder and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights and liquidation
preferences granted hereunder of the holders of the Series A Preferred Stock
against impairment.
15
The Company has caused this Certificate of Designation to be signed as
of this __ day of September, 2005.
ADUROMED CORPORATION
By:
------------------------------------
Name:
Title:
16
EXHIBIT C
FORM OF FIRST CLOSING WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ADUROMED CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
ADUROMED CORPORATION
COMMON STOCK WARRANT
No. __ Issue Date: __________
ADUROMED CORPORATION, a corporation organized under the laws of the State
of Delaware, hereby certifies that, for value received, _________________, or
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the date hereof and
at any time or from time to time before 5:00 p.m., New York time, through the
close of business (New York time) on September 30, 2012 (the "Expiration Date"),
up to _______(1) fully paid and nonassessable shares of Common Stock of the
Company, par value $0.01 per share ("Common Stock") at an exercise price of
$0.68 per share, subject to adjustment hereunder (such exercise price, as
adjusted from time to time, the "Exercise Price").
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Aduromed Corporation and any
corporation which shall succeed, or assume the obligations of, Aduromed
Corporation hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, par
value $0.01 per share, and (b) any other securities into which or for which any
of the securities described in clause (a) may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the
----------
(1) This shall equal 100% of the shares of Series A Preferred Stock purchased
by the Purchaser at the First Closing
Warrant, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 3 or 4 or otherwise.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), up to _______ shares of Common Stock of the
Company, subject to adjustment pursuant to Sections 4 and 5 (such number of
shares of Common Stock, as adjusted from time to time, the "Warrant Shares
Number").
1.2 Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise.
2.2 Cash Exercise. Payment shall be made in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, for the number of shares of Common Stock (or Other
Securities) specified in such Exercise Notice (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
(or Other Securities) issuable to the Holder per the terms of this Warrant) and
the Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
2.3 Cashless Exercise. In lieu of payment of the Exercise Price as
provided above, the Holder may elect a cashless net exercise. In the case of
such cashless net exercise, the Holder shall surrender this Warrant for
cancellation and receive in exchange therefor the full
2
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) as is computed using the following
formula:
X = Y * (A - B)
-----------
A
where:
X = the number of shares of Common Stock (or Other Securities) to be
issued to the Holder upon cashless exercise of this Warrant
Y = the total number of shares Common Stock (or Other Securities) covered
by this Warrant which the Holder has surrendered at such time for
cashless exercise (including both shares to be issued to the Holder
upon cashless exercise of this Warrant and shares to be cancelled as
payment therefor)
A = the Current Market Value as of the business day on which the Holder
surrenders this Warrant to the Company
B = the Exercise Price then in effect under this Warrant at the time at
which the Holder surrenders this Warrant to the Company
For purposes of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), it is intended, understood and acknowledged that
the Common Stock (or Other Securities) issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Common Stock (or Other Securities) shall be deemed to have commenced, on the
date this Warrant was originally issued.
2.4 Limitation on Exercise. Notwithstanding anything herein to the
contrary, from and after the date on which the Company shall have registered the
Common Stock (or Other Securities) under the Securities Act, in no event shall
the Holder be entitled to exercise any portion of this Warrant in excess of that
portion of this Warrant upon exercise of which the sum of (i) the number of
shares of Common Stock (or Other Securities) beneficially owned by the Holder
and its Affiliates (other than shares of Common Stock (or Other Securities)
which may be deemed beneficially owned through the ownership of the unexercised
portion of the Warrant or the unexercised or unconverted portion of any other
security of the Holder subject to a limitation on conversion analogous to the
limitations contained herein) and (ii) the number of shares of Common Stock (or
Other Securities) issuable upon the exercise of the portion of this Warrant with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its Affiliates of more than 4.99% of
the then outstanding shares of Common Stock (or Other Securities). As used
herein, the term "Affiliate" means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a person or entity, as such terms are used in and
construed under Rule 144 under the Securities Act. For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The Holder may waive the limitations set forth
herein by sixty-one (61) days written notice to the Company.
3
3. Effect of Merger or Reorganization, etc.; Adjustment of Exercise Price.
3.1 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or merger
involving the Company (including, without limitation, a Public Transaction (as
defined in that certain Securities Purchase Agreement, dated as of September __,
2005, among the Company and the purchasers named therein) in which the Common
Stock is converted into or exchanged for securities, cash or other property,
then, following any such reorganization, recapitalization, reclassification,
consolidation or merger, this Warrant shall thereafter be exercisable in lieu of
the Common Stock into which it was exercisable prior to such event into the kind
and amount of securities, cash or other property which a holder of the number of
shares of Common Stock of the Company issuable upon exercise of this Warrant
immediately prior to such reorganization, recapitalization, reclassification,
consolidation or merger would have been entitled to receive pursuant to such
transaction; and, in such case, appropriate adjustment (as determined in good
faith by the board of directors of the Company (the "Board")) shall be made in
the application of the provisions of Section 3, 4 and 5 with respect to the
rights and interests thereafter of the Holders of this Warrant, to the end that
the provisions set forth in Section 3, 4 and 5 (including provisions with
respect to changes in and other adjustments of the Exercise Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities or other property thereafter deliverable upon the exercise of this
Warrant.
3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1.
3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3 (including, without limitation, a Public Transaction), this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant. In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this Section 3,
then the Company's securities and property (including cash, where applicable)
receivable by the Holders of the Warrant will be delivered to Holder.
4. Extraordinary Events Regarding Common Stock.
4.1 Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time effect a subdivision of the outstanding Common
Stock (or Other Securities), the Exercise Price then in effect immediately
before that subdivision shall be
4
proportionately decreased. If the Company shall at any time or from time to time
combine the outstanding shares of Common Stock (or Other Securities), the
Exercise Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this clause shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
4.2 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock (or Other
Securities) entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock (or Other Securities), then and in each such
event the Exercise Price then in effect shall be decreased as of the time of
such issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Exercise Price
then in effect by a fraction:
(i) the numerator of which shall be the total number of shares of
Common Stock (or Other Securities) issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date, and
(ii) the denominator of which shall be the total number of shares
of Common Stock (or Other Securities) issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
(or Other Securities) issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Exercise Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Exercise Price shall be adjusted
pursuant to this clause as of the time of actual payment of such dividends or
distributions.
4.3 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock (or Other
Securities) entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock (or Other
Securities), then and in each such event provision shall be made so that the
Holder shall receive upon exercise of this Warrant in addition to the number of
shares of Common Stock (or Other Securities) receivable thereupon, the amount of
securities of the Company that it would have received had this Warrant been
exercised into Common Stock (or Other Securities) on the date of such event and
had they thereafter, during the period from the date of such event to and
including the exercise date, retained such securities receivable by them as
aforesaid during such period, giving application to all adjustments called for
during such period with respect to the rights of the Holder.
4.4 Adjustment for Reclassification, Exchange, or Substitution. If the
Common Stock (or Other Securities) issuable upon the exercise of this Warrant
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares
5
or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the Holder shall have the right thereafter to exercise this Warrant into
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other change, by
holders of the number of shares of Common Stock (or Other Securities) into which
this Warrant might have been exercised immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
4.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 4, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price then in effect, and (iii) the Warrant
Shares Number and the amount, if any, of other property which then would be
received upon the exercise of this Warrant.
4.6 Warrant Shares Number. If any event shall occur that results in
any adjustment to the Exercise Price pursuant to this Section 4, then the
Warrant Shares Number, as in effect immediately prior to such event, shall be
adjusted such that the product of (a) the Exercise Price (as adjusted), times
(b) the Warrant Shares Number (as adjusted), in each case in effect immediately
following such event shall equal the product of (i) the Exercise Price, times
(b) the Warrant Shares Number, in each case in effect immediately prior to such
event.
5. Dilutive Issuances.
5.1 Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the issuance of this Warrant shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of
any class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares of Common Stock (or Other
Securities) (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue
or, in case such a record date shall have been fixed, as of the close of
business on such record date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Exercise Price pursuant
to the terms of Section 5.2 below, are revised (either automatically
pursuant to the provisions contained therein or as a result of an amendment
to such terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock (or Other Securities) issuable upon the
6
exercise, conversion or exchange of any such Option or Convertible Security
or (2) any increase or decrease in the consideration payable to the Company
upon such exercise, conversion or exchange, then, effective upon such
increase or decrease becoming effective, the Exercise Price computed upon
the original issue of such Option or Convertible Security (or upon the
occurrence of a record date with respect thereto) shall be readjusted to
such Exercise Price as would have obtained had such revised terms been in
effect upon the original date of issuance of such Option or Convertible
Security. Notwithstanding the foregoing, no adjustment pursuant to this
clause (ii) shall have the effect of increasing the Exercise Price to an
amount which exceeds the lower of (i) the Exercise Price on the original
adjustment date, or (ii) the Exercise Price that would have resulted from
any issuances of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Exercise Price
pursuant to the terms of Section 5.2 below (either because the
consideration per share of the Additional Shares of Common Stock subject
thereto was equal to or greater than the Exercise Price then in effect, or
because such Option or Convertible Security was issued before the issuance
of this Warrant), are revised after the issuance of this Warrant (either
automatically pursuant to the provisions contained therein or as a result
of an amendment to such terms) to provide for either (1) any increase or
decrease in the number of shares of Common Stock (or Other Securities)
issuable upon the exercise, conversion or exchange of any such Option or
Convertible Security or (2) any increase or decrease in the consideration
payable to the Company upon such exercise, conversion or exchange, then
such Option or Convertible Security, as so amended, and the Additional
Shares of Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted (either
upon its original issuance or upon a revision of its terms) in an
adjustment to the Exercise Price pursuant to the terms of Section 5.2
below, the Exercise Price shall be readjusted to such Exercise Price as
would have obtained had such Option or Convertible Security never been
issued.
5.2 Adjustment of Exercise Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company shall at any time after the issuance of
this Warrant issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 5.1), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect immediately prior to such issue, then the Exercise Price shall
be reduced, concurrently with such issue, to a price (calculated to the nearest
one-hundredth of a cent) determined in accordance with the following formula:
EP(2) = EP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
7
"EP(2)" shall mean the Exercise Price in effect immediately after
such issue of Additional Shares of Common Stock;
"EP(1)" shall mean the Exercise Price in effect immediately prior
to such issue of Additional Shares of Common Stock;
"A" shall mean the number of shares of Common Stock (or Other
Securities) outstanding and deemed outstanding
immediately prior to such issue of Additional Shares of
Common Stock (treating for this purpose as outstanding
all shares of Common Stock (or Other Securities) issuable
upon exercise of Options outstanding immediately prior to
such issue or upon conversion of Convertible Securities
outstanding immediately prior to such issue);
"B" shall mean the number of shares of Common Stock (or Other
Securities) that would have been issued if such
Additional Shares of Common Stock had been issued at a
price per share equal to EP1 (determined by dividing the
aggregate consideration received by the Company in
respect of such issue by EP(1)); and
"C" shall mean the number of such Additional Shares of Common
Stock issued in such transaction.
5.3 Determination of Consideration. For purposes of this Section 5,
the consideration received by the Company for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 5.1, relating to
Options and Convertible Securities, shall be determined by dividing:
8
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
5.4 Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Exercise Price pursuant to the terms of Section 5.2 above
then, upon the final such issuance, the Exercise Price shall be readjusted to
give effect to all such issuances as if they occurred on the date of the first
such issuance (and without additional giving effect to any adjustments as a
result of any subsequent issuances within such period).
5.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price then in effect, and (iii) the Warrant
Shares Number and the amount, if any, of other property which then would be
received upon the exercise of this Warrant.
5.6 Warrant Shares Number. If any event shall occur that results in
any adjustment to the Exercise Price pursuant to this Section 5, then the
Warrant Shares Number, as in effect immediately prior to such event, shall be
adjusted such that the product of (a) the Exercise Price (as adjusted), times
(b) the Warrant Shares Number (as adjusted), in each case in effect immediately
following such event shall equal the product of (i) the Exercise Price, times
(b) the Warrant Shares Number, in each case in effect immediately prior to such
event.
6. Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant. The Company will not,
by amendment of its charter or through reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
9
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock (or Other Securities) obtainable upon the exercise of this Warrant
and (b) take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock (or Other Securities) upon the exercise of this Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to the Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
12. Definitions. For purposes of this Warrant, the following definitions
shall apply:
10
(a) "Additional Shares of Common Stock" shall mean all shares of
Common Stock (or Other Securities) issued (or deemed to be issued pursuant
to Section 5) by the Company after the date of issuance of this Warrant,
but shall not include up to 2,382,200 shares of Common Stock issuable upon
exercise of options granted by the Company pursuant to a statutory employee
benefit plan approved in accordance with Section 7 of the Company's Series
A Certificate of Designations.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible
into or exchangeable for Common Stock (or Other Securities), but excluding
Options.
(c) "Current Market Value" means the fair market value of the
shares of Common Stock (or Other Securities), as determined as follows:
(i) if the Common Stock (or Other Securities) is traded on a
securities exchange or the NASDAQ Stock Market, the value shall
be deemed to be the average of the closing prices of the Common
Stock (or Other Securities) on such exchange or market over the
five (5) trading day period ending three (3) days prior to the
date of determination;
(ii) if the Common Stock (or Other Securities) is actively
traded over-the-counter, the value shall be deemed to be the
average of the closing bid prices over the five (5) trading day
period ending three (3) days prior to the date of determination;
or
(iii) if there is no active public market for the Common
Stock (or Other Securities), the value shall be the fair market
value thereof, as determined in good faith by the Board.
(d) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock (or Other Securities) or
Convertible Securities, but shall not include options to purchase up to
2,382,200 shares of Common Stock granted by the Company pursuant to a
statutory employee benefit plan approved in accordance with Section 7 of
the Company's Series A Certificate of Designations.
13. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. In
the event that any provision of this Warrant is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
11
[Signature page to follow]
12
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
ADUROMED CORPORATION
By:
------------------------------------
Name:
Title:
13
EXHIBIT E
FORM OF SECOND CLOSING WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO GENERAL DEVICES, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
GENERAL DEVICES, INC.
COMMON STOCK WARRANT
No. __ Issue Date: __________
GENERAL DEVICES, INC., a corporation organized under the laws of the State
of Delaware, hereby certifies that, for value received, _________________, or
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the date hereof and
at any time or from time to time before 5:00 p.m., New York time, through the
close of business (New York time) on January 24, 2013 (the "Expiration Date"),
up to _______ fully paid and nonassessable shares of Common Stock of the
Company, par value $0.0001 per share ("Common Stock") at an exercise price of
$0.37883 per share, subject to adjustment hereunder (such exercise price, as
adjusted from time to time, the "Exercise Price").
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include General Devices, Inc. and any
corporation which shall succeed, or assume the obligations of, General Devices,
Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, par
value $0.0001 per share, and (b) any other securities into which or for which
any of the securities described in clause (a) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3 or 4 or otherwise.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), up to _______ shares of Common Stock of the
Company, subject to adjustment pursuant to Sections 4 and 5 (such number of
shares of Common Stock, as adjusted from time to time, the "Warrant Shares
Number").
1.2 Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise.
2.2 Cash Exercise. Payment shall be made in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, for the number of shares of Common Stock (or Other
Securities) specified in such Exercise Notice (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
(or Other Securities) issuable to the Holder per the terms of this Warrant) and
the Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
2.3 Cashless Exercise. In lieu of payment of the Exercise Price as
provided above, the Holder may elect a cashless net exercise. In the case of
such cashless net exercise, the Holder shall surrender this Warrant for
cancellation and receive in exchange therefor the full number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) as is computed using the following formula:
X = Y * (A - B)
-----------
A
2
where:
X = the number of shares of Common Stock (or Other Securities) to be
issued to the Holder upon cashless exercise of this Warrant
Y = the total number of shares Common Stock (or Other Securities) covered
by this Warrant which the Holder has surrendered at such time for
cashless exercise (including both shares to be issued to the Holder
upon cashless exercise of this Warrant and shares to be cancelled as
payment therefor)
A = the Current Market Value as of the business day on which the Holder
surrenders this Warrant to the Company
B = the Exercise Price then in effect under this Warrant at the time at
which the Holder surrenders this Warrant to the Company
For purposes of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), it is intended, understood and acknowledged that
the Common Stock (or Other Securities) issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Common Stock (or Other Securities) shall be deemed to have commenced, on the
date this Warrant was originally issued.
2.4 Limitation on Exercise. Notwithstanding anything herein to the
contrary, from and after the date on which the Company shall have registered the
Common Stock (or Other Securities) under the Securities Act, in no event shall
the Holder be entitled to exercise any portion of this Warrant in excess of that
portion of this Warrant upon exercise of which the sum of (i) the number of
shares of Common Stock (or Other Securities) beneficially owned by the Holder
and its Affiliates (other than shares of Common Stock (or Other Securities)
which may be deemed beneficially owned through the ownership of the unexercised
portion of the Warrant or the unexercised or unconverted portion of any other
security of the Holder subject to a limitation on conversion analogous to the
limitations contained herein) and (ii) the number of shares of Common Stock (or
Other Securities) issuable upon the exercise of the portion of this Warrant with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its Affiliates of more than 4.99% of
the then outstanding shares of Common Stock (or Other Securities). As used
herein, the term "Affiliate" means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a person or entity, as such terms are used in and
construed under Rule 144 under the Securities Act. For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The Holder may waive the limitations set forth
herein by sixty-one (61) days written notice to the Company.
3. Effect of Merger or Reorganization, etc.; Adjustment of Exercise Price.
3.1 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or merger
involving the Company
3
in which the Common Stock is converted into or exchanged for securities, cash or
other property, then, following any such reorganization, recapitalization,
reclassification, consolidation or merger, this Warrant shall thereafter be
exercisable in lieu of the Common Stock into which it was exercisable prior to
such event into the kind and amount of securities, cash or other property which
a holder of the number of shares of Common Stock of the Company issuable upon
exercise of this Warrant immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case, appropriate
adjustment (as determined in good faith by the board of directors of the Company
(the "Board")) shall be made in the application of the provisions of Section 3,
4 and 5 with respect to the rights and interests thereafter of the Holders of
this Warrant, to the end that the provisions set forth in Section 3, 4 and 5
(including provisions with respect to changes in and other adjustments of the
Exercise Price) shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or other property thereafter deliverable upon the
exercise of this Warrant.
3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1.
3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant. In the event this Warrant does not
continue in full force and effect after the consummation of the transactions
described in this Section 3, then the Company's securities and property
(including cash, where applicable) receivable by the Holders of the Warrant will
be delivered to Holder.
4. Extraordinary Events Regarding Common Stock.
4.1 Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time effect a subdivision of the outstanding Common
Stock (or Other Securities), the Exercise Price then in effect immediately
before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time combine the outstanding shares of Common Stock
(or Other Securities), the Exercise Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this clause
shall become effective at the close of business on the date the subdivision or
combination becomes effective.
4.2 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time shall make or issue, or fix a
record date for the
4
determination of holders of Common Stock (or Other Securities) entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock (or Other Securities), then and in each such event the Exercise Price then
in effect shall be decreased as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of business on such
record date, by multiplying the Exercise Price then in effect by a fraction:
(i) the numerator of which shall be the total number of shares of
Common Stock (or Other Securities) issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date, and
(ii) the denominator of which shall be the total number of shares
of Common Stock (or Other Securities) issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
(or Other Securities) issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Exercise Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Exercise Price shall be adjusted
pursuant to this clause as of the time of actual payment of such dividends or
distributions.
4.3 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock (or Other
Securities) entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock (or Other
Securities), then and in each such event provision shall be made so that the
Holder shall receive upon exercise of this Warrant in addition to the number of
shares of Common Stock (or Other Securities) receivable thereupon, the amount of
securities of the Company that it would have received had this Warrant been
exercised into Common Stock (or Other Securities) on the date of such event and
had they thereafter, during the period from the date of such event to and
including the exercise date, retained such securities receivable by them as
aforesaid during such period, giving application to all adjustments called for
during such period with respect to the rights of the Holder.
4.4 Adjustment for Reclassification, Exchange, or Substitution. If the
Common Stock (or Other Securities) issuable upon the exercise of this Warrant
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Common
Stock (or Other Securities) into which this Warrant might have been exercised
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
5
4.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 4, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price then in effect, and (iii) the Warrant
Shares Number and the amount, if any, of other property which then would be
received upon the exercise of this Warrant.
4.6 Warrant Shares Number. If any event shall occur that results in
any adjustment to the Exercise Price pursuant to this Section 4, then the
Warrant Shares Number, as in effect immediately prior to such event, shall be
adjusted such that the product of (a) the Exercise Price (as adjusted), times
(b) the Warrant Shares Number (as adjusted), in each case in effect immediately
following such event shall equal the product of (i) the Exercise Price, times
(b) the Warrant Shares Number, in each case in effect immediately prior to such
event.
5. Dilutive Issuances.
5.1 Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the issuance of this Warrant shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of
any class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares of Common Stock (or Other
Securities) (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue
or, in case such a record date shall have been fixed, as of the close of
business on such record date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Exercise Price pursuant
to the terms of Section 5.2 below, are revised (either automatically
pursuant to the provisions contained therein or as a result of an amendment
to such terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock (or Other Securities) issuable upon the
exercise, conversion or exchange of any such Option or Convertible Security
or (2) any increase or decrease in the consideration payable to the Company
upon such exercise, conversion or exchange, then, effective upon such
increase or decrease becoming effective, the Exercise Price computed upon
the original issue of such Option or Convertible Security (or upon the
occurrence of a record date with respect thereto) shall be readjusted to
such Exercise Price as would have obtained had such revised terms been in
effect upon the original date of issuance of such Option or Convertible
Security. Notwithstanding the foregoing, no adjustment pursuant to this
clause (ii) shall have the
6
effect of increasing the Exercise Price to an amount which exceeds the
lower of (i) the Exercise Price on the original adjustment date, or (ii)
the Exercise Price that would have resulted from any issuances of
Additional Shares of Common Stock between the original adjustment date and
such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Exercise Price
pursuant to the terms of Section 5.2 below (either because the
consideration per share of the Additional Shares of Common Stock subject
thereto was equal to or greater than the Exercise Price then in effect, or
because such Option or Convertible Security was issued before the issuance
of this Warrant), are revised after the issuance of this Warrant (either
automatically pursuant to the provisions contained therein or as a result
of an amendment to such terms) to provide for either (1) any increase or
decrease in the number of shares of Common Stock (or Other Securities)
issuable upon the exercise, conversion or exchange of any such Option or
Convertible Security or (2) any increase or decrease in the consideration
payable to the Company upon such exercise, conversion or exchange, then
such Option or Convertible Security, as so amended, and the Additional
Shares of Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted (either
upon its original issuance or upon a revision of its terms) in an
adjustment to the Exercise Price pursuant to the terms of Section 5.2
below, the Exercise Price shall be readjusted to such Exercise Price as
would have obtained had such Option or Convertible Security never been
issued.
5.2 Adjustment of Exercise Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company shall at any time after the issuance of
this Warrant issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 5.1), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect immediately prior to such issue, then the Exercise Price shall
be reduced, concurrently with such issue, to a price (calculated to the nearest
one-hundredth of a cent) determined in accordance with the following formula:
EP(2) = EP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
"EP(2)" shall mean the Exercise Price in effect immediately after
such issue of Additional Shares of Common Stock;
"EP(1)" shall mean the Exercise Price in effect immediately prior
to such issue of Additional Shares of Common Stock;
"A" shall mean the number of shares of Common Stock (or Other
Securities) outstanding and deemed outstanding
immediately prior to such issue of Additional Shares of
Common Stock (treating for
7
this purpose as outstanding all shares of Common Stock
(or Other Securities) issuable upon exercise of Options
outstanding immediately prior to such issue or upon
conversion of Convertible Securities outstanding
immediately prior to such issue);
"B" shall mean the number of shares of Common Stock (or Other
Securities) that would have been issued if such
Additional Shares of Common Stock had been issued at a
price per share equal to EP(1) (determined by dividing
the aggregate consideration received by the Company in
respect of such issue by EP(1)); and
"C" shall mean the number of such Additional Shares of Common
Stock issued in such transaction.
5.3 Determination of Consideration. For purposes of this Section 5,
the consideration received by the Company for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 5.1, relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such
8
Options for Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
5.4 Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Exercise Price pursuant to the terms of Section 5.2 above
then, upon the final such issuance, the Exercise Price shall be readjusted to
give effect to all such issuances as if they occurred on the date of the first
such issuance (and without additional giving effect to any adjustments as a
result of any subsequent issuances within such period).
5.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price then in effect, and (iii) the Warrant
Shares Number and the amount, if any, of other property which then would be
received upon the exercise of this Warrant.
5.6 Warrant Shares Number. If any event shall occur that results in
any adjustment to the Exercise Price pursuant to this Section 5, then the
Warrant Shares Number, as in effect immediately prior to such event, shall be
adjusted such that the product of (a) the Exercise Price (as adjusted), times
(b) the Warrant Shares Number (as adjusted), in each case in effect immediately
following such event shall equal the product of (i) the Exercise Price, times
(b) the Warrant Shares Number, in each case in effect immediately prior to such
event.
6. Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant. The Company will not,
by amendment of its charter or through 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. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock (or
Other Securities) obtainable upon the exercise of this Warrant and (b) take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
(or Other Securities) upon the exercise of this Warrant.
9
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to the Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
12. Definitions. For purposes of this Warrant, the following definitions
shall apply:
(a) "Additional Shares of Common Stock" shall mean all shares of
Common Stock (or Other Securities) issued (or deemed to be issued pursuant
to Section 5) by the Company after the date of issuance of this Warrant,
but shall not include up to 4,211,799 shares of Common Stock issuable upon
exercise of options granted by the Company pursuant to a statutory employee
benefit plan approved in accordance with Section 7 of the Company's Series
A Certificate of Designations.
10
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible
into or exchangeable for Common Stock (or Other Securities), but excluding
Options.
(c) "Current Market Value" means the fair market value of the
shares of Common Stock (or Other Securities), as determined as follows:
(i) if the Common Stock (or Other Securities) is traded on a
securities exchange or the NASDAQ Stock Market, the value shall
be deemed to be the average of the closing prices of the Common
Stock (or Other Securities) on such exchange or market over the
five (5) trading day period ending three (3) days prior to the
date of determination;
(ii) if the Common Stock (or Other Securities) is actively
traded over-the-counter, the value shall be deemed to be the
average of the closing bid prices over the five (5) trading day
period ending three (3) days prior to the date of determination;
or
(iii) if there is no active public market for the Common
Stock (or Other Securities), the value shall be the fair market
value thereof, as determined in good faith by the Board.
(d) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock (or Other Securities) or
Convertible Securities, but shall not include options to purchase up to
4,211,799 shares of Common Stock granted by the Company pursuant to a
statutory employee benefit plan approved in accordance with Section 7 of
the Company's Series A Certificate of Designations.
13. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. In
the event that any provision of this Warrant is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
[Signature page to follow]
11
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
GENERAL DEVICES, INC.
By:
------------------------------------
Name:
Title:
12
EXHIBIT F
REPRESENTATIONS OF THE COMPANY
PARA 3.2(b) CAPITALIZATION
See exhibit F-1 as provided under section 3.4
PARA 3.8 PROPERTY AND ASSETS
See pledge and security Agreement between Xxxxxxxxx Xxxxxxxx and the Company
attached.
PARA 3.23 BROKERAGE;
The Company has agreed to pay Xxxxx Brothers Securities Corporation the
following monies and warrants in consideration of their efforts:
o 7% of gross raise of $7 million or $490,000 total
o 6 months of pay @ $10,000 per month for a total of $60,000 total
o 10% of founder's warrants that is a total of 1,221,334 warrants @
$0.627 conversion to common or 10% over Purchasers' strike price of
$0.57.
PARA 3.24 EMPLOYEE BENEFIT PLANS
a) The Company offers to all active employees the option to participate
through the Connecticut Business and Industry Association (CBIA)
Health Connections group medical health coverage and Genworth
Financial for Dental coverage. Employees can select from different
levels of coverage and from various insurance carriers such as: CIGNA
HealthCare, ConnectiCare, Health Net and Oxford Health Plans.
Currently, new employees contribute 25% towards the cost of the
premiums.
b) Current staffing comprises the following employees of the Company:
a. Xxxxxx Xxxxxx President, CEO See employment contract
b. Xxxxx Xxxxxx, CFO See employment contract
c. Xxxxxx Xxxxx, VP New Business Development See employment contract
d. (2) design draftsmen $18-20 per hour
e. (2) administrators $20-24 per hour
f. (2) Project Managers $50-70,000 per annum
ADUROMED CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
ADUROMED CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEX TO FINANCIAL STATEMENTS 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2
BALANCE SHEETS (RESTATED) 3
STATEMENTS OF OPERATIONS (RESTATED) 4
STATEMENTS OF STOCKHOLDERS' DEFICIT (RESTATED) 5
STATEMENTS OF CASH FLOWS (RESTATED) 6
NOTES TO FINANCIAL STATEMENTS 7
1
CHILD, XXXXXXXX & COMPANY
A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS
0000 X. XXXXX XXXXXX XX., XXXXX X,
XXXXXXXXX, XX 00000 PHONE: (000) 000-0000 FAX: (000) 000-0000
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors
ADUROMED CORPORATION
Bethel, Connecticut
We have audited the accompanying restated balance sheets of ADUROMED CORPORATION
as of December 31, 2004 and 2003, and the related restated statements of
operations, stockholders' equity, and cash flows for the years then ended. These
restated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these restated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the restated financial statements referred to above present
fairly, in all material respects, the financial position of ADUROMED CORPORATION
as of December 31, 2004 and 2003, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Since our previous report dated August 19, 2005, as described in note 7, certain
amounts related to the valuations of goodwill and deferred tax assets have been
reevaluated by the Company. However, the Company has restated the financial
statements to reflect these amounts.
Child, Xxxxxxxx & Company
Kaysville, Utah
August 19, 2005, except for note 7 which is dated February 22, 2006.
2
ADUROMED CORPORATION
BALANCE SHEETS (RESTATED)
December 31,
-----------------------
ASSETS 2004 2003
--------- --------
Current assets
Cash $ 11,958 $ 14,905
Accounts receivable 196,431 93,506
Loans receivable 27,815 2,767
Costs in excess of xxxxxxxx on uncompleted contracts 59,184 54,928
Inventory 62,345 3,070
-------- --------
Total current assets 357,733 169,176
Property, plant and equipment 11,991 5,422
Other assets
Security deposits 4,114 4,114
-------- --------
Total other assets 4,114 4,114
-------- --------
Total assets $373,838 $178,712
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities $479,262 $154,270
Xxxxxxxx in excess of costs on uncompleted contracts 84,053 -
Customer advances 30,362 -
-------- --------
Total current liabilities 593,677 154,270
Other liabilities
Notes payable 88,971 20,417
Notes payable to related parties 236,470 269,785
--------- ---------
Total other liabilities 325,441 290,202
--------- --------
Total liabilities 919,118 444,472
Stockholders' deficit
Common stock: $.01 par value; 20,000,000 shares authorized;
9,151,000 shares issued and outstanding 91,510 91,510
Additional paid-in capital 348,590 348,590
Accumulated deficit (985,380) (705,860)
--------- ---------
Total stockholders' deficit (545,280) (265,760)
--------- ---------
Total liabilities and stockholders' deficit $ 373,838 $ 178,712
========= =========
See notes to financial statements.
3
ADUROMED CORPORATION
STATEMENTS OF OPERATIONS (RESTATED)
Year ended
December 31,
-----------------------
2004 2003
---- ----
Revenues
Sales and service revenues $ 2,285,198 $ 877,886
Rental income - 6,160
----------- ---------
Total revenues 2,285,198 884,046
Cost of sales 1,504,392 516,857
----------- ---------
Gross profit 780,806 367,189
Operating expenses
Operating expenses 701,671 568,689
General and administrative expenses 323,834 191,139
----------- ---------
Total operating expenses 1,025,505 759,828
----------- ---------
Loss from operations (244,699) (392,639)
Other income and expenses
Other income 20 -
Interest income 2 684
Interest expense (34,843) (32,735)
----------- ---------
Total other income and expenses (34,821) (32,051)
----------- ---------
Net loss before income taxes (279,520) (424,690)
Provision for income tax benefit - -
----------- ---------
Net loss $ (279,520) $ (424,690)
=========== ==========
Basic and diluted net loss per share $ (0.03) $ (0.05)
=========== ==========
Weighted average number of shares outstanding 9,151,000 9,033,329
=========== ==========
See notes to financial statements.
4
ADUROMED CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT (RESTATED)
FOR THE PERIOD FROM JANUARY 1, 2003 TO DECEMBER 31, 2004
Common Stock
------------------------ Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
------ ------ --------------- ------- -----
Balance at January 1, 2003 8,801,000 $ 88,010 $ 147,090 $(281,170) $ (46,070)
Common stock issued for conversion of note 50,000 500 24,500 - 25,000
Common stock issued 300,000 3,000 177,000 - 180,000
Net loss for the period - - - (424,690) (424,690)
--------- -------- --------- --------- ---------
Balance December 31, 2003 9,151,000 91,510 348,590 (705,860) (265,760)
Net loss for the year - - - (279,520) (279,520)
--------- --------- --------- --------- ---------
Balance December 31, 2004 9,151,000 $ 91,510 $ 348,590 $(985,380) $(545,280)
========= ========= ========= ========= =========
See notes to financial statements.
5
ADUROMED CORPORATION
STATEMENTS OF CASH FLOWS (RESTATED)
Year ended
December 31,
------------------------------
2004 2003
------------ ------------
Cash flows from operating activities:
Net loss $(279,520) $(424,690)
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation expense 2,247 286
Increase in accounts receivable (102,925) (1,887)
Increase in loans receivable (25,048) (2,767)
Increase in costs in excess of xxxxxxxx (4,256) (54,928)
Decrease/(increase) in inventory (59,275) 71,474
Increase in security deposits - (868)
Increase in accounts payable and accrued liabilities 324,992 101,416
Increase in xxxxxxxx in excess of costs 84,053 -
Increase in customer advances 30,362 -
--------- ---------
Net cash provided/(used) in operating activities (29,370) (311,964)
Cash flows from investing activities:
Purchase of fixed assets (8,816) (5,708)
--------- ---------
Net cash used by investing activities (8,816) (5,708)
Cash flows from financing activities:
Advances from notes payable 68,555 20,417
Repayments of notes payable to related parties (33,316) (116,765)
Proceeds from issuance of common stock - 205,000
--------- ---------
Net cash provided by financing activities 35,239 108,652
--------- ---------
Decrease in cash and cash equivalents (2,947) (209,020)
Cash and cash equivalents, beginning of period 14,905 223,925
---------- ---------
Cash and cash equivalents, end of period $ 11,958 $ 14,905
========== =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 15,659 $ 4,500
========== =========
Cash paid for income taxes $ - $ -
========== =========
See notes to financial statements.
6
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION - ORGANIZATION
On August 1, 2002, ADUROMED CORPORATION (the "Company") was incorporated
under the laws of the State of Delaware as DQA ONE CORPORATION. The Company
is engaged in the selling of custom-built autoclave equipment and
disposable products related to that line of medical equipment.
On September 6, 2002 DQA ONE, LLC was established under the laws of the
State of Delaware. On September 16, 2002, DQA ONE, LLC acquired 63.16%
interest of Automated Process, LLC.
On October 22, 2002, DQA ONE CORPORATION merged with DQA ONE, LLC and
Automated Process, LLC and changed its name to Automated Process
Corporation. On January 30, 2003, Automated Process Corporation changed its
name to ADUROMED CORPORATION.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
START-UP COSTS
The Company adopted the provisions of the American Institute of Certified
Public Accountants' Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities". SOP 98-5 provides guidance on the financial reporting
of start-up and organization costs and requires such costs to be expensed
as incurred.
NET LOSS PER COMMON SHARE
The net loss per common share is computed by dividing the net loss for the
period by the weighted average number of shares outstanding for the period.
Outstanding warrants and options were not included in the calculation for
net loss per common share because it would be antidilutive.
USE OF ESTIMATES
The preparation of the accompanying financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of expenses
during the reporting periods. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
7
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTS RECEIVABLE
The Company maintains an accounts receivable ledger to track amounts due
from individual customers. Per company policy an allowance for bad debts is
maintained for any receivables that are outstanding for more than 60 days.
The allowance for bad debts was $34,278 and $0 as of December 31, 2004 and
2003, respectively.
PROPERTY, PLANT AND EQUIPMENT
The Company has property, plant and equipment that consists of computers,
related accessories and office furniture. The depreciation is calculated
using the straight line method over the life of the property. All property
currently held has a useful life of 5 years. The following table summarizes
these assets for each year:
2004 2003
---- ----
Office Furniture 1,497 -
Computers and Accessories 13,027 5,708
------ -----
14,524 5,708
Accumulated Depreciation 2,533 286
------ -----
11,991 5,422
INVENTORY
The Company maintains an inventory, which consists primarily of spare parts
and finished goods. The inventory, using the average cost method, was
$62,345 and $3,070 as of December 31, 2004 and 2003 respectively.
BUSINESS COMBINATION
On September 16, 2002, DQA ONE, LLC acquired 63.16% interest in Automated
Process, LLC from X. Xxxxx (31.58%) and X. Xxxxxxxx (31.58%). On October
22, 2002, DQA ONE, LLC and Automated Process, LLC were merged into DQA ONE
CORPORATION. This merger was accounted for as a transfer under common
control. Consequently, the $256,748 paid for the net assets in excess of
their historical cost was recorded as a dividend to the selling owners
rather than capitalized as goodwill. Xxxxx and Xxxxxxxx are to be
compensated with 3% of sales of certain products of ADUROMED CORPORATION
during the three (3) year period subsequent to the closing. The accrual of
these amounts will be included in cost of sales in the period that the
revenues are recognized through September 16, 2005. Cost of sales related
to such accruals totaled $68,556 and $26,267 for the years ended December
31, 2004 and 2003, respectively.
8
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOAN RECEIVABLE
The Company has advanced money to employees. These loans have no set
repayment schedule. The loan receivable was $27,815 and $2,767 as of
December 31, 2004 and 2003, respectively.
CONSTRUCTION CONTRACTS
The Company entered into construction type contracts to furnish and install
their systems in hospitals. There were four outstanding contracts at
December 31, 2004 and one at December 31, 2003. The following table
summarizes these outstanding contracts:
Contract Revenue Amounts Revenues in Xxxxxxxx in excess
Amount Recognized Billed excess of Xxxxxxxx of Revenues
-------- ---------- ------- ------------------ -------------------
2004 Outstanding Contracts
419,241 234,455 279,991 - 45,536
197,819 176,519 150,614 25,905 -
699,764 588,706 627,223 - 38,517
820,584 786,650 753,371 33,279 -
------ -
59,184 84,053
====== ======
2003 Outstanding Contracts
370,300 301,794 246,866 54,928 -
NOTES PAYABLE
In connection with the acquisition of the interest in Automated Process,
LLC, the 3% of sales that are due to Xxxxx and Xxxxxxxx on a quarterly
basis through 2005 have been converted to notes payable. These notes bear
no interest and have no maturity date. These notes payable were $88,972 and
$20,417 on December 31, 2004 and 2003, respectively.
NOTES PAYABLE TO A RELATED PARTY
There is an outstanding note payable to a shareholder. The note bears a 12%
interest rate and matured on December 15, 2003. Both parties have entered a
verbal agreement to extend the maturity date on this note indefinitely. No
accrued interest has been paid on this note to date. The following
summarizes the balances due:
2004 2003 2002
---- ---- ----
Principal 97,500 135,000 350,000
Accrued Interest 58,647 39,785 11,550
------- ------- -------
Balance as of December 31 156,147 174,785 361,550
======= ======= =======
9
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
NOTES PAYABLE TO A RELATED PARTY (Continued)
X. Xxxxxx has personally guaranteed a line of credit with Xxxxx Fargo Bank.
The line bears interest at 12-1/4 percent. The outstanding balance was
$30,323 and $45,000 as of December 31, 2004 and 2003, respectively. At
December 31, 2004 there was $9,677 of available credit on the line.
There is an outstanding note payable of $50,000 with S&C Xxxxxxxx. Xxxxxx
Xxxxxxxx, a director of the Company, is the son of S&C Xxxxxxxx. The note
bears a 12% interest rate and matured on December 24, 2003. The parties
entered a verbal agreement to extend the maturity date on this note
indefinitely. Interest has been paid on a monthly basis.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to reverse. The effect on deferred tax
assets and liabilities from a change in tax rates is recognized in the
statement of operations in the period that includes the enactment date.
Management believes it is more likely than not that all of the deferred tax
asset will not be realized. A valuation allowance has been provided for the
entire deferred tax benefit.
The Company has available at December 31, 2004 unused operating loss
carryforwards that may be applied against future taxable income and that
expire as follows:
Year Federal State
---- ------- -----
2007 $ $ 24,913
2008 - 404,973
2009 - 205,341
2017 25,163 -
2018 405,727 -
2019 205,641 -
-------- --------
$636,531 $635,227
======== ========
The provision for income taxes consists of the following components:
2004 2003
---- ----
Current $ - $ -
Deferred benefit $ 77,542 $ 177,502
Valuation allowance (77,542) (177,502)
-------- ---------
$ - $ -
======== =========
10
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. LEASE COMMITMENTS
The Company conducts its operations from facilities that are leased under a
month-to-month agreement. The Company also leases a phone system on a 60
month term, which began on December 24, 2003. The monthly installment is
$434 plus applicable taxes. There is a $118 security deposit with this
lease agreement. This lease commitment is $5,517 per year through 2008. The
annual lease payments are as follows:
2005 $10,734
2006 10,734
2007 10,734
2008 10,734
-------
$42,936
=======
4. COMMON STOCK
The Company is authorized to issue 20,000,000 shares of par value $.01
common stock. As of December 31, 2002, 8,801,000 shares were issued and
outstanding.
On January 1, 2003, the Company issued 50,000 shares to S&C Xxxxxxxx for
the conversion of a $25,000 note payable to common stock. The note was
dated October 31, 2002 and matured six months from that date, but could be
converted any time during the six month period. Xxxxxx Xxxxxxxx, a director
of the Company, is the son of S&C Xxxxxxxx.
On May 28, 2003, the Company issued 300,000 shares to United Link Asset
Holdings Limited for $0.60 per share.
5. STOCK OPTIONS AND WARRANTS
Stock option and warrant transactions are summarized as follows:
Stock Options Warrants
2004 2003 2004 2003
---- ---- ---- ----
Outstanding - beginning of year 3,005,000 1,750,000 2,318,450 2,318,450
Granted - 1,255,000 - -
Exercised - - - -
Forfeited - - - -
--------- --------- --------- ---------
Outstanding - end of year 3,005,000 3,005,000 2,318,450 2,318,450
========= ========= ========= =========
Shares exercisable - end of year 2,085,000 1,583,333 2,318,450 2,318,450
========= ========= ========= =========
11
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
5. STOCK OPTIONS AND WARRANTS (Continued)
The following table provides certain information with respect to the
above-referenced stock options and warrants outstanding at December 31,
2004:
Weighted Weighted
Number Exercise Average Average
Outstanding Price Range Exercise Price Life in Years
----------- ----------- -------------- -------------
Options 3,005,000 $0.10 - $0.50 $0.21 5.7
Warrants 2,318,450 $0.10 - $1.00 $0.67 3.6
The following table provides certain information with respect to the
above-referenced stock options and warrants exercisable at December 31,
2004:
Weighted Weighted
Number Exercise Average Average
Outstanding Price Range Exercise Price Life in Years
----------- ----------- -------------- -------------
Options 2,085,000 $0.10 - $0.50 $0.16 6.7
Warrants 2,318,450 $0.10 - $1.00 $0.67 3.6
The estimated fair values at date of grant were $.15 to $.42 for the
options granted above, using the Black-Scholes option valuation model with
the following assumptions:
Expected life in years 6
Interest rate 6%
Volatility 5%
Dividend yield 0%
In electing to continue to follow XXX Xx. 00 for expense recognition
purposes, the Company is obligated to provide the expanded disclosures
required under SFAS No. 148 for stock-based compensation granted in 2003 to
employees, including if materially different from reported results,
disclosure of pro forma net loss and loss per share had compensation
expense relating to the options been measured under the fair value
recognition provision of SFAS No. 123.
The Company's pro forma information for the years ended December 31, 2004
and 2003 prepared in accordance with the provisions of SFAS No. 148 is
provided below. For purposes of pro forma disclosures, stock-based
compensation is amortized to expense on a straight-line basis over the
vesting period.
12
ADUROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
5. STOCK OPTIONS AND WARRANTS (Continued)
2004 2003
---- ----
Net loss, as reported $ (279,520) $ (424,690)
Deduct: total stock-based employee compensation
determined under fair value based method for
all awards, net of related tax effects (165,917) (26,667)
---------- ----------
Pro forma net loss (445,437) (451,357)
========== ==========
Basic and diluted LPS - as reported $ (0.03) $ (0.05)
========== ==========
Basic and diluted LPS - pro forma $ (0.05) $ (0.05)
========== ==========
Basic and diluted LPS share denominator 9,151,000 9,033,329
6. SUBSEQUENT EVENTS
On May 20, 2005, the Company entered into an agreement with Xxxxx Brothers
Securities Corporation, to act as financial advisors with respect to
raising approximately $6 million through the issuance by the Company of
common stock and attached warrants. Upon purchasing a "clean public shell"
the Company contemplates a transaction involving the merger or other
reorganization of Aduromed Corporation and the public shell with the
simultaneous issuance of equity securities by the public shell to investors
and the present shareholders of Aduromed Corporation. Following completion
of the transactions, the name of the public shell will be changed to
"Aduromed Corporation".
7. RESTATEMENT
Subsequent to the publication of the financial statements management
revised its estimates of certain asset valuations which had a material
impact on the results of operations of the Company. Consequently, these
financial statements have been restated to reflect those revised estimates.
The valuation placed on the deferred tax asset was previously $255,044 and
$177,502 at December 31, 2004 and 2003, but has been restated as $0 because
the future profitability of the Company cannot be assured. This revaluation
also applies to the income tax benefits previously reported on the
statements of operations, causing an increase in net loss of $77,542 and
$177,502 for the years ended December 31, 2004 and 2003. The Company also
reevaluated its accounting for goodwill since the business combination
referenced in Note 2. Goodwill previously stated as $351,571 and $283,015
as of December 31, 2004 and 2003 has been restated as $0 due to a
re-evaluation of the facts and circumstances that existed at the time of
the business combination. The transaction was previously accounted for
under purchase accounting rather than as a transfer under common control.
The restatement has the effect of reclassifying 2002 goodwill as a dividend
to the sellers of $256,748 and increasing the net losses for the years
ended December 31, 2004 and 2003 by $68,556 and $26,267. The aggregate
effect of the restatements is the increase in accumulated deficit at
January 1, 2003 of $256,748 and the increase in net loss for the years
ended December 31, 2004 and 2003 of $146,098 and $206,769.
00
XXXXXX XXXXXX XXXXXXXXXX XX XXXXXXXX
XXXXXXX XXXXX
FROM: ECom102 [xxxx000@xxxxx.xxx]
SENT: Thursday, 08 July, 2004 13:28
TO: Xxxxxx@xxxxxxxx.xxx
SUBJECT: TRADEMARK APPLICATION XX. 00000000 - XXXXXXXX - X/X
XXXXXX XXXXXX PATENT AND TRADEMARK OFFICE
SERIAL NO: 78/334234
APPLICANT: Aduromed Corporation *78334234*
CORRESPONDENT ADDRESS: RETURN ADDRESS:
Aduromed Corporation Commissioner for Trademarks
000 Xxxxxxxxx Xxxxxx Xxxxx 00-00 0000 Xxxxxxx Xxxxx
Xxxxxx, XX 00000 Xxxxxxxxx, XX 00000-0000
XXXX: ADUROMED
CORRESPONDENT'S REFERENCE/DOCKET NO: N/A Please provide in all
correspondence:
1. Filing date, serial number,
xxxx and applicant's name.
CORRESPONDENT EMAIL ADDRESS: 2. Date of this Office Action.
xxxxxx@xxxxxxxx.xxx 3. Examining Attorney's
name and Law Office number.
4. Your telephone number
and e-mail address.
OFFICE ACTION
TO AVOID ABANDONMENT, WE MUST RECEIVE A PROPER RESPONSE TO THIS OFFICE ACTION
WITHIN 6 MONTHS OF OUR MAIL.ENG OR E-MAILING DATE
Serial Number 78/334234
The assigned examining attorney has reviewed the above-referenced application
and determined the following.
LIKELIHOOD OF CONFUSION
The examining attorney refuses registration under Trademark Act Section 2(d), 15
U.S.C. Section 1052(d), because the applicant's xxxx, when used on or in
connection with the identified goods and services, so resembles the xxxx in U.S.
Registration No. 0986984 and 2430702 as to be likely to cause confusion, to
cause mistake, or to deceive. TMEP ss.ss.1207.01 et seq. See the enclosed
registration(s).
I. COMPARISON OF THE MARKS
When determining whether there is a likelihood of confusion under Section 2(d),
the question is whether the marks will confuse consumers into believing that the
goods and/or services emanate from the same source. In re West Point-Pepperell,
Inc., 468 F.2d 200, 175 USPQ 558 (C.C.P.A. 1972). For that reason, the test of
likelihood of confusion is not whether the marks can be distinguished when
subjected to a side-by-side comparison. The issue is whether the
UNITED STATES DEPARTMENT OF COMMERCE
Marks create the same overall impression. Visual Information Inst., Inc. v.
Vicon Indus. Inc., 209 USPQ 179 (TTAB 1980). The focus is on the recollection of
the average purchaser who normally retains a general rather than specific
impression of trademarks. Chemetron Corp. x. Xxxxxx Coupling & Clamp Co., 203
USPQ 537 (TTAB 1979); Sealed Air Corp. x. Xxxxx Paper Co., 190 USPQ 106 (TTAB
1975); TMEP ss.1207.01(b).
The applicant's xxxx is ADUROMED. The registrant's xxxx for both registrations
is DURO-MED. The applicant has essentially only added the letter "a" to the
registrant's marks. The mere addition of a term to a registered xxxx is not
sufficient to overcome a likelihood of confusion under Section 2(d). Coca-Cola
Bottling Co. v. Xxxxxx X. Xxxxxxx & Sons, Inc., 526 F.2d 556, 188 USPQ 105
(C.C.P.A. 1975) ("BENGAL" and "BENGAL LANCER"); Xxxxx Xxxxxxxx, Inc. v. Xxxxx
Xxx Corp., 376 F.2d 324, 153 USPQ 406 (C.C.P.A. 1967) ("THE LILLY" and "XXXXX
XXX"); In re El Torito Restaurants Inc.. 9 USPQ2d 2002 (TTAB 1988) ("MACHO" and
"MACHO COMBOS"); In re United States Shoe Corp., 229 USPQ 707 (TTAB 1985)
("CAREER IMAGE" and "CREST CAREER IMAGES"); In re Corning Glass Works, 229 USPQ
65 (TTAB 1985) ("CONFIRM" and "CONFIRMCELLS"); In re Xxxxxx, 225 USPQ 630 (TTAB
1985) ("ACCUTUNE" and "XXXXXXX XXXXX'X ACCU TUNE"); In re Cosvetic Laboratories,
Inc., 202 USPQ 842 (TTAB 1979) ("HEAD START" and "HEAD START COSVETIC"). TMEP
ss.1207.01(b)(iii). The average consumer would retain a general impression of
the xxxx and would believe the goods and/or services come from the same source.
If the marks of the respective parties are identical or highly similar, the
examining attorney must consider the commercial relationship between the goods
or services of the respective parties carefully to determine whether there is a
likelihood of confusion. In re Concordia International Forwarding Corp., 222
USPQ 355 (TTAB 1983).
II. COMPARISON OF THE GOODS AND SERVICES
The goods and/or services of the parties need not be identical or directly
competitive to find a likelihood of confusion. They need only be related in some
manner, or the conditions surrounding their marketing be such, that they could
be encountered by the same purchasers under circumstances that could give rise
to the mistaken belief that the goods and/or services come from a common source.
In re Xxxxxx'x Famous Pastry Shoppe, Inc., 748 F.2d 1565, 223 USPQ 1289 (Fed.
Cir. 1984): In re Corning Glass Works, 229 USPQ 65 (TTAB 1985); In re Rexel
Inc., 223 USPQ 830 (TTAB 1984); Guardian Products Co., Inc. x. Xxxxx Paper Co.,
200 USPQ 738 (TTAB 1978); In re International Telephone & Telegraph Corp., 197
USPQ 910 (TTAB 1978).
The applicant's goods and services include "Autoclaves and consulting services
for medical use." The registrant's goods for Registration No. 0986984 comprise
"patient aid equipment and medical soft goods for the health care
industry-namely, convalescent gowns, cervical collars, patient restraints, grab
bars, commodes, and walkers." The registrant's goods for Registration No.
2430702 include "Medical, surgical and orthopedic apparatuses, instruments and
articles, namely, cushions, wedges and pillows for medical use; mattresses,
mattress pads, sheets, bed rails, screens and pads, laps trays, and bed trays
all for use by patients and physically handicapped persons; convalescent gowns;
physical therapy and invalid walkers, canes and crutches; toilets adapted for
medical patients, elderly and handicapped persons; bed pans, urine collectors
and specimen containers for medical use; catheters and tubing; disposable
airways kits; resuscitators; resuscitation masks; sphygmomanometers;
stethoscopes; medical examination lamps; medical instrument trays; medical
syringes; intravenous feeding apparatuses and stands; surgical gloves; surgical
instruments, namely, scissors, forceps, percussion and neutrological hammers,
ring cutters and cervical collars; heat pads and packs for medical use; ice
packs and bags for medical use; traction sets, belts and halters for
immobilizing body packs; orthopedic bandages, braces, wraps and supports for
namely the back, abdomen, ankles, knees, shoulders, wrists, forearms and elbows;
anti-embolism stockings; orthopedic tape; orthopedic shoes, boots and foot care
products, namely, insoles, felt, moleskin, foam, toe caps, and crest-buttress
pads; therapeutic weights, exercisers, and grab bars; patient aids, namely,
reach extenders and products that aid in putting on shoes, socks, stockings,
buttoning, zipping, writing, dressing, eating, drinking, washing, cooking, and
other everyday activities; hearing and visual aids for patients; xxxxx cloth,
vinyl and plastic eating smocks and bibs all for use by patients and physically
handicapped persons; shower and bath seats, bath mats, bath pillows, bathtub
and shower rails, tub and shower bars and whirlpools all for therapeutic use;
and furniture for medical use, namely chairs, folding tables, treatment tables,
bed boards, footstools, foot rests and stools; beds specifically for physically
handicapped persons." The applicant's goods and services are highly related to
the registrant's goods because both the applicant and registrant are providing
medical goods that would be used by the
UNITED STATES DEPARTMENT OF COMMERCE
same health case professionals.
The similarities among the marks and the goods and/or services of the parties
are so great as to create a likelihood of confusion. The examining attorney must
resolve any doubt as to the issue of likelihood of confusion in favor of the
registrant and against the applicant who has a legal duty to select a xxxx that
is totally dissimilar to trademarks already being used. Xxxxxxxxx Welcome Co.
x. Xxxxxx-Xxxxxxx Co., 203 USPQ 191 (TTAB 1979).
INFORMALITIES
Although the examining attorney has refused registration, the applicant may
respond to the refusal to register by submitting evidence and arguments in
support of registration. If the applicant chooses to respond to the refusal to
register, the applicant must also respond to the following informalities.
IDENTIFICATION AND CLASSIFICATION OF SERVICES
The identification of goods is unacceptable as indefinite because "consulting
services for medical use" does not indicate the specific type of services, e.g.,
consulting services regarding the medical use of autoclaves in Class 44. The
applicant may adopt the following identification, if accurate. TMEP ss.1402.11.
Class 10: Autoclaves for medical use.
Class 44: Consulting services regarding the medical use of autoclaves.
In addition, the examining attorney strongly recommends that the applicant
consult The Acceptable Identification of Goods and Services Manual, available
on-line at xxx.xxxxx.xxx/xxx/xxxxxxx/xxx/xxx/xxxxxxxx/. As set forth in the
TMEP, this manual "sets out acceptable language for identifying goods and
services of various types." TMEP ss. 1402.04.
Please note that, while an application may be amended to clarify or limit the
identification, additions to the identification are not permitted. 37 C.F.R.
ss.2.71(a); TMEP ss.1402.06. Therefore, the applicant may not amend to include
any goods that are not within the scope of goods set forth in the present
identification.
MULTIPLE CLASS APPLICATION - INTENT TO USE
The application identifies goods that may be classified in several international
classes. Therefore, the applicant must either: (1) restrict the application to
the number of class(es) covered by the fee already paid, or (2) pay the required
fee for each additional class(es). 37 C.F.R. ss.2.86(a)(2): TEMP ss.ss.810.01,
1401.04, 1401.04(b) and 1403.01.
Effective January 1, 2003, the fee for filing a trademark application is $335
for each class. This applies to classes added to pending applications as well as
to new applications filed on or after that date. 37 C.F.R. ss.2.6(a)(1).
If the applicant prosecutes this application as a combined, or multiple-class,
application, the applicant must comply with each of the following.
(1) The applicant must list the goods/services by international class with
the classes listed in ascending numerical order, as shown above. TMEP
ss. 1403.01.
(2) The applicant must submit a filing fee for each international class
of goods/services not covered by the fee already paid. 37 C.F.R.
ss.ss2.6(a)(1) and 2.86(a); TMEP ss.ss810.01 and 1403.01. Effective
January 1, 2003, the fee for filing a trademark application is $335 for
each class. This applies to classes added to pending applications as well
as to new applications filed on or after that date.
INFORMATION FOR THE APPLICANT
No set form is required for response to this Office action. The applicant must
respond to each point raised. The applicant should simply set forth the required
changes or statements and request that the Office enter them. The applicant must
sign the response.
UNITED STATES DEPARTMENT OF COMMERCE
In a1l correspondence to the Patent and Trademark Office, the applicant should
list the name and law office of the examining attorney, the serial number of
this application, the mailing date of this Office action.
PLEASE NOTE: Submission of duplicate papers is discouraged because it delays
processing. Unless specifically requested to do so by the Office, parties should
not mail follow up copies of documents transmitted by fax. TMEP 702.04(e):
Cf.ITC Entertainment Group Ltd. V Nintendo of America Inc. 45 USPQ2d 2021
(TTAB 1998).
Current status and status date information is available at
xxxx://xxxx.xxxxx.xxx/.
If the applicant has any questions or needs assistance in responding to this
Office action, please telephone the assigned examining attorney.
/Xxxxx X. Xxxxxxx/
Trademark Attorney
Law Office 102
(703) 308-9102 ext. 236
Xxxxx.Xxxxxxx@xxxxx.xxx (informal)
HOW TO RESPOND TO THIS OFFICE ACTION:
To respond formally using the Office's Trademark Electronic Application System
(TEAS), visit XXXX://XXX.XXXXX.XXX/XXXX/XXXXX.XXXX and follow the instructions.
To respond formally via regular mail, your response should be sent to the
mailing Return Address listed above and include the serial number, law office
and examining attorney's name on the upper right corner of each page of your
response.
To check the status of your application at any time, visit the Office's
Trademark Applications and Registrations Retrieval (XXXX) system at
XXXX://XXXX.XXXXX.XXX/
For general and other useful information about trademarks, you are encouraged
to visit the Office's web site at HTTP//XXX.XXXXX.XXX/XXXX/XXXXXXXXXX.XXX
FOR INQUIRIES OR QUESTIONS ABOUT THIS OFFICE ACTION, PLEASE CONTACT THE ASSIGNED
EXAMINING ATTORNEY.
EXHIBIT G
FORM OF FIRST CLOSING OPINIONS
[Capitalized terms shall have the meanings ascribed thereto in the Securities
Purchase Agreement]
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
2. The Company has all necessary corporate power and authority to execute
and deliver, and to perform its obligations under, the Agreement and
each of the other Related Agreements to be executed and delivered by
the Company at the First Closing.
3. The execution, delivery and performance by the Company of the
Agreement and each of the other Related Agreements to be executed and
delivered by the Company at the First Closing, and the consummation of
the transactions contemplated thereby, have been duly authorized by
all necessary corporate action of the Company.
4. The Agreement and each of the other Related Agreements to be executed
and delivered by the Company at the First Closing have been duly
executed and delivered by the Company and constitute the legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms.
5. Neither the execution, and delivery of the Agreement or any other
Related Agreement to be executed and delivered by the Company at the
First Closing, nor the consummation or performance by the Company of
any of the transactions contemplated by the Agreement or such Related
Agreements (i) contravene, conflict with or result in a violation of
any provisions of the Company's certificate of incorporation or
bylaws; (ii) constitute a violation of any U.S. federal or New York
state law, rule or regulation applicable to the Company or the
Delaware General Corporation Law statute; (iii) violate any judgment,
decree, order or award of any court, governmental body or arbitrator
specifically naming the Company of which we are aware; or (iv) with or
without notice and/or the passage of time, conflict with or result in
the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation
of any lien, charge or encumbrance upon the properties or assets of
the Company pursuant to, any agreement to which the Company is a party
and which is listed on Exhibit F-1 of the Agreement.
6. The authorized capital stock of the Company on the date hereof
consists of (i) 50,000,000 shares of Common Stock, and (ii) 20,000,000
shares of Preferred Stock, of which 3,489,527 shares have been
designated as Series A Preferred. As of the date hereof, without
giving effect to the transactions contemplated by the Agreement to
occur at the First Closing, there are issued and outstanding of
record: 9,751,000 shares of Common Stock and no shares of Series A
Preferred. The currently outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable. The respective rights, preferences and
privileges of the Series A Preferred are as stated in the Series A
Certificate of Designations.
7. To our knowledge, except as set forth in the Agreement or the other
Related Agreements (including the Disclosure Schedule to the
Agreement), (i) no agreement, subscription, warrant, option,
convertible security or other right (contingent or otherwise) granted
by contract to purchase or acquire any shares of capital stock of the
Company from the Company is authorized or outstanding, (ii) there is
not any commitment of the Company to issue any subscription, warrant,
option, convertible security or other such right or to issue or
distribute to holders of any shares of its capital stock any evidence
of indebtedness or assets of the Company, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof,
and (iv) there are no restrictions on the transfer of any shares of
the Company's capital stock, except as imposed by Federal or state
securities or "blue sky" laws.
8. To our knowledge, except as provided or disclosed in the Agreement and
the other Related Agreements (including the Disclosure Schedule to the
Agreement), no person or entity is entitled to (i) any preemptive,
right of first refusal, contractual or similar rights with respect to
the issuance of the Series A Preferred, the First Closing Warrants,
the First Closing Warrant Shares or the Conversion Shares, which
rights have not been waived, or (ii) any rights with respect to the
registration of any capital stock of the Company under the Securities
Act of 1933, as amended (the "Securities Act").
9. The Series A Preferred, the First Closing Warrant Shares and the
Conversion Shares have been duly authorized or reserved for issuance
by all necessary corporate action on the part of the Company; and the
Series A Preferred, when issued, sold and delivered against payment
therefor in accordance with the provisions of the Agreement, the First
Closing Warrant Shares issuable upon exercise of the First Closing
Warrants, when issued upon exercise of the First Closing Warrants in
accordance with the terms of the First Closing Warrants, and the
Conversion Shares issuable upon conversion of the Series A Preferred,
when issued upon such conversion in accordance with the terms of the
Series A Certificate of Designations, will be duly and validly issued,
fully paid and non-assessable.
10. Based in part on the representations of each of the Purchasers in
Section 4 of the Agreement, the offer, issuance and sale of the Series
A Preferred at the First Closing pursuant to the Agreement are, and
the issuance of the First Closing Warrant Shares issuable upon
exercise of the First Closing Warrants and the Conversion Shares
issuable upon conversion of the Series A Preferred will be, exempt
from the registration requirements of the Securities Act.
EXHIBIT H
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of September 30, 2005 (this
"Agreement"), by and among Aduromed Corporation, a Delaware corporation (the
"Company"), and the Purchasers set forth on the signature pages hereto (the
"Purchasers"). Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed thereto in the Securities Purchase
Agreement (as defined below).
WITNESSETH:
WHEREAS, the Company and the Purchasers have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Securities Purchase
Agreement"), pursuant to which (i) the Company has agreed to sell and issue, and
the Purchasers have agreement to purchase, at the First Closing, certain shares
of the Company's Series A Preferred and the First Closing Warrants to purchase
certain shares of the Company's Common Stock (the "First Closing Warrant
Shares") and (ii) the Company has agreed to sell and issue, and the Purchasers
have agreement to purchase, at the Second Closing, certain shares of the
Company's Series B Preferred and the Second Closing Warrants to purchase certain
shares of the Company's Common Stock (the "Second Closing Warrant Shares" and
together with the First Closing Warrant Shares, the "Warrant Shares"); and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Securities Purchase Agreement that the Company
provide for the rights set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties hereto hereby agree as follows:
1. Registration Rights.
1.1 Required Registration. The Company shall:
(x) prepare and file with the SEC a registration statement (the
"Required Registration Statement") on Form S-1 or SB-1 or a successor form or
another form selected by the Company that is available to the Company under the
Securities Act which conforms with applicable rules and regulations, as amended
and supplemented from time to time, covering the Registrable Securities, to
permit, when effective, the offer and re-sale from time to time of such
Registrable Securities in accordance with the methods of distribution provided
by the Purchasers, by the date which is not more than sixty (60) days after the
consummation of the Public Transaction (the "Registration Statement Filing
Deadline");
(y) use its reasonable best efforts to cause the Required
Registration Statement to be declared effective under the provisions of the
Securities Act within one hundred twenty (120) days after the consummation of
the Public Transaction (the "Registration Statement Effectiveness Deadline");
and
(z) use its reasonable best efforts to cause such Required
Registration Statement to remain continuously effective until the earlier of (A)
the date when all Registrable Securities covered by the Required Registration
Statement have been sold thereunder, (B) the date on which all of the
Registrable Securities may be sold without any restriction pursuant to Rule 144
under the Securities Act, or any similar rule or regulation hereafter adopted by
the SEC, as determined by the counsel to the Company pursuant to a written
opinion letter and (C) the fifth anniversary of the effectiveness date of the
Required Registration Statement (such period, the "Required Effectiveness
Period").
If: (i) the Required Registration Statement is not filed with the SEC on or
prior to the Registration Statement Filing Deadline, (ii) the Required
Registration Statement filed or required to be filed hereunder is not declared
effective by the SEC on or prior to the Registration Statement Effectiveness
Deadline or (iii) during the Required Effectiveness Period, the Required
Registration Statement ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective (any such
failure or breach, an "Event" and the date of the occurrence of such Event, the
"Event Date"), then on each monthly anniversary of each such Event Date and
until such time as all then continuing Events shall have been cured, the Company
shall pay to each Purchaser, as partial liquidated damages and not as a penalty,
an amount in cash equal to 1.5% of the aggregate purchase price paid by such
Purchaser for any Registrable Securities then held by such Purchaser for each
30-day period, or pro rata for any portion thereof, following such Event Date.
For the purposes of the foregoing, each month will be deemed to be thirty (30)
days in length. Any liquidated damages payable under this Section 1.1 shall be
in addition to any remedies available to the Purchasers at law or in equity by
reason of any breach of this Agreement by the Company.
To the extent that the Registrable Securities are not sold under the
Required Registration Statement, the Purchasers shall have the registration
rights as enumerated in Sections 1.3 and 1.4 of this Agreement.
1.2 Current Public Information. The Company covenants that it will use
reasonable best efforts to file all reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder, and will use reasonable best efforts to take such further action
as the Purchasers may reasonably request, all to the extent required to enable
the holders of Registrable Securities to sell Registrable Securities pursuant to
Rule 144 or Rule 144A adopted by the SEC under the Securities Act or any similar
rule or regulation hereafter adopted by the SEC. The Company shall, upon the
request of a holder of Registrable Securities (each a "Designated Holder" and
collectively, the "Designated Holders"), deliver to such Designated Holder a
written statement as to whether it has complied with such requirements.
-2-
1.3 Form S-3 Registration. If the Company is eligible to use Form S-3
under the Securities Act (or any similar successor form) and shall receive from
a Purchaser and/or its permitted transferees (the "S-3 Initiating Holders") a
written request or requests that the Company effect a registration on such Form
S-3, including without limitation, pursuant to Rule 415 of the Securities Act
and any related qualification or compliance with respect to all or part of the
Registrable Securities owned by the S-3 Initiating Holders and its permitted
transferees (provided, that the S-3 Initiating Holders registering Registrable
Securities in such registration (together with all other holders of Registrable
Securities to be included in such registration) propose to sell their
Registrable Securities at an aggregate price (calculated based upon the Market
Price of the Registrable Securities on the date of filing of the Form S-3 with
respect to such Registrable Securities) to the public of no less than the lesser
of $500,000 or the remaining Registrable Securities), the Company shall (i)
promptly give written notice of the proposed registration, and any related
qualification or compliance, to all other holders of Registrable Securities; and
(ii) as soon as practicable, use reasonable best efforts to file and effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of the Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other holder in
the group of holders joining in such request as is specified in a written
request given within fifteen (15) days after the holder's receipt of such
written notice from the Company. No registration requested by any S-3 Initiating
Holders pursuant to this Section 1.3 shall be deemed a registration pursuant to
Section 1.1.
1.4 Piggyback Registrations.
(a) Right to Piggyback. From and after the date hereof under the
earlier of (i) the fifth anniversary of the date hereof and (ii) the date on
which each Purchaser shall have sold all of their respective Registrable
Securities pursuant to the Required Registration Statement, whenever the Company
proposes to register any of its securities under the Securities Act (other than
pursuant to a registration pursuant to Section 1.3 or a registration on Form S-4
or S-8 or any successor or similar forms) and the registration form to be used
may be used for the registration of Registrable Securities, whether or not for
sale for its own account, the Company will give prompt written notice (but in no
event less than fifteen (15) days before the anticipated filing date) to all
holders of Registrable Securities, and such notice shall describe the proposed
registration and distribution and offer to all holders of Registrable Securities
the opportunity to register the number of Registrable Securities as each such
holder may request. The Company will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within ten (10) days after the holders' receipt
of the Company's notice (a "Piggyback Registration").
(b) Reasonable Efforts. The Company shall use all reasonable best
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in a Piggyback Registration to be included on the same terms and
conditions as any similar securities of the Company or any other security holder
-3-
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof.
(c) Withdrawal. Any Designated Holder shall have the right to withdraw
its request for inclusion of its Registrable Securities in any Registration
Statement pursuant to this Section 1.4 by giving written notice to the Company
of its request to withdraw; provided, that in the event of such withdrawal
(other than pursuant to Section 1.4(e) hereof, the Company shall not be required
to reimburse such holder for the fees and expenses referred to in Section 1.6(b)
hereof incurred by or on behalf of such holder prior to such withdrawal. The
Company may withdraw a Piggyback Registration at any time prior to the time it
becomes effective.
(d) Priority in Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of Registrable Securities requested to be included on a secondary basis
in such registration exceeds the number which can be sold in such offering
without materially and adversely affecting the marketability of such primary or
secondary offering (the "Company Offering Quantity"), then the Company will
include in such registration securities in the following priority:
(i) First, the Company will include the securities the Company
proposes to sell.
(ii) Second, subject to any rights of other holders of securities
of the Company which are prior to the rights of the Purchasers to
registration pursuant to agreements set forth on the Disclosure Schedules
to the Securities Purchase Agreement, the Company will include all
Registrable Securities requested to be included by any Designated Holder
may request to be so included, and if the number of such Designated
Holders' securities requested to be included exceeds the Company Offering
Quantity, then the Company shall include only each such requesting
Designated Holders' pro rata share of the shares available for
registration, based on the amount of securities held by such holder, on an
as converted basis.
(iii) Third, the Company will include other securities of the
Company proposed to be included in the registration.
(e) Cutback. If, as a result of the proration provisions of this
Section 1.4, any Designated Holders shall not be entitled to include all
Registrable Securities in a Piggyback Registration that such Designated Holders
has requested to be included, such holder may elect to withdraw his request to
include Registrable Securities in such registration but the Company shall be
required to reimburse such holder for the fees and expenses referred to in
Section 1.6(b) hereof incurred by such holder prior to such withdrawal.
-4-
1.5 Holdback Agreements.
(a) To the extent not inconsistent with applicable law, in connection
with a public offering of securities of the Company, upon the request of the
Company or the underwriter, in the case of an underwritten public offering, the
underwriters managing such underwritten offering of the Company's securities,
each holder of Registrable Securities who owns at least 5% of the outstanding
capital stock of the Company on an "as-converted" basis or is an officer or
director of the Company will not effect any public sale or distribution (other
than those included in the registration) of any securities of the Company, or
any securities, options or rights convertible into or exchangeable or
exercisable for such securities during the seven (7) days prior to and the
90-day period beginning on such effective date, unless (in the case of an
underwritten public offering) the managing underwriters otherwise agree to a
shorter period of time. Notwithstanding the foregoing, no Designated Holder
shall be required to enter into any such "lock up" agreement unless and until
all of the Company's executive officers and directors execute substantially
similar "lock up" agreements and the Company uses commercially reasonable
efforts to cause each holder of more than 5% of its outstanding capital stock to
execute substantially similar "lock up" agreements. Neither the Company nor the
underwriter shall amend, terminate or waive a "lock up" agreement unless each
"lock up" agreement with a Designated Holder is also amended or waived in a
similar manner or terminated, as the case may be. Notwithstanding anything to
the contrary in this Agreement, the lock up provisions of this Section 1.5(a)
shall not be effective until after the Required Registration Statement has
become effective and it has remained effective for 120 days.
(b) The Company shall have the right at any time to require that the
Designated Holders of Registrable Securities suspend further open market offers
and sales of Registrable Securities pursuant to a Registration Statement filed
hereunder whenever in the reasonable judgment of the Company after consultation
with counsel there is or may be in existence a Changing Event (as defined in
Section 1.6(a)(v)). The Company will give the Designated Holders notice of any
such suspension and will use all reasonable best efforts to minimize the length
of such suspension.
(c) In connection with the Required Registration Statement, the
Company shall cause each officer or director of the Company to agree to refrain
from effecting any public or private sale or distribution of any securities of
the Company during the seven (7) days prior to and the 90-day period following
the effective date of the Required Registration Statement.
1.6 Registration Procedures.
(a) Whenever any Registrable Securities are required to be registered
pursuant to this Agreement, the Company will use reasonable best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended methods of disposition thereof, and pursuant
thereto the Company will as expeditiously as possible:
(i) prepare and file with the SEC on any form, if not so
otherwise provided for, for which the Company qualifies, as soon as
practicable after the end of the
-5-
period within which requests for registration may be given to the Company,
a Registration Statement with respect to the offer and sale of such
Registrable Securities and thereafter use reasonable best efforts to cause
such Registration Statement to become effective and remain effective until
the completion of the distribution contemplated thereby or the required
time period under this Agreement, whichever is shorter (and before filing
such Registration Statement, the Company will furnish to the counsel
selected by the holders of a majority of the Registrable Securities
initiating such Registration Statement copies of all such documents
proposed to be filed); provided, however, that the Company may postpone for
not more than sixty (60) calendar days the filing or effectiveness of any
registration statement required pursuant to this Agreement other than a
Required Registration Statement required to be filed pursuant to Section
1.1 of this Agreement if the Board of Directors, in its good faith
judgment, determines that such registration could reasonably be expected to
have a material adverse effect on the Company and its stockholders for any
reason including, but not limited to, any proposal or plan by the Company
to engage in any acquisition or sale of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction then under consideration (in which event, the Designated
Holders shall be entitled to withdraw such request, and if such request is
withdrawn such registration will not count as a registration statement
pursuant to this Agreement) by delivering written notice to the Designated
Holders who requested inclusion of Registrable Securities in such
Registration Statement of its determination to postpone such Registration
Statement; provided, further, that (i) the Company shall not disclose any
information that could be deemed material non-public information to any
holder of Registrable Securities included in a Registration Statement that
is subject to such postponement, (ii) in no event may the Company postpone
a filing requested hereunder more than twice in any twelve (12) month
period; provided, that any two postponements must be at least three (3)
months apart; provided, further, that the Company shall delay the
effectiveness of any such registration statement if the SEC rules and
regulations prohibit the Company from declaring a Registration Statement
effective because its financial statements are stale at a time when its
fiscal year has ended or it has made an acquisition reportable under Item 2
of Form 8-K or any other similar situation until the earliest time in which
the SEC would allow the Company to declare a Registration Statement
effective (provided that the Company shall use its reasonable best efforts
to cure any such situation as soon as possible so that the Registration
Statement can be made effective at the earliest possible time);
(ii) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for a period provided for in the applicable Section
above, or if not so provided, for a period of twelve (12) months (for a
registration pursuant to Rule 415 of the Securities Act) or, if such
Registration Statement relates to an underwritten offering, such period as
in the opinion of counsel for the underwriters a prospectus is required by
law to be delivered in connection with sales of Registrable Securities by
an underwriter or dealer or (ii) such shorter period as will
-6-
terminate when all of the securities covered by such Registration Statement
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement (but in any event not before the expiration of any longer period
required under the Securities Act), and to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement. In the event the Company shall give any notice pursuant to
Section 1.5(b), the applicable time period mentioned in this Section
1.6(a)(ii) during which a Registration Statement is to remain effective
shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 1.5(b)
to and including the date when each seller of a Registrable Security
covered by such Registration Statement shall have received the copies of
the supplemented or amended prospectus contemplated by Section 1.6(a)(v);
(iii) furnish to each seller of Registrable Securities, prior to
filing a Registration Statement, such number of copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included
in such Registration Statement (including each preliminary prospectus) and
such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(iv) register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such seller and to keep each such registration or qualification (or
exemption therefrom) effective during the period which the Registration
Statement is required to be kept effective (provided, that the Company will
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction);
(v) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event (a "Changing Event") as a
result of which, the prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will as soon as possible prepare and furnish to such
seller (a "Correction Event") a reasonable number of copies of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact
-7-
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on The Nasdaq Stock Market
or the Nasdaq SmallCap trading system or the Nasdaq OTC Bulletin Board;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
Registration Statement;
(viii) enter into such customary agreements (including
underwriting agreements in customary form with any underwriter, if any is
selected by the Company) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities, including causing its officers to
participate in "road shows" and other information meetings organized by an
underwriter, if any, provided that any underwriter shall have been selected
by the Company;
(ix) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such Registration Statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such Registration Statement;
(x) before filing a Registration Statement or prospectus or any
amendments or supplements thereto, the Company shall provide to counsel
selected by the Designated Holders holding a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") and
any other Inspector (as defined below) with an adequate and appropriate
opportunity to review and comment on such Registration Statement and each
prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, subject to such documents being under the Company's
control, and the Company shall notify the Holders' Counsel and each seller
of Registrable Securities of any stop order issued or threatened by the
SEC;
(xi) otherwise comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the Company's first
full calendar quarter after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
-8-
(xii) in the event of the issuance of any stop order suspending
the effectiveness of a Registration Statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any securities included in such Registration Statement for
sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order;
(xiii) obtain one or more comfort letters, dated the effective
date of such Registration Statement (and, if such registration includes an
underwritten offering, dated the date of the closing under the underwriting
agreement), signed by the Company's independent public accountants in
customary form and covering such matters of the type customarily covered by
comfort letters as the holders of a majority of the Registrable Securities
being sold reasonably request;
(xiv) provide a legal opinion of the Company's outside counsel,
dated the effective date of such Registration Statement (and, if such
registration includes an underwritten offering, dated the date of the
closing under the underwriting agreement), with respect to the Registration
Statement, each amendment and supplement thereto, the prospectus included
therein (including the preliminary prospectus) and such other documents
relating thereto in customary form and covering such matters of the type
customarily covered by legal opinions of such nature;
(xv) subject to execution and delivery of mutually satisfactory
confidentiality agreements, make available at reasonable times for
inspection by any seller of Registrable Securities, any managing
underwriter participating in any disposition of such Registrable Securities
pursuant to a Registration Statement, Holders' Counsel and any attorney,
accountant or other agent retained by any managing underwriter (each, an
"Inspector" and collectively, the "Inspectors"), during normal business
hours of Company at Company's corporate office in New York, New York and
without unreasonable disruption of Company's business or unreasonable
expense to Company and solely for the purpose of due diligence with respect
to the registration statement, non-confidential, legally disclosable,
financial and other records and pertinent corporate documents of the
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the
Company, to make available for inspection, at such parties' offices during
their respective normal business hours and without unreasonable disruption
of their business or unreasonable expense to Company and solely for the
purpose of due diligence with respect to a registration statement covering
Registrable Securities pursuant to this Agreement all information
reasonably requested by any such Inspector in connection with such
Registration Statement, provided, that, in each instance the Inspectors
execute customary confidentiality agreements prepared by the Company
pursuant to which such Inspectors agree not to divulge information of a
non-public nature and covenant not to act upon such information in any
manner in violation of applicable law;
-9-
(xvi) subject to execution and delivery of mutually satisfactory
confidentiality agreements, keep Holders' Counsel advised as to the
initiation and progress of any registration hereunder including, but not
limited to, providing Holders' Counsel with all correspondence with the
SEC;
(xvii) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD; and
(xviii) take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
(b) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement including, without limitation,
all registration and filing fees payable by the Company, fees and expenses of
compliance by the Company with securities or blue sky laws, printing expenses of
the Company, messenger and delivery expenses of the Company, and fees and
disbursements of counsel for the Company, one counsel selected by the Purchasers
and all independent certified public accountants of the Company, underwriters
(excluding discounts and commissions, which will be paid by the sellers of
Registrable Securities) and other Persons retained by the Company will be borne
by the Company, and the Company will pay its internal expenses (including,
without limitation, all salaries and expenses of its employees performing legal
or accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance of the Company and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on The Nasdaq
National Market, Nasdaq SmallCap Market or the OTC Bulletin Board trading
system. The Company shall have no obligation to pay any underwriting discounts
or commissions attributable to the sale of Registrable Securities and any of the
expenses incurred by any holder of Registrable Securities which are not payable
by the Company, such costs to be borne by such holder or holders, including,
without limitation, underwriting fees, discounts and expenses, if any,
applicable to any holder's Registrable Securities; selling commissions or stock
transfer taxes applicable to the Registrable Securities registered on behalf of
any holder; any other expenses incurred by or on behalf of such holder in
connection with the offer and sale of such Holder's Registrable Securities other
than expenses which the Company is expressly obligated to pay pursuant to this
Agreement.
1.7 Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities and its general
or limited partners, officers, directors, members, managers, employees,
advisors, representatives, agents and Affiliates (collectively, the
"Representatives") from and against any loss, claim, damage, liability,
attorney's fees, cost or expense and costs and expenses of investigating and
defending any such claim (collectively, the "Losses"), joint or several, and any
action in respect thereof to
-10-
which such holder of Registrable Securities or its Representatives may become
subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereto)
arise out of or are based upon (i) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, prospectus or preliminary
or summary prospectus or any amendment or supplement thereto or (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company shall reimburse each such holder of Registrable Securities and its
Representatives for any reasonable legal or any other expenses incurred by them
in connection with investigating or defending or preparing to defend against any
such Loss, action or proceeding; provided, however, that the Company shall not
be liable to any such holder or other indemnitee in any such case to the extent
that any such Loss (or action or proceeding, whether commenced or threatened, in
respect thereof) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission, made in such Registration
Statement, any such prospectus or preliminary or summary prospectus or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information prepared and furnished to the Company by such holder
expressly for use therein or by failure of any holder of Registrable Securities
to deliver a copy of the Registration Statement or prospectus or any amendments
or supplements thereto in violation of applicable law after the Company has
furnished such holder of Registrable Securities with copies of the same in such
number as requested by such holder. In connection with an underwritten offering,
the Company will indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the holders of Registrable Securities.
(b) In connection with any Registration Statement in which the holders
of Registrable Securities are participating pursuant to this Agreement, the
holders of Registrable Securities will furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
such Registration Statement or prospectus and, to the fullest extent permitted
by law, each such holder of Registrable Securities will indemnify and hold
harmless the Company and its Representatives from and against any Losses,
severally but not jointly, and any action in respect thereof to which the
Company and its Representatives may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon (i) any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, prospectus or preliminary or summary prospectus or any amendment or
supplement thereto, or (ii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but, in each case, only to the extent that such untrue statement or
omission is made in such Registration Statement, any such prospectus or
preliminary or summary prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information prepared and furnished
to the Company by such holder of Registrable Securities expressly for use
therein or by failure of such holder of Registrable Securities to deliver a copy
of the Registration Statement or prospectus or any amendments or supplements
thereto in violation of applicable law after the Company has furnished such
holder of Registrable Securities with copies of the same in such number as
-11-
requested by such holder; provided, however, that such holder of Registrable
Securities shall not be liable in any such case to the extent that prior to the
filing of any such Registration Statement or prospectus or amendment or
supplement thereto, such holder of Registrable Securities has furnished in
writing to the Company information expressly for use in such Registration
Statement or prospectus or any amendment or supplement thereto which corrected
or made not misleading information previously furnished to the Company;
provided, further, however, that the obligation to indemnify will be individual
to each such holder of Registrable Securities and will be limited to the net
amount of proceeds received by such holder of Registrable Securities from the
sale of Registrable Securities pursuant to such Registration Statement. In no
event, however, shall any holder be liable for indirect, incidental or
consequential or special damages.
(c) Promptly after receipt by any Person in respect of which indemnity
may be sought pursuant to Section 1.7(a) or 1.7(b) (an "Indemnified Party") of
notice of any claim or the commencement of any action, the Indemnified Party
shall, if a claim in respect thereof is to be made against the Person against
whom such indemnity may be sought (an "Indemnifying Party"), promptly notify the
Indemnifying Party in writing of the claim or the commencement of such action;
provided, that the failure to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability which it may have to an Indemnified
Party otherwise than under Section 1.7(a) or 1.7(b) except to the extent of any
actual prejudice resulting therefrom. If any such claim or action shall be
brought against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party and its
Representatives who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the written opinion of counsel to such Indemnified Party, representation
of both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such claim or proceeding other than the
payment of monetary damages by the Indemnifying Party on
-12-
behalf of the Indemnified Party. Whether or not the defense of any claim or
action is assumed by the Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its consent, which
consent will not be unreasonably withheld.
(d) If the indemnification provided for in this Section 1.7 is
unavailable to the Indemnified Parties in respect of any Losses referred to
herein, 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 benefits received by the Company on the one hand and the holders of the
Registrable Securities on the other from the offering of the Registrable
Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also
the relative fault of the Company on the one hand and the holders of the
Registrable Securities on the other in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of each
holder of the Registrable Securities on the other shall be determined by
reference to, among other things, whether any action taken, including any untrue
or alleged untrue statement of a material fact, or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the holders of the Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this Section
1.7(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
Indemnified Party as a result of the Losses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 1.7, no holder of the Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such holder were
offered to the public exceeds the amount of any Losses which such holder has
otherwise paid by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Each holder's obligations to contribute pursuant to this
Section 1.7 is several in the proportion that the proceeds of the offering
received by such holder of the Registrable Securities bears to the total
proceeds of the offering received by all the holders of the Registrable
Securities and not joint.
1.8 Participation in Underwritten Registrations.
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided
-13-
in any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements (including, without limitation, pursuant
to the terms of any over-allotment or "green shoe" option requested by the
managing underwriter(s), provided, that each holder of Registrable Securities
shall not be required to sell more than the number of Registrable Securities
that such holder has requested the Company to include in any registration) and
(ii) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and this Agreement.
(b) Each Person that is participating in any registration under this
Agreement agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 1.6(a)(v) above, such
Person will forthwith discontinue the disposition of its Registrable Securities
pursuant to the Registration Statement and all use of the Registration Statement
or any prospectus or related document until such Person's receipt of the copies
of a supplemented or amended prospectus as contemplated by such Section
1.6(a)(v) and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
holder's possession of such documents at the time of receipt of such notice.
Furthermore, each holder agrees that if such holder uses a prospectus in
connection with the offering and sale of any of the Registrable Securities, the
holder will use only the latest version of such prospectus provided by Company.
2. Transfers of Certain Rights.
2.1 Transfer. The rights granted to a Purchaser under this Agreement
may be transferred by such Purchaser in connection with a transfer by such
Purchaser of any Registrable Security.
2.2 Transferees. Any permitted transferee to whom rights under this
Agreement are transferred shall, as a condition to such transfer, deliver to the
Company a written instrument by which such transferee agrees to be bound by the
obligations imposed upon a Purchaser under this Agreement to the same extent as
if such transferee were a Purchaser hereunder. Any purported transfer that does
not comply with the terms of this Section 2.2 shall be deemed null and void.
3. Certain Definitions. The following capitalized terms shall have the
meanings ascribed to them below:
"Affiliate" means any Person that directly or indirectly controls, or
is under control with, or is controlled by such Person. As used in this
definition, "control" (including with its correlative meanings, "controlled by"
and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
-14-
"Closing Price" means, with respect to the Registrable Securities (a)
if the shares are listed or admitted for trading on any national securities
exchange or included in The Nasdaq National Market or Nasdaq SmallCap Market,
the last reported sales price as reported on such exchange or market; (b) if the
shares are not listed or admitted for trading on any national securities
exchange or included in The Nasdaq National Market or Nasdaq SmallCap Market,
the average of the last reported closing bid and asked quotation for the shares
as reported on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or a similar service if NASDAQ is not reporting such
information; (c) if the shares are not listed or admitted for trading on any
national securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market or quoted by NASDAQ or a similar service, the average of the
last reported bid and asked quotation for the shares as quoted by a market maker
in the shares (or if there is more than one market maker, the bid and asked
quotation shall be obtained from two market makers and the average of the lowest
bid and highest asked quotation). In the absence of any available public
quotations for the Common Stock, the Board and a majority of the Holders shall
determine in good faith the fair value of the Common Stock
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Market Price" means, on any date of determination, the average of the
daily Closing Price of the Registrable Securities for the immediately preceding
five (5) on which the national securities exchanges are open for trading.
"Person" means any individual, company, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
governmental body or other entity.
"Registrable Securities" means (i) the Conversion Shares, (ii) the
Warrants and the Warrant Shares, and (iii) any shares of Common Stock issued or
issuable directly or indirectly with respect to the securities referred to in
clauses (i) and (ii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Registration Statement" means any registration statement of the
Company filed under the Securities Act which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such registration statement.
"SEC" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
-15-
4. Miscellaneous.
4.1 Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply to the full extent set forth herein with respect to (i)
the Registrable Securities, (ii) any and all shares of Common Stock into which
the Registrable Securities are converted, exchanged or substituted in any
recapitalization or other capital reorganization by the Company and (iii) any
and all equity securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in conversion of, in exchange for or in
substitution of, the Registrable Securities and shall be appropriately adjusted
for any stock dividends, splits, reverse splits, combinations, recapitalizations
and the like occurring after the date hereof. The Company shall cause any
successor or assign (whether by merger, consolidation, sale of assets or
otherwise, including, without limitation, the Public Transaction) to enter into
a new registration rights agreement with the Purchasers on terms substantially
the same as this Agreement as a condition of any such transaction.
4.2 No Inconsistent Agreements. The Company has not and shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Purchasers in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or materially
inconsistent with the rights granted in this Agreement.
4.3 Amendments and Waivers. The provisions of this Agreement may be
amended and the Company may take action herein prohibited, or omit to perform
any act herein required to be performed by it, if, but only if, the Company has
obtained the written consent of a majority in interest of the Registrable
Securities (and the securities convertible into or exercisable to acquire the
those securities) then in existence.
4.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
4.5 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.6 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy, telex or similar
writing) and shall be deemed given or made as of the date delivered, if
delivered personally or by telecopy (provided that delivery by telecopy shall be
followed by delivery of an additional copy personally, by mail or overnight
courier), one day after being delivered by overnight courier or four business
days after being mailed by registered or certified mail (postage prepaid for the
most expeditious form of delivery, return receipt requested), to the parties at
the following addresses (or to such other
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address or telex or telecopy number as a party may have specified by notice
given to the other party pursuant to this provision):
If to the Company, to:
Xxxxxx X. Xxxxxx, President
Aduromed Corporation
000 Xxxxxxxxx Xxxxxx, Xxxxx 00-00
Xxxxxx, XX 00000
Fax Number: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx X. Xxx, Esq.
Stairs Xxxxxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax Number: (000) 000-0000
If to the Purchaser, to:
The address or facsimile number of each Purchaser as recorded in
the stockholders records of the Company.
4.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of laws rules or provisions.
4.8 Forum; Service of Process. Any legal suit, action or proceeding
brought by any party or any of its affiliates arising out of or based upon this
Agreement shall be instituted in any federal or state court in New York County,
New York, and each party waives any objection which it may now or hereafter have
to the laying of venue or any such proceeding, and irrevocably submits to the
jurisdiction of such courts in any such suit, action or proceeding.
4.9 Captions. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way limit or amplify the
terms and provisions hereof.
4.10 No Prejudice. The terms of this Agreement shall not be construed
in favor of or against any party on account of its participation in the
preparation hereof.
4.11 Words in Singular and Plural Form. Words used in the singular
form in this Agreement shall be deemed to import the plural, and vice versa, as
the sense may require.
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4.12 Remedy for Breach. The Company hereby acknowledges that in the
event of any breach or threatened breach by the Company of any of the provisions
of this Agreement, the holders of the Registrable Securities would have no
adequate remedy at law and could suffer substantial and irreparable damage.
Accordingly, the Company hereby agrees that, in such event, the holders of the
Registrable Securities shall be entitled, and notwithstanding any election by
any holder of the Registrable Securities to claim damages, to obtain a temporary
and/or permanent injunction to restrain any such breach or threatened breach or
to obtain specific performance of any such provisions, all without prejudice to
any and all other remedies which any holder of the Registrable Securities may
have at law or in equity.
4.13 Successors and Assigns; Third Party Beneficiaries. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto, each subsequent holder of the Registrable Securities and
their respective permitted successors and assigns and executors, administrators
and heirs. Holders of the Registrable Securities are intended third party
beneficiaries of this Agreement and this Agreement may be enforced by such
holders.
4.14 Entire Agreement. This Agreement sets forth the entire agreement
and understanding between the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
[Remainder of page intentionally left blank.]
-18-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed as of the date and year first written above.
ADUROMED CORPORATION
By:
------------------------------------
Name:
Title:
PURCHASERS:
PEQUOT SCOUT FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
-20-
PEQUOT MARINER MASTER FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
-21-
PEQUOT NAVIGATOR OFFSHORE FUND, INC.
By: Pequot Capital Management, Inc.,
its Investment Advisor
By:
------------------------------------
Name:
Title:
-22-
PEQUOT DIVERSIFIED MASTER FUND, LTD.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
-23-
PREMIUM SERIES PCC LIMITED CELL 33
By:
------------------------------------
Name:
Title:
-24-
SHERLEIGH ASSOCIATES INC. DEFINED
BENEFIT PENSION PLAN
By:
------------------------------------
Name:
Title:
-25-
EXHIBIT I
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") dated as of September 30,
2005, is by and among Aduromed Corporation, a Delaware corporation (the
"Company"), each holder of the Company's Series A Preferred and Series B
Preferred (collectively, the "Preferred Holders") and the Persons holding a
majority of the issued and outstanding shares of the Company's Common Stock set
forth on Annex A hereto (collectively the "Common Holders" and together with the
Preferred Holders, the "Stockholders"). Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Securities Purchase Agreement (as defined below).
WHEREAS, the Company and the Preferred Holders have entered into a
Securities Purchase Agreement, dated as of the date hereof (the "Securities
Purchase Agreement"), pursuant to which (i) the Company has agreed to sell and
issue, and the Purchasers have agreement to purchase, at the First Closing,
certain shares of the Company's Series A Preferred and the First Closing
Warrants to purchase certain shares of the Company's Common Stock and (ii) the
Company has agreed to sell and issue, and the Purchasers have agreement to
purchase, at the Second Closing, certain shares of the Company's Series B
Preferred and the Second Closing Warrants to purchase certain shares of the
Company's Common Stock; and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Securities Purchase Agreement that the Company
and the Stockholders enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the meanings set forth below:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act. In
addition, any limited partner or member, as the case may be, of a Stockholder
shall be deemed to be an Affiliate of such Stockholder.
"Agreement" means this Agreement as the same may be amended, restated,
supplemented or modified in accordance with the terms herein.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Charter Documents" means the certificate of incorporation and bylaws
of the Company as in effect from time to time.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Holders" has the meaning set forth in the preamble to this
Agreement.
"Company" has the meaning set forth in the preamble to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"Issuance Notice" has the meaning set forth in Section 2.3(a) of this
Agreement.
"Management Designees" has the meaning set forth in Section 3.3(c) of
this Agreement.
"Permitted Securities" means (i) the Series A Preferred, Series B
Preferred and Warrants issued or to be issued pursuant to the Securities
Purchase Agreement, (ii) the Conversion Shares issuable upon conversion of the
Series A Preferred and Series B Preferred, (iii) the Warrant Shares issuable
upon exercise of the Warrant and (iv) any Securities issuable pursuant to an
employee stock option plan approved by each of the Preferred Designees.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Preemptive Interests" has the meaning set forth in Section 2.3 of
this Agreement.
"Preemptive Purchaser" has the meaning set forth in Section 2.3(b)(i)
of this Agreement.
"Preferred Designees" has the meaning set forth in Section 3.3(b) of
this Agreement.
"Preferred Holders" has the meaning set forth in the preamble to this
Agreement.
"Pro Rata Share" means, with respect to any Preferred Holder, a
quotient, expressed as a percentage, (i) the numerator of which is equal to the
aggregate number of shares of Series A Preferred and Series B Preferred then
held by such Preferred Holder and (ii) the denominator of which is equal to the
aggregate number of shares of Series A Preferred and Series B Preferred then
held by all Preferred Holders.
"Response Notice" has the meaning set forth in Section 2.3(b)(i) of
this Agreement.
2
"Securities" means, collectively, the Shares, the Warrants and any
other equity security of the Company now or hereafter issued and outstanding.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Securities Purchase Agreement" has the meaning set forth in the
preamble to this Agreement.
"Shares" means, collectively, all shares, whether now owned or
hereafter acquired, of Common Stock, Series A Preferred, Series B Preferred,
Warrant Shares, Conversion Shares or of any other series or class of capital
stock of the Company.
"Stockholders" means, collectively, (a) the Preferred Holders, (b) the
Common Holders and (c) any other Person that becomes a party hereto and has
agreed to be or is bound by the terms and conditions of this Agreement as a
"Stockholder" hereunder.
"Stockholders Meeting" has the meaning set forth in Section 3.1 of
this Agreement.
"Subsequent Issuance Notice" has the meaning set forth in Section
2.3(b)(ii) of this Agreement.
"Subsequent Response Notice" has the meaning set forth in Section
2.3(b)(ii) of this Agreement.
"Transfer" means any transfer, exchange, sale or other disposition.
"Unrestricted Additional Securities" has the meaning set forth in
Section 2.3(c) of this Agreement.
"Unrestricted Securities" has the meaning set forth in Section
2.3(b)(ii) of this Agreement.
"Written Consent" has the meaning set forth in Section 3.1 of this
Agreement.
2. After-Acquired Securities; Agreement to be Bound; Preemptive Rights.
2.1 After-Acquired Securities. All of the provisions of this Agreement
shall apply to all of the Securities now owned or which may be issued or
Transferred hereafter to a Stockholder in consequence of any additional
issuance, purchase, exchange or reclassification of any of such Securities, any
exercise of any security convertible or exercisable into a Security, any
corporate reorganization, or any other form of recapitalization, consolidation,
merger, share split or share dividend, or which are acquired by a Stockholder in
any other manner. No Stockholder may Transfer any Security unless the transferee
thereof shall, as a condition precedent to such Transfer, agree in writing to be
bound by the terms and conditions of this Agreement as a "Stockholder"
hereunder.
3
2.2 Agreement to be Bound. The Company shall not issue any Securities
to any Person not a party to this Agreement unless such Person has agreed in
writing to be bound by the terms and conditions of this Agreement as a
"Stockholder" hereunder. Upon becoming a party to this Agreement, such Person
shall be deemed to be, and shall be subject to the same obligations as, a
Stockholder, Preferred Holder or Common Holder, as applicable, hereunder. Any
issuance of Securities by the Company in violation of this Section 2.2 shall be
null and void ab initio and neither the Company nor any transfer agent shall
give effect in the Company's stock records to such attempted issuance. The
foregoing provisions shall not, in any case, be applicable to any issuance or
Transfer of Shares made to underwriters in connection with an underwritten
public offering of such Shares registered under the Securities Act or any
issuance or Transfer of Shares that is conducted publicly through one or more
registered broker dealers over a stock exchange or interdealer quotation service
where the Shares are listed or quoted.
2.3 Preemptive Rights. After the date hereof, in the event that the
Company proposes to issue any Securities other than Permitted Securities
(collectively, "Preemptive Interests"), the Company shall comply with the
provisions of this Section 2.3.
(a) Issuance Notice. The Company shall give the Preferred Holders
written notice of the Company's intention to issue such Preemptive Interests
(the "Issuance Notice"), describing the material terms of the Preemptive
Interests, the price at which such Preemptive Interests will be issued or sold
and the material terms upon which the Company proposes to issue or sell such
Preemptive Interests, including the anticipated date of such issuance or sale.
(b) Response Notice.
(i) Each Preferred Holder shall have thirty (30) days from
the date the Issuance Notice is received to agree to purchase all (but not less
than all) of such Preferred Holder's Pro Rata Share of such Preemptive Interests
by giving written notice to the Company of its desire to purchase such Preferred
Holder's Pro Rata Share of such Preemptive Interests (the "Response Notice").
Such Response Notice shall constitute the irrevocable agreement of such
Preferred Holder (a "Preemptive Purchaser") to purchase all (but not less than
all) of such Preemptive Purchaser's Pro Rata Share of the Preemptive Interests
at the price and upon the terms stated in the Issuance Notice.
(ii) In the event any Preemptive Interests remain
unsubscribed thirty (30) days after delivery of the Issuance Notice (the
"Unsubscribed Securities"), the Company shall promptly issue a subsequent
Issuance Notice (the "Subsequent Issuance Notice") to each Preemptive Purchaser.
Each Preemptive Purchaser shall have ten (10) days from the date the Subsequent
Issuance Notice is received to agree to purchase all or any portion of the
Unsubscribed Securities by giving a second Response Notice (the "Subsequent
Response Notice") and stating therein the quantity of Unsubscribed Securities to
be purchased. Such Subsequent Response Notice shall constitute the irrevocable
agreement of such Preemptive Purchaser to purchase the quantity of Unsubscribed
Securities indicated in such Subsequent Response Notice at the price and upon
the terms stated in the Issuance Notice. If such Preemptive Purchasers subscribe
for more than the Unsubscribed Securities available, the
4
Unsubscribed Securities shall be allocated among each such Preemptive Purchaser
in proportion to each such Preemptive Purchaser's respective Pro Rata Share.
(c) Unsubscribed Securities. In the event any Unsubscribed
Securities remain unsubscribed ten (10) days after delivery of the Subsequent
Issuance Notice (the "Unrestricted Additional Securities"), the Company shall
have the right, but not the obligation, to issue and sell such Unrestricted
Additional Securities to any Person within ninety (90) days from the date of the
initial Issuance Notice at a price and upon the terms that are not materially
less favorable to the Company than those specified in the Issuance Notice. If
the Company proposes to issue any Preemptive Interests after such 90-day period
or at a price or upon terms that are materially less favorable to the Company
than those specified in the Issuance Notice, it must again comply with this
Section 2.3.
(d) Closings of Sales of Preemptive Interests. Any purchase of
Preemptive Interests by any Preemptive Purchaser pursuant to the this Section
2.3 shall be consummated on the closing date specified in the Issuance Notice
(or, if other Persons are purchasing Unrestricted Additional Securities, the
date on which such Unrestricted Additional Securities are first issued and sold
to such other Persons).
3. Corporate Governance.
3.1 General. From and after the execution of this Agreement, each
Stockholder shall vote its Shares at any regular or special meeting of
stockholders of the Company (a "Stockholders Meeting") or in any written consent
executed in lieu of such a meeting of stockholders (a "Written Consent"), and
shall take all other actions necessary, to give effect to the provisions of this
Agreement (including, without limitation, Section 3.3 hereof) and to ensure that
the Charter Documents do not, at any time hereafter, conflict in any respect
with the provisions of this Agreement, it being understood and agreed by the
parties hereto that the Charter Documents do not, as of the date hereof,
conflict in any respect with the provisions of this Agreement. In addition, each
Stockholder shall vote its Shares at any Stockholders Meeting or act by Written
Consent with respect to such Shares, upon any matter submitted for action by the
Company's stockholders or with respect to which such Stockholder may vote or act
by Written Consent, in conformity with the specific terms and provisions of this
Agreement and the Charter Documents.
3.2 Stockholder Actions. In order to effectuate the provisions of this
Section 4, each Stockholder (a) hereby agrees that when any action or vote is
required to be taken by such Stockholder pursuant to this Agreement, such
Stockholder shall use its reasonable best efforts to call, or cause the
appropriate officers and directors of the Company to call, a Stockholders
Meeting, or to execute or cause to be executed a Written Consent to effectuate
such stockholder action, (b) shall use its reasonable best efforts to cause the
Board of Directors to adopt, either at a meeting of the Board of Directors or by
unanimous written consent of the Board of Directors, all the resolutions
necessary to effectuate the provisions of this Agreement, and (c) shall use its
reasonable best efforts to cause the Board of Directors to cause the Secretary
of the Company, or if there be no Secretary, such other officer of the Company
as the Board of Directors may appoint to fulfill the duties of Secretary, not to
record any vote or consent contrary to the terms of this Section 3.
5
3.3 Election of Directors; Number and Composition. Each Stockholder
shall vote its Shares at any Stockholders Meeting, or act by Written Consent
with respect to such Shares, and take all other actions necessary to ensure:
(a) that the number of directors constituting the entire Board of
Directors shall be seven;
(b) for so long as the Preferred Holders own at least ten (10%)
percent of the outstanding shares of Common Stock (calculated as if all shares
of Series A Preferred and Series B Preferred shall have been converted into
shares of Common Stock and all Warrants shall have been exercised for shares of
Common Stock), the election to the Board of Directors of at least two members
(the "Preferred Designees") designated by the holders of at least a majority of
the outstanding shares of the Series A Preferred and Series B Preferred (or any
shares of Common Stock into which such shares of Series A Preferred or Series B
Preferred shall have been converted);
(c) for so long as Xxxxxx Xxxxxx is employed as the Chief
Executive Officer of the Company, the election to the Board of Directors of five
members (the "Management Designees") designated by Xxxxxx Xxxxxx; and
(d) for so long as the Preferred Holders own at least ten (10%)
percent of the outstanding shares of Common Stock (calculated as if all shares
of Series A Preferred and Series B Preferred shall have been converted into
shares of Common Stock and all Warrants shall have been exercised for shares of
Common Stock), that at least one Preferred Designee shall be appointed to each
committee of the Board of Directors including any audit committee, compensation
committee or executive committee of the Board of Directors.
3.4 Removal and Replacement of Designees.
(a) Removal of Designees.
(i) If at any time, the holders of at least a majority of
the outstanding shares of the Series A Preferred and Series B Preferred notifies
the other Stockholders of their wish to remove at any time and for any reason
(or no reason) any of the Preferred Designees, then each Stockholder shall vote
all of its Shares so as to remove such Preferred Designee.
(ii) If at any time, Xxxxxx Xxxxxx notifies the other
Stockholders of his wish to remove at any time and for any reason (or no reason)
any of the Management Designees, then each Stockholder shall vote all of its
Shares so as to remove such Management Designee.
(b) Replacement of Designees.
(i) If at any time, a vacancy is created on the Board of
Directors by reason of the incapacity, death, removal or resignation of any of
the Preferred Designees, then the holders of at least a majority of the
outstanding shares of the Series A
6
Preferred and Series B Preferred shall designate an individual who shall be
elected to fill the vacancy until the next Stockholders Meeting. Upon receipt of
notice of the designation of a nominee pursuant to this Section 3.4(b)(i) each
Stockholder shall, as soon as practicable after the date of such notice, take
all reasonable actions, including the voting of its Shares, to elect the
director so designated to fill the vacancy.
(ii) If at any time, a vacancy is created on the Board of
Directors by reason of the incapacity, death, removal or resignation of any of
the Management Designees, then Xxxxxx Xxxxxx shall designate an individual who
shall be elected to fill the vacancy until the next Stockholders Meeting. Upon
receipt of notice of the designation of a nominee pursuant to this Section
3.4(b)(ii) each Stockholder shall, as soon as practicable after the date of such
notice, take all reasonable actions, including the voting of its Shares, to
elect the director so designated to fill the vacancy.
3.5 Reimbursement of Expenses. Preferred Designees and Management
Designees will be entitled to reimbursement by the Company for reasonable
out-of-pocket expenses incurred in connection with the performance of their
duties as members of the Board of Directors, including, without limitation,
travel expenses incurred in connection with their attendance at meetings of the
Board of Directors.
3.6 Director's and Officer's Indemnification and Insurance. For so
long as any Preferred Director or Management Designee serves on the Board of
Directors or the board of directors of any of the Company's subsidiaries, and
for a period of at least six (6) years thereafter, the Company and the
Stockholders hereby agree to (i) provide in the certificate of incorporation of
the Company and each of its subsidiaries on whose boards of directors such
Preferred Designee or Management Director serves, and their respective by-laws,
for indemnification and reimbursement of expenses of directors and officers to
the fullest extent and in the manner permitted by the General Corporation Law of
Delaware or the general corporation law of the state of its incorporation, as
applicable; and (ii) purchase and maintain director and officer insurance in an
amount of at least $1 million on behalf of any Person who is or was a director
or an officer of the Company and its subsidiaries on whose boards such Preferred
Designee or Management Director serves, or is or was serving at the request of
the Company or such subsidiary as a director or an officer of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such Person and incurred by him or her in any such
capacity, or arising out of his or her status as such. As soon as practicable
following the date hereof, the Company shall purchase satisfactory director's
and officer's insurance, subject to the approval of the Board of Directors.
3.7 Directors' Meetings. The Company shall call, and use its best
efforts to have, regular meetings of the Board of Directors not less frequently
than quarterly.
3.8 Observer. For so long as the Preferred Holders own at least ten
(10%) percent of the outstanding shares of Common Stock (calculated as if all
shares of Series A Preferred and Series B Preferred shall have been converted
into shares of Common Stock and all Warrants shall have been exercised for
shares of Common Stock), the holders of at least a majority of the shares of
Series A Preferred and Series B Preferred outstanding shall have the
7
right to have, in addition to any Preferred Designee, one representative present
at all meetings of the Board of Directors and all committees of the Board of
Directors.
4. Information Rights. The Company shall furnish the following information
to each Preferred Holder for so long as such Preferred Holder owns any shares of
Series A Preferred or Series B Preferred:
(a) within ninety (90) days after the end of each fiscal year of
the Company, an audited consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal year
then ended (provided, that, at any time that the Company has at least one class
of equity securities registered under the Securities Act, in the event that the
Company shall timely and properly file with the Commission, in accordance with
applicable Commission rules and regulations, a request for extension of the time
period in which the Company is obligated to file with the Commission the
financial statements referenced in this clause (a), the time period in which the
Company must deliver to the Preferred Holders such financial statements pursuant
to this clause (a) shall be correspondingly be extended);
(b) within forty-five (45) days after the end of each fiscal
quarter (other than the last fiscal quarter in each fiscal year), an unaudited
consolidated balance sheet of the Company and its Subsidiaries and the related
unaudited consolidated statements of income, stockholders' equity and cash
flows, such consolidated balance sheet to be as of the end of such quarter and
such consolidated statements of income, stockholders' equity and cash flows to
be for such quarter and for the period from the beginning of the fiscal year to
the end of such quarter (provided, that, at any time that the Company has at
least one class of equity securities registered under the Securities Act, in the
event that the Company shall timely and properly file with the Commission, in
accordance with applicable Commission rules and regulations, a request for
extension of the time period in which the Company is obligated to file with the
Commission the financial statements referenced in this clause (b), the time
period in which the Company must deliver to the Preferred Holders such financial
statements pursuant to this clause (b) shall be correspondingly be extended);
(c) if prepared by the Company in the ordinary course of
business, as promptly as reasonably practicable following such preparation,
monthly unaudited consolidated balance sheets of the Company and its
subsidiaries and the related monthly unaudited consolidated statements of
income, stockholders' equity and cash flows;
(d) at least thirty (30) days prior to the start of each fiscal
year, a copy of the Company's proposed annual budget for such fiscal year; and
(e) such additional information about the Company as such
Preferred Holder reasonably requests.
5. Stock Certificate Legend. A copy of this Agreement shall be filed with
the Secretary of the Company and kept with the records of the Company. Each
certificate representing Securities now held or hereafter acquired by any
Stockholder shall for as long as this Agreement is effective bear legends
substantially in the following forms:
8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL
RESTRICTIONS ON VOTING AS SET FORTH IN THE STOCKHOLDERS AGREEMENT, DATED
SEPTEMBER __, 2005, AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE
COMPANY NAMED THEREIN, A COPY OF WHICH MAY BE INSPECTED AT THE COMPANY'S
PRINCIPAL OFFICE. THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS
BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS AGREEMENT.
If any Securities shall cease to be subject to the restrictions on Transfer
and voting set forth in this Agreement, the Company shall, upon the written
request of the holder thereof, issue to such holder a new certificate evidencing
such Securities without the legend required by this Section 5 endorsed thereon.
6. Miscellaneous.
6.1 Notices. All notices, demands or other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first class mail, return receipt requested, telecopier (provided that
delivery by telecopier shall be followed by delivery of an additional copy
personally, by mail or overnight courier), courier service, overnight mail or
personal delivery:
(i) if to the Company:
Xxxxxx X. Xxxxxx, President
Aduromed Corporation
000 Xxxxxxxxx Xxxxxx, Xxxxx 00-00
Xxxxxx, XX 00000
Fax Number: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx X. Xxx, Esq.
Stairs Xxxxxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax Number: (000) 000-0000
(ii) if to any Stockholder, at its address as it appears on the
record books of the Company.
Any party may by notice given in accordance with this Section 6.1 designate
another address or Person for receipt of notices hereunder. All such notices,
demands and other communications shall be deemed to have been duly given when
delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial courier service; five (5) Business Days after
9
being deposited in the mail, postage prepaid, if mailed; and when receipt is
mechanically acknowledged, if telecopied.
6.2 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs,
legatees and legal representatives.
6.3 Amendment and Waiver.
(a) Except as specifically set forth in this Agreement, no
failure or delay on the part of any party hereto in exercising any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the parties hereto at law, in equity or
otherwise.
(b) Except as specifically set forth in this Agreement, any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by any party from the terms of any provision of this Agreement, shall be
effective only if it is made or given in writing and signed by (i) the Company
and (ii) Stockholders holding a majority of the Shares held by the Stockholders
(calculated on an as converted into Common Stock basis). Any such amendment,
supplement, modification, waiver or consent shall be binding upon the Company
and all of the Stockholders.
(c) Notwithstanding anything set forth to the contrary herein, no
amendment, supplement, waiver or modification of any provision of this Agreement
shall be effective without the written consent of Preferred Holders holding at
least a majority of the Series A Preferred and Series B Preferred then
outstanding.
6.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
6.5 Specific Performance. The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
6.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF ANY
10
JURISDICTION. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE BROUGHT BY THE PARTIES AND HEARD AND DETERMINED ONLY IN A
FEDERAL OR STATE COURT LOCATED IN THE STATE OF NEW YORK AND THE PARTIES HERETO
CONSENT TO JURISDICTION BEFORE AND WAIVE ANY OBJECTIONS TO THE VENUE OF SUCH
FEDERAL AND NEW YORK COURTS. THE PARTIES HERETO AGREE TO ACCEPT SERVICE OF
PROCESS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN ANY MANNER PERMITTED
FOR A NOTICE HEREUNDER.
6.8 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be void, invalid or otherwise unenforceable,
in whole or in part, then such provision shall be severed from this Agreement
and shall be inoperative, the remaining portions of this Agreement shall remain
in effect and the parties hereto will use their best efforts to substitute for
the void, invalid or unenforceable provision a new provision of like economic
intent and effect.
6.9 Confidentiality. Except as may be required by applicable law or as
otherwise agreed among the parties hereto, without the prior affirmative vote or
written consent of at least a majority of the members of the Board of Directors,
neither the Company, the Stockholders nor any of their respective Affiliates
shall at any time publicly divulge, disclose, disseminate, announce or release
any information to any Person concerning this Agreement, the transactions
contemplated hereby, any trade secrets or other confidential information of the
Company or the Stockholders, without first obtaining the prior written consent
of the other parties hereto; provided, however, that (i) the Stockholders shall
be entitled to disclose information with respect to their investment in the
Company on any reports that the Stockholders furnish to their investors or as
otherwise required by applicable law and (ii) the Company shall be entitled to
disclose its trade secrets or other confidential information not related to this
Agreement or the transactions contemplated hereby in any manner consistent with
good business practice.
6.10 Entire Agreement. This Agreement, together with the exhibits
hereto, is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits hereto, supersedes all prior agreements
and understandings among the parties with respect to such subject matter.
6.11 Further Assurances. Each of the parties shall, and shall cause
their respective Affiliates to, execute such instruments and take such action as
may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby.
6.12 Recapitalizations, Exchanges, etc. The Company shall cause any
successor or assign (whether by merger, consolidation, sale of assets or
otherwise, including, without limitation, the Public Transaction) to enter into
a new stockholders agreement with the Stockholders on terms substantially the
same as this Agreement as a condition of any such transaction.
11
6.13 No Third Party Beneficiaries. This Agreement is entered into
solely among, and may be enforced only by, the parties hereto. This Agreement
shall not be deemed to create any rights in any third parties, including
suppliers, customers and employees of any party, or to create any obligations of
a party to any such third parties.
6.14 Term and Termination. The provisions of Section 2.3 of this
Agreement shall terminate on the date on which the Company consummates an
underwritten public offering of its common stock, with an aggregate price to the
public of not less than $50 million (without deduction for underwriting fees,
commissions or discounts), pursuant to an effective registration statement under
the Securities Act (other than a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company (or such successor entity) following which such common stock is listed
on a national securities exchange or the National Association of Securities
Dealers National Market System.
[Signatures Follow]
12
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Stockholders Agreement on the date first written above.
COMPANY:
ADUROMED CORPORATION
By:
------------------------------------
Name:
Title:
STOCKHOLDERS:
PEQUOT SCOUT FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
PEQUOT MARINER MASTER FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
PEQUOT NAVIGATOR OFFSHORE FUND, INC.
By: Pequot Capital Management, Inc.,
its Investment Advisor
By:
------------------------------------
Name:
Title:
PEQUOT DIVERSIFIED MASTER FUND, LTD.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
PREMIUM SERIES PCC LIMITED CELL 33
By:
------------------------------------
Name:
Title:
SHERLEIGH ASSOCIATES INC. DEFINED
BENEFIT PENSION PLAN
By:
------------------------------------
Name:
Title:
EXHIBIT J-1
STAIRS XXXXXXXXXX XXXXXX
ATTORNEYS-AT-LAW
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
000 XXXXXXX XXXXXX
XXX XXXX, X.X. X00X0-0000
TEL: (2I2) 000-0000
FAX: (2I2) 000-0000
January 23, 2006
Pequot Scout Fund, L.P.
Pequot Mariner Master Fund L.P.
Pequot Navigator Offshore Fund, Inc.
Pequot Diversified Master Fund, Ltd.
Pequot Series PCC Limited Cell 33
Sherleigh Associates Inc.
Defined Benefit Plan
Dear Sir/Madam:
We have acted as special counsel for Aduromed Corporation, a Delaware
corporation ("Aduromed") in connection with the execution and delivery of that
certain Securities Purchase Agreement dated September 30, 2005 (the "Agreement")
by and among Aduromed and the persons whose names and addresses are set out in
Schedule A-1 to the Agreement (the "Purchasers"), as amended and restated by
that certain Amended and Restated Securities Purchase Agreement dated January
23, 2006 by and among General Devices, Inc., a Delaware corporation ("GDI"),
Aduromed and the Purchasers (the "Amended Agreement"). This opinion is delivered
in accordance with the provisions of Section 6.1(c) of the Amended Agreement.
We have examined originals or copies, certified or otherwise identified to our
satisfaction, of the following documents:
1. The Agreement, the Amended Agreement and the First Closing Related
Agreements and the Second Closing Related Agreements referenced in the Agreement
and the Amended Agreement.
2. The Certificate of Incorporation (the "Aduromed Certificate of
Incorporation") and the By-laws (the "Aduromed By-laws") of Aduromed, each
amended to date.
3. The Certificate of Incorporation (the "GDI Certificate of
Incorporation") and the By-laws (the "GDI By-laws") of GDI, each amended to
date.
4. A certificate, dated January 23, 2006, of the Secretary of State of
Delaware, certifying as to the continued legal existence and corporate good
standing of Aduromed in the State of Delaware (the "Aduromed Domestic
Certificate").
4. A certificate, dated January 23, 2006, of the Secretary of State of
Delaware, certifying as to the continued legal existence and corporate good
standing of GDI in the State of Delaware (the "GDI Domestic Certificate").
5. A certificate from an officer of Aduromed (the "Aduromed Officer's
Certificate"), dated as of the date hereof, attesting to the Aduromed
Certificate of Incorporation and Aduromed By-laws, certain resolutions adopted
by Aduromed's Board of Directors and stockholders, the incumbency of certain
officers of Aduromed and certain other matters.
6. A certificate from an officer of GDI (the "GDI Officer's Certificate"),
dated as of the date hereof, attesting to the GDI Certificate of Incorporation
and GDI By-laws, certain resolutions adopted by GDI's Board of Directors and
stockholders, the incumbency of certain officers of GDI and certain other
matters.
7. Such other records of meetings, documents, instruments and
certifications (including but not limited to certificates of public officials
and officers of Aduromed and GDI) as we have considered necessary for purposes
of this opinion.
In rendering this opinion, we have assumed, without any independent
investigation or verification of any kind (i) the due authorization, execution
and delivery and enforceability of the Amended Agreement, by and upon all
parties other than Aduromed and GDI, (ii) the genuineness of all signatures, and
(iii) the authenticity and veracity of all opinions, documents and papers
submitted pursuant to the Amended Agreement.
In rendering this opinion, we have relied, as to all questions of fact material
to this opinion, upon certificates of public officials and officers of Aduromed
and GDI and, upon the representations and warranties made in the Amended
Agreement by the parties thereto. We have not attempted to verify independently
such facts, although nothing has come to our attention which has caused us to
question the accuracy of such certificates or representations and warranties.
Any reference herein to "our knowledge", or to any matter "known to us", "coming
to our attention" or "of which we are aware," or any variation of any of the
foregoing, shall mean the conscious awareness of the attorneys in this firm who
have rendered substantive attention to the transaction to which this opinion
relates of the existence or absence of any facts which would contradict our
opinions or statements set forth herein. We have not undertaken any independent
investigation to determine the existence or absence of such facts, and no
inference as to our knowledge of the existence or absence of such facts should
be drawn from the fact of our representation of Aduromed. Without limiting the
foregoing, we have not conducted a search of any electronic databases or the
2
dockets of any court, administrative or regulatory body, agency or other filing
office in any jurisdiction.
Furthermore, with regard to the opinions expressed herein, please be advised
that our opinion is qualified to the extent that the enforceability of the
Amended Agreement may be limited or hindered by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter affecting the
enforcement of creditors' rights in general; (ii) statutory or decisional law
concerning recourse by creditors to security in the absence of notice or
hearing, (iii) duties and standards imposed on creditors and parties to
contracts, including, without limitation, requirements of good faith,
reasonableness and fair dealing; and (iv) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law). We express no opinion as to the availability of any equitable or
specific remedy upon any breach of any of the agreements as to which we are
opining herein, or any of the agreements, documents or obligations referred to
therein, or to the successful assertion of any equitable defenses, inasmuch as
the availability of such remedies or the success of any such defenses may be
subject to the discretion of a court.
We also express no opinion herein as to any provision of any agreement (i) which
may be deemed to or construed to waive any right of Aduromed or GDI, (ii) to the
effect that rights and remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any other right or remedy
and does not preclude recourse to one or more other rights or remedies, (iii)
relating to the effect of invalidity or unenforceability of any provision of the
Amended Agreement on the validity or enforceability of any other provision
thereof, (iv) requiring the payment of penalties, consequential damages or
liquidated damages, (v) which is in violation of public policy, including,
without limitation, any provision relating to non-competition and
non-solicitation or relating to indemnification and contribution with respect to
securities law matters, (vi) purporting to indemnify any person against his, her
or its own negligence or intentional misconduct, (vii) which provides that the
terms of the Amended Agreement may not be waived or modified except in writing
or (viii) relating to choice of law or consent to jurisdiction. We are
expressing no opinion herein as to the consequences of the transaction
contemplated by the Amended Agreement under applicable state, local or federal
income tax laws and regulations.
Our opinion expressed in paragraph (i) below is based solely on the Aduromed
Domestic Certificate and is limited accordingly, and, as to such matters, our
opinion is rendered as of the date of such certificate. Our opinion expressed in
paragraph (ii) below is based solely on the GDI Domestic Certificate and is
limited accordingly, and, as to such matters, our opinion is rendered as of the
date of such certificate. In connection with our opinion expressed in paragraph
(vii) below, insofar as it relates to the authorized capital stock of Aduromed,
we have relied solely on the Aduromed Certificate of Incorporation. In
connection with our opinion expressed in paragraph (viii) below, insofar as it
relates to the authorized capital stock of GDI, we have relied solely on the GDI
Certificate of Incorporation. In connection with our opinion expressed in
paragraph (vii) below, insofar as it relates to the outstanding shares of common
stock of Aduromed and the holder thereof, we have relied solely on the Officer's
Certificate.
Any reference herein to "our knowledge", or to any matter "known to us", "coming
to our attention" or "of which we are aware," or any variation of any of the
foregoing, shall mean the conscious
3
awareness of the attorneys in this firm who have rendered substantive attention
to the transaction to which this opinion relates of the existence or absence of
any facts which would contradict our opinions or statements set forth herein. We
have not undertaken any independent investigation to determine the existence or
absence of such facts, and no inference as to our knowledge of the existence or
absence of such facts should be drawn from the fact of our representation of
Aduromed. Without limiting the foregoing, we have not conducted a search of any
electronic databases or the dockets of any court, administrative or regulatory
body, agency or other filing office in any jurisdiction.
In addition, we have considered such legal matters we deemed relevant to this
opinion. However, we express no opinion ourselves other than as to (a) laws of
the State of New York, and (b) the federal laws of the United States of America.
We are not members of the bar of the State of Delaware and do not hold ourselves
out as experts on the laws of that State. However, we have made a study of the
laws of Delaware insofar as they involve the incorporation, existence, good
standing, authority, corporate power and corporate action taken by Aduromed.
Based on the foregoing, we are of the opinion that:
(i) Aduromed is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(ii) GDI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(iii) Each of Aduromed and GDI has the requisite corporate power and
authority to execute and deliver, and to perform its obligations under, the
Amended Agreement and each of the Second Closing Related Agreements (as defined
therein) to be executed and delivered by Aduromed or GDI, as applicable, at the
Second Closing.
(iv) The execution and delivery by Aduromed of the Amended Agreement and
the Second Closing Related Agreements to be executed and delivered by Aduromed
at the Second Closing, and the consummation by Aduromed of the transactions
contemplated thereby have been duly and validly authorized by all requisite
corporate action on the part of Aduromed.
(v) Aduromed's execution, delivery and performance of its obligations under
the Amended Agreement and the Second Closing Related Agreements to be executed
by Aduromed at the Second Closing will not, as of the Second Closing, result in
(i) a violation of the Aduromed Certificate of Incorporation or Aduromed Bylaws,
(ii) a material violation of Delaware General Corporation Law or any statute,
rule or regulation of United States federal law applicable to Aduromed, (iii) a
violation of any judgment or order specifically identified in the Disclosure
Schedule to the Amended Agreement, if any, or (iv) to our knowledge, a default
by Aduromed under any Contractual Obligation. For purposes of this opinion, a
"Contractual Obligation" shall mean only an obligation of Aduromed contained in
those contracts to which Aduromed is a party and which are expressly listed on
Exhibit F to the Amended Agreement.
4
(vi) GDI's execution, delivery and performance of its obligations under the
Amended Agreement and the Second Closing Related Agreements to be executed by
GDI at the Second Closing will not, as of the Second Closing, result in (i) a
violation of the GDI Certificate of Incorporation or GDI Bylaws, or (ii) a
material violation of Delaware General Corporation Law or any statute, rule or
regulation of United States federal law applicable to GDI.
(vii) The authorized capital stock of Aduromed on the date hereof consists
of (i) 50,000,000 shares of Common Stock, par value $0.01 per share, and (ii)
20,000,000 shares of Preferred Stock, par value $0.01 per share, of which
3,489,527 shares have been designated Series A Preferred. After giving effect to
the merger reflected in the Certificate of Merger filed this day by GDI with the
Secretary of State of the State of Delaware, 100 shares of the Common Stock and
none of the Series A Preferred of Aduromed are issued and outstanding. The
currently outstanding shares of capital stock of Aduromed have been duly
authorized and validly issued and are fully paid and nonassessable.
(viii) The authorized capital stock of GDI on the date hereof consists of
(i) 100,000,000 shares of Common Stock, par value $0.0001 per share, and (ii)
40,000,000 shares of Preferred Stock, par value $0.0001 per share, of which
6,263,702 shares have been designated Series A Preferred Stock and 15,780,160
shares of which have been designated Series B Preferred Stock.
(ix) Based in part on the representations of each of the Purchasers in
Section 5 of the Amended Agreement, the offer, issuance and sale of the GDI
Series B Preferred and Second Closing GDI Warrants at the Second Closing
pursuant to the Amended Agreement are, and the issuance of the Second Closing
GDI Warrant Shares issuable upon exercise of the Second Closing GDI Warrants and
the Second Closing GDI Conversion Shares issuable upon conversion of the GDI
Series B Preferred will be, exempt from the registration requirements of the
Securities Act.
(x) The Amended Agreement and each of the other Second Closing Related
Agreements to be executed and delivered by Aduromed at the Second Closing have
been duly executed and delivered by Aduromed, as applicable, and constitute the
legal, valid and binding obligations of Aduromed, enforceable against it in
accordance with their respective terms.
This opinion is provided to the Purchasers as a legal opinion only and not as a
guaranty or warranty of the matters discussed herein. This opinion is based upon
currently existing statutes, rules, regulations and judicial decisions and is
rendered as of the date hereof, and we disclaim any obligation to advise you of
any change in any of the foregoing sources of law or subsequent developments in
law or changes in facts or circumstances which might affect any matters or
opinions set forth herein.
This opinion is rendered only to the Purchasers and is solely for the benefit of
the Purchasers in
5
connection with the transactions contemplated by the Amended Agreement. This
opinion may not be relied upon by the Purchasers for any other purpose, nor may
this opinion be provided to, quoted to or relied upon by any other person or
entity nor is it to be filed with any governmental agency or other person, for
any purpose, without our prior written consent.
Very truly yours,
/s/ Stairs Xxxxxxxxxx Xxxxxx
---------------------------------------
Stairs Xxxxxxxxxx Xxxxxx
6
EXHIBIT K
CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK
GENERAL DEVICES, INC.
CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK
General Devices, Inc., a Delaware company (the "Company"), hereby
certifies that the following resolution has been duly adopted by the board of
directors of the Company:
RESOLVED, that pursuant to the authority granted to and vested in the
board of directors of the Company (the "Board") by the provisions of the
certificate of in Company of the Company, there is created a series of preferred
stock, par value $0.0001 per share, and that the voting powers, designation and
number of shares thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
1. Designation and Number; Rank; Prohibited Payments.
(a) The shares of this series shall be designated as Series A
Preferred Stock. The number of shares initially constituting the Series A
Preferred Stock shall be 6,263,702 which number may, subject to any consent
right of the holders of any capital stock of the Company, be increased or
decreased by the Board; provided, however, that such number may not be
decreased below the number of the then outstanding shares of Series A
Preferred Stock.
(b) The Series A Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding up, rank:
(i) junior to all classes and series of any hereafter authorized
capital stock of the Company ranking senior (as to dividend rights,
redemption rights and rights upon liquidation, dissolution or winding
up) to the Series A Preferred Stock ("Senior Stock");
(ii) pari passu with all classes and series of any now or
hereafter authorized capital stock of the Company ranking on a par (as
to dividend rights, redemption rights and rights upon liquidation,
dissolution or winding up) with the Series A Preferred Stock ("Parity
Stock"), including, but not limited to, the Company's Series B
Preferred Stock (the "Series B Preferred Stock"); and
(iii) senior to all classes and series of any now or hereafter
authorized capital stock of the Company ranking junior (as to dividend
rights, redemption rights and rights upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, including, without
limitation, any class of the Company's common stock, par value $0.0001
per share ("Common Stock") (such classes and series are referred to as
"Junior Stock").
2. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive preferential dividends at an annual rate equal to six
percent (6%) per annum times the Original Issue Price (as defined below)
for each share of Series A Preferred Stock held by such holders, and such
dividends shall be payable in cash to the holders of record at the close of
business on each March 15 and September 15 of each year. Dividends on
shares of the Series A Preferred Stock shall accumulate on a daily basis
from the date on which such shares are issued and, to the extent they are
not paid in cash when due, shall compound on a semi-annual basis on each
March 15 and September 15 of each year, whether or not the Company has
earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
(b) Upon conversion of any share of Series A Preferred Stock into
Common Stock pursuant to Section 4, the holder of such Series A Preferred
Stock shall be entitled to receive payment of all accrued and unpaid
dividends thereon, at the option of the holder thereof, (i) in cash or (ii)
in the form of such number of additional shares of Common Stock equal to
(x) the amount of such accrued and unpaid dividends, divided by (y) the
then applicable Series A Conversion Price.
(c) In no event may any dividends be paid on the Series A Preferred
Stock unless, at the time of such payment, any and all dividends then
accrued and payable on the shares of any Senior Stock shall have been paid
in full. If dividends are paid on the shares of Series A Preferred Stock
and shares of Parity Stock in an amount less than the total amount of such
dividends at the time accrued and payable on all of such shares, such
dividends shall be allocated pro rata (in proportion to the respective
amounts due with respect thereto) among all such shares of Series A
Preferred Stock and shares of Parity Stock at the time outstanding based on
the amount of dividends then due with respect to each such share. In no
event may any dividends be paid on any Junior Stock unless, at the time of
such payment, any and all dividends then accrued and payable on the shares
of the Series A Preferred Stock have been paid in full.
3. Preference on Liquidation.
(a) Upon the liquidation or dissolution of the Company ("Liquidation
Event"), the holders of Series A Preferred Stock shall be entitled to
receive out of the Company's assets, for each share of Series A Preferred
Stock outstanding at the time thereof, distributions in the amount of
$0.31755 (subject to adjustment from time to time as a result of a stock
split, stock combination or any other similar event affecting the
outstanding number of shares of Series A Preferred Stock) (as adjusted from
time to time, the "Original Issue Price") plus an amount equal to all
accumulated but unpaid dividends thereon, whether or not declared (the
Original Issue Price together with such dividends, the "Liquidation
Preference").
(b) Distributions of the Company's cash, securities and other assets
pursuant to this Section 3 shall be made to the holders of shares of Series
A Preferred Stock and all
2
other Parity Stock in proportion to the total amounts to which the holders
of all shares of Series A Preferred Stock and all other Parity Stock are
entitled upon a Liquidation Event.
(c) No payment or distribution shall be made in respect of any shares
of Series A Preferred Stock pursuant to Section 3(a) unless, at the time of
such distribution, all amounts due in respect of any shares of Senior Stock
have been paid in full.
(d) No payment or distribution shall be made in respect of any shares
of Junior Stock unless, at the time of such distribution, the holders of
shares of Series A Preferred Stock shall have received the Liquidation
Preference with respect to each share.
(e) Upon the payment in full of all amounts due to a holder of Series
A Preferred Stock pursuant to this Section 3, such holder shall not be
entitled to any further participation in the assets of the Company.
4. Conversion.
4.1 Right to Convert.
(a) Each share of Series A Preferred Stock shall be convertible, at
the option of the holder thereof upon exercise in accordance with Section
4.1(b), without the payment of additional consideration, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Original Issue Price by the Series A Conversion Price (as
defined below) in effect at the time of conversion. The "Series A
Conversion Price" shall initially be equal to $0.31755. Such initial Series
A Conversion Price, and the rate at which shares of Series A Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below.
(b) A record holder of shares of Series A Preferred Stock may effect
the optional conversion thereof in accordance with Section 4.1(a) by making
a written demand for such conversion (a "Series A Conversion Demand") upon
the Company at its principal executive offices that sets forth (i) the
number of shares of Series A Preferred Stock to be converted; and (ii) the
proposed date of such conversion, which shall be a Business Day not less
than 5 Business Days after the date of such Series A Conversion Demand (the
"Series A Conversion Date"). The Series A Conversion Demand shall be
accompanied by the certificate representing such shares or, if such
certificate has been lost or stolen, a lost stock certificate affidavit and
indemnification agreement in form and substance satisfactory to the Company
and, if the Company shall so request, evidence that such holder shall have
posted a bond satisfactory to the Company. As soon as practicable after the
Series A Conversion Date, the Company shall issue and deliver to such
holder a certificate for the number of shares of Common Stock issuable upon
such conversion in accordance with the provisions hereof (rounded down to
the nearest whole share). Upon surrender of a certificate representing
Series A Preferred Stock to be converted in part, the Company shall after
the Series A Conversion Date issue a certificate representing the number of
full shares of Series A Preferred Stock not so converted.
3
(c) All outstanding shares of Series A Preferred Stock to be converted
pursuant to the Series A Conversion Demand shall, on the Series A
Conversion Date, be converted into Common Stock for all purposes. On and
after the Series A Conversion Date, (i) no such shares of Series A
Preferred Stock shall be deemed to be outstanding or be transferable on the
books of the Company or the stock transfer agent, if any, for such shares
of Series A Preferred Stock, and (ii) the holder of such shares, as such,
shall not be entitled to receive any dividends or other distributions, to
receive notices or to vote such shares or to exercise or to enjoy any other
powers, preferences or rights in respect thereof, other than the right,
upon surrender of the certificate representing such shares, to receive a
certificate for the number of shares of Common Stock into which such shares
shall have been converted.
4.2 Adjustments to Series A Conversion Price.
(a) Definitions. For the purposes of this Section 4, the following
terms shall have the following meanings ascribed thereto:
(i) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or deemed to be issued pursuant to clause (b)
below) by the Company after the Initial Issuance Date, but shall not
include up to 4,211,799 shares of Common Stock issuable upon exercise
of options granted by the Company pursuant to a statutory employee
option plan approved in accordance with Section 7 below.
(ii) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding
Options.
(iii) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, but shall not include options to purchase up
to 4,211,799 shares of Common Stock granted by the Company pursuant to
any statutory employee option plan approved in accordance with Section
7 below.
(b) Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the initial issuance of shares of Series A Preferred Stock
(the "Initial Issuance Date") shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common
4
Stock issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record
date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Series A Conversion
Price pursuant to the terms of Section 4.2(c) below, are revised
(either automatically pursuant to the provisions contained therein or
as a result of an amendment to such terms) to provide for either (1)
any increase or decrease in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such Option
or Convertible Security or (2) any increase or decrease in the
consideration payable to the Company upon such exercise, conversion or
exchange, then, effective upon such increase or decrease becoming
effective, the Series A Conversion Price computed upon the original
issue of such Option or Convertible Security (or upon the occurrence
of a record date with respect thereto) shall be readjusted to such
Series A Conversion Price as would have obtained had such revised
terms been in effect upon the original date of issuance of such Option
or Convertible Security. Notwithstanding the foregoing, no adjustment
pursuant to this clause (ii) shall have the effect of increasing the
Series A Conversion Price to an amount which exceeds the lower of (i)
the Series A Conversion Price on the original adjustment date, or (ii)
the Series A Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Series A
Conversion Price pursuant to the terms of Section 4.2(c) below (either
because the consideration per share of the Additional Shares of Common
Stock subject thereto was equal to or greater than the Series A
Conversion Price then in effect, or because such Option or Convertible
Security was issued before the Initial Issuance Date), are revised
after the Initial Issuance Date (either automatically pursuant to the
provisions contained therein or as a result of an amendment to such
terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the
Company upon such exercise, conversion or exchange, then such Option
or Convertible Security, as so amended, and the Additional Shares of
Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted
(either upon its original issuance or upon a revision of its terms) in
an adjustment to the Series A Conversion Price pursuant to the terms
of Section 4.2(c) below, the Series A Conversion Price shall be
readjusted to such Series A Conversion Price as would have obtained
had such Option or Convertible Security never been issued.
5
(c) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Company shall at any
time after the Initial Issuance Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.2(b)), without consideration or for a consideration
per share less than the applicable Series A Conversion Price in effect
immediately prior to such issue, then the Series A Conversion Price shall
be reduced, concurrently with such issue, to a price (calculated to the
nearest one-hundredth of a cent) determined in accordance with the
following formula:
CP(2) = CP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
(A) "CP(2)" shall mean the Series A Conversion Price in effect
immediately after such issue of Additional Shares of Common
Stock;
(B) "CP(1)" shall mean the Series A Conversion Price in effect
immediately prior to such issue of Additional Shares of
Common Stock;
(C) "A" shall mean the number of shares of Common Stock
outstanding and deemed outstanding immediately prior to such
issue of Additional Shares of Common Stock (treating for
this purpose as outstanding all shares of Common Stock
issuable upon exercise of Options outstanding immediately
prior to such issue or upon conversion of Convertible
Securities (including the Series A Preferred Stock)
outstanding immediately prior to such issue);
(D) "B" shall mean the number of shares of Common Stock that
would have been issued if such Additional Shares of Common
Stock had been issued at a price per share equal to CP(1)
(determined by dividing the aggregate consideration received
by the Company in respect of such issue by CP(1)); and
(E) "C" shall mean the number of such Additional Shares of
Common Stock issued in such transaction.
(d) Determination of Consideration. For purposes of this Section 4.2,
the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
6
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4.2(b), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(e) Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Series A Conversion Price pursuant to the terms of
Section 4.2(c) above then, upon the final such issuance, the Series A
Conversion Price shall be readjusted to give effect to all such issuances
as if they occurred on the date of the first such issuance (and without
additional giving effect to any adjustments as a result of any subsequent
issuances within such period).
(f) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Initial Issuance Date effect a
subdivision of the outstanding Common Stock without a comparable
subdivision of the Series A Preferred Stock or combine the outstanding
shares of Series A Preferred Stock without a comparable combination of the
Common Stock, the Series A Conversion Price in effect
7
immediately before that subdivision or combination shall be proportionately
decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to
such increase in the aggregate number of shares of Common Stock
outstanding. If the Company shall at any time or from time to time after
the Initial Issuance Date combine the outstanding shares of Common Stock
without a comparable combination of the Series A Preferred Stock or effect
a subdivision of the outstanding shares of Series A Preferred Stock without
a comparable subdivision of the Common Stock, the Series A Conversion Price
in effect immediately before the combination or subdivision shall be
proportionately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in the aggregate number of shares of Common
Stock outstanding. Any adjustment under this subsection shall become
effective at the close of business on the date the subdivision or
combination becomes effective.
4.3 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable on the Common Stock in additional shares of Common
Stock, then and in each such event the Series A Conversion Price in effect
immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Series A
Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series A Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter
the Series A Conversion Price shall be adjusted pursuant to this subsection
as of the time of actual payment of such dividends or distributions; and
provided further, however, that no such adjustment shall be made if the
holders of Series A Preferred Stock simultaneously receive (i) a dividend
or other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if all
outstanding shares of Series A Preferred Stock had been converted into
Common Stock on the date of such event or (ii) a dividend or other
distribution of shares of Series A Preferred Stock which are convertible,
as of the date of such event, into such number of shares of Common Stock as
is equal to the number of additional shares of Common Stock being issued
with respect to each share of Common Stock in such dividend or
distribution.
8
4.4 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of capital stock of the Company entitled to receive, a dividend or
other distribution payable in securities of the Company (other than a
distribution of shares of Common Stock in respect of outstanding shares of
Common Stock) or in other property, then and in each such event the holders
of Series A Preferred Stock shall receive, simultaneously with the
distribution to the holders of such capital stock, a dividend or other
distribution of such securities or other property in an amount equal to the
amount of such securities or other property as they would have received if
all outstanding shares of Series A Preferred Stock had been converted into
Common Stock on the date of such event.
4.5 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or
merger involving the Company in which the Common Stock (but not the Series
A Preferred Stock) is converted into or exchanged for securities, cash or
other property (other than a transaction covered by Sections 4.3 or 4.4),
then, following any such reorganization, recapitalization,
reclassification, consolidation or merger, each share of Series A Preferred
Stock shall thereafter be convertible in lieu of the Common Stock into
which it was convertible prior to such event into the kind and amount of
securities, cash or other property which a holder of the number of shares
of Common Stock of the Company issuable upon conversion of one share of
Series A Preferred Stock immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case,
appropriate adjustment (as determined in good faith by the Board) shall be
made in the application of the provisions in this Section 4 with respect to
the rights and interests thereafter of the holders of the Series A
Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of
the Series A Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other property
thereafter deliverable upon the conversion of the Series A Preferred Stock.
4.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to
this Section 4, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred Stock a certificate setting
forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property into which the Series A Preferred Stock
is convertible) and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, as promptly as reasonably
practicable after the written request at any time of any holder of Series A
Preferred Stock (but in any event not later than 10 days thereafter),
furnish or cause to be furnished to such holder a certificate setting forth
(i) the Series A Conversion Price then in effect, and (ii) the number of
shares of Common Stock and the amount, if any, of other securities, cash or
property which then would be received upon the conversion of Series A
Preferred Stock.
9
4.7 Notice of Record Date. In the event:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time issuable upon conversion of the
Series A Preferred Stock) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will send or cause to be sent to
the holders of the Series A Preferred Stock a notice specifying, as the
case may be, (i) the record date for such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
proposed to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at
the time issuable upon the conversion of the Series A Preferred Stock)
shall be entitled to exchange their shares of Common Stock (or such other
stock or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and
character of such exchange applicable to the Series A Preferred Stock and
the Common Stock. Such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice. Any
notice required by the provisions hereof to be given to a holder of shares
of Preferred Stock shall be deemed sent to such holder if deposited in the
United States mail, postage prepaid, and addressed to such holder at his,
her or its address appearing on the books of the Company.
4.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of
Series A Preferred Stock. Any fractional interest in a share of Common
Stock resulting from conversion of one or more shares of Series A Preferred
Stock shall be paid in cash (computed to the nearest cent) equal to such
fraction equal to the fair market value of a share of Common Stock as of
the date of such conversion, as reasonably determined by the Company.
4.9 Reserved Common Stock. The Company will at all times when any
shares of Series A Preferred Stock are outstanding, reserve and keep
available out of its authorized but unissued stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock.
4.10 Provisional Conversion at the Option of the Corporation.
10
(a) The Company may, at its option, cause the conversion of all, but
not less than all, of the shares of the Series A Preferred Stock then
outstanding into such number of fully paid and nonassessable shares of
Common Stock, per share of Series A Preferred Stock so converted, as is
determined by dividing the Original Issue Price by the Series A Conversion
Price in effect at the time of conversion, if (x) the Closing Price (as
defined below) of the Common Stock has exceeded 400% of the then effective
Series A Conversion Price for at least 20 Trading Days (as defined below)
within a period of 30 consecutive Trading Days ending on the Trading Day
prior to the date on which the Company notifies the holders of the Series A
Preferred Stock (pursuant to Section 4.10(b) below) that it is exercising
its option to cause the conversion of the Series A Preferred Stock pursuant
to this Section 4.10 (the "Provisional Conversion Notice Date") and (y) the
actual average daily trading volume of the Common Stock, on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed, during the 30 consecutive
Trading Day period referred to in clause (x) above is at least 100,000
shares of Common Stock (subject to adjustment from time to time as a result
of a stock split, stock combination or any other similar event affecting
the outstanding number of shares of Common Stock).
(b) In order for the Company to exercise its rights to cause the
conversion of all of the Series A Preferred Stock pursuant to this Section
4.10, a written notice (the "Provisional Conversion Notice") shall be sent
by or on behalf of the Company, by first class mail, postage prepaid, to
the holders of record of the Series A Preferred Stock as they appear on the
stock register of the Company on the Provisional Conversion Notice Date
notifying such holders of the election of the Company to cause the
conversion of all of the Series A Preferred Stock and of the Provisional
Conversion Date (as defined below), which date shall not be less than 5
days nor be more than 10 days after the Provisional Conversion Notice Date.
(c) If a Provisional Conversion Notice shall have been given as
hereinbefore provided, then each holder of the Series A Preferred Stock
shall be entitled to all preferences and relative, participating, optional
and other special rights accorded by this certificate until and including
the Provisional Conversion Date. From and after the Provisional Conversion
Date, upon delivery by the Company of the Common Stock issuable upon
conversion of the Series A Preferred Stock, together with payment in full
of all accrued and unpaid dividends thereon as provided in Section 2(b),
the Series A Preferred Stock shall no longer be deemed to be outstanding,
and all rights of the holders of such Series A Preferred Stock (in their
capacity as holders of Series A Preferred Stock) shall cease and terminate.
(d) For purpose of this Section 4.10, following definitions shall
apply:
(i) "Closing Price" means, on any date of determination, the
closing price (or, if no closing price is reported, the last reported
sale price) per share reported by the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common
Stock is listed.
11
(ii) "Provisional Conversion Date" means the date fixed for
conversion of shares of Series A Preferred Stock pursuant to this
Section 4.10.
(iii) "Trading Day" means a day on which the Common Stock (i) is
not suspended from trading on the Over-The-Counter Bulletin Board or
any other stock quotation system or exchange upon which the Common
Stock is listed and (ii) has traded at least once on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed.
5. [Intentionally Omitted].
6. Reacquired Shares. Any shares of Series A Preferred Stock converted,
exchanged, redeemed, purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares of Series A Preferred Stock shall upon their
cancellation become authorized but unissued shares of the Company's preferred
stock, par value $0.0001 per share, and, upon the filing of an appropriate
Certificate of Designation with the Secretary of State of the State of Delaware,
may be reissued as part of another class or series of the Company's preferred
stock, par value $0.0001 per share, including, without limitation, Series A
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth herein.
7. Voting Rights.
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to vote, in person, by proxy or at a special or annual meeting of the
stockholders of the Company, on all matters voted on by holders of Common Stock,
voting together as a single class with the holders of the Common Stock and all
other shares entitled to vote thereon as a single class with the Common Stock.
With respect to any such matters as to which holders of the Series A Preferred
Stock shall be entitled to vote, each issued and outstanding share of Series A
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of shares of Common Stock issuable upon
conversion thereof.
(b) The Company shall not, without the prior affirmative vote or
written consent of the Requisite Preferred Majority (as defined below):
(i) adversely alter or change, or engage in any action that would
result in any adverse alteration of or change to, the rights,
preferences or privileges of the Series A Preferred Stock or the
Series B Preferred Stock;
(ii) increase the authorized number of shares of the Series A
Preferred Stock or the Series B Preferred Stock;
(iii) create, authorize, sell or issue any new class or series of
the Company's capital stock or any bonds, notes or other obligations
convertible into, exchangeable for or having option rights to purchase
shares of such new class or series or reclassify any class or series
of the Company's capital stock;
(iv) increase the authorized number of members of the Board;
12
(v) amend or repeal any provision of, or add any provision to,
the Company's certificate of incorporation, certificates of
designations or bylaws (in any such case, whether by merger,
consolidation or otherwise) in a manner that adversely affects the
rights of the Series A Preferred Stock, the Series B Preferred Stock
or the holders thereof;
(vi) pay or set aside funds for the payment of any dividends or
make any distributions on any of the Company's capital stock (other
than the Series A Preferred Stock or the Series B Preferred Stock);
(vii) engage, or permit any of its subsidiaries to engage, in any
transaction with an affiliate of the Company or any of its
subsidiaries, or an affiliate of any such person;
(viii) make, or permit any of its subsidiaries to make, any
material change, directly or indirectly, in the nature of the
Company's or such subsidiary's business;
(ix) incur or become liable for, or permit any of its
subsidiaries to incur or become liable for, through guarantees or
otherwise, directly or indirectly, any indebtedness in excess of $5
million in the aggregate at any one time outstanding (calculated on a
consolidated basis for the Company and its subsidiaries);
(x) for so long as the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock shall collectively represent 5% of
the outstanding shares of capital stock of the Company or any
successor entity thereto (calculated on a fully diluted basis),
engage, or permit any of its subsidiaries to engage, in any merger,
consolidation, acquisition, recapitalization, joint venture or
partnership;
(xi) directly or indirectly dispose of all of the equity
interests in any of its direct or indirect subsidiaries or directly or
indirectly dispose of all or substantially all of the assets of the
Company or any of its direct or indirect subsidiaries;
(xii) authorize, approve or implement any employee option plan or
similar employee equity program (it being understood that (x) the
Company contemplates authorizing a 2005 Management Stock Option Plan
providing for the issuance of options for up to 4,211,799 shares of
Common Stock and (y) the Requisite Preferred Majority shall have the
right to approve the form and substance of such 2005 Management Stock
Option Plan pursuant to this clause (xii));
(xiii) permit any of its subsidiaries to issue any of its capital
stock or other equity securities to any person or entity other than
the Company or any of the Company's wholly-owned subsidiaries or
otherwise engage in any transaction, or permit any of its subsidiaries
to engage in any transaction, which results in the Company ceasing to
directly or indirectly own 100% of the issued and
13
outstanding capital stock and other equity securities of Aduromed
Corporation or any other direct or indirect subsidiary of the Company;
or
(xiv) enter into, or permit any of its subsidiaries to enter
into, any contract or other agreement to consummate any of the
foregoing.
(c) For the purposes hereof, the term "Requisite Preferred Majority"
shall mean the holders of more than 50% of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, voting together as a single class
on an as-converted basis.
8. No Impairment. The Company will not, through any reorganization,
transfer of assets, 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 to be observed or performed hereunder by the Company but will
at all times in good faith assist in the carrying out of all the provisions
hereunder and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights and liquidation
preferences granted hereunder of the holders of the Series A Preferred Stock
against impairment.
14
The Company has caused this Certificate of Designation to be signed as
of this 23rd day of January, 2006.
GENERAL DEVICES, INC.
By: /s/ Xxxxx Xxxxxx, Xx.
------------------------------------
Name: Xxxxx Xxxxxx, Xx.
Title: President
15
EXHIBIT L
CERTIFICATE OF DESIGNATIONS OF SERIES B PREFERRED STOCK
GENERAL DEVICES, INC.
CERTIFICATE OF DESIGNATIONS OF SERIES B PREFERRED STOCK
General Devices, Inc., a Delaware company (the "Company"), hereby
certifies that the following resolution has been duly adopted by the board of
directors of the Company:
RESOLVED, that pursuant to the authority granted to and vested in the
board of directors of the Company (the "Board") by the provisions of the
certificate of in Company of the Company, there is created a series of preferred
stock, par value $0.0001 per share, and that the voting powers, designation and
number of shares thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
1. Designation and Number; Rank; Prohibited Payments.
(a) The shares of this series shall be designated as Series B
Preferred Stock. The number of shares initially constituting the Series B
Preferred Stock shall be 15,780,160, which number may, subject to any
consent right of the holders of any capital stock of the Company, be
increased or decreased by the Board; provided, however, that such number
may not be decreased below the number of the then outstanding shares of
Series B Preferred Stock.
(b) The Series B Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding up, rank:
(i) junior to all classes and series of any hereafter authorized
capital stock of the Company ranking senior (as to dividend rights,
redemption rights and rights upon liquidation, dissolution or winding
up) to the Series B Preferred Stock ("Senior Stock");
(ii) pari passu with all classes and series of any now or
hereafter authorized capital stock of the Company ranking on a par (as
to dividend rights, redemption rights and rights upon liquidation,
dissolution or winding up) with the Series B Preferred Stock ("Parity
Stock"), including, but not limited to, the Company's Series A
Preferred Stock (the "Series A Preferred Stock"); and
(iii) senior to all classes and series of any now or hereafter
authorized capital stock of the Company ranking junior (as to dividend
rights, redemption rights and rights upon liquidation, dissolution or
winding up) to the Series B Preferred Stock, including, without
limitation, any class of the Company's common stock, par value $0.0001
per share ("Common Stock") (such classes and series are referred to as
"Junior Stock").
2. Dividends.
(a) The holders of shares of Series B Preferred Stock shall be
entitled to receive preferential dividends at an annual rate equal to six
percent (6%) per annum times the Original Issue Price (as defined below)
for each share of Series B Preferred Stock held by such holders, and such
dividends shall be payable in cash to the holders of record at the close of
business on each March 15 and September 15 of each year. Dividends on
shares of the Series B Preferred Stock shall accumulate on a daily basis
from the date on which such shares are issued and, to the extent they are
not paid in cash when due, shall compound on a semi-annual basis on each
March 15 and September 15 of each year, whether or not the Company has
earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
(b) Upon conversion of any share of Series B Preferred Stock into
Common Stock pursuant to Section 4, the holder of such Series B Preferred
Stock shall be entitled to receive payment of all accrued and unpaid
dividends thereon, at the option of the holder thereof, (i) in cash or (ii)
in the form of such number of additional shares of Common Stock equal to
(x) the amount of such accrued and unpaid dividends, divided by (y) the
then applicable Series B Conversion Price.
(c) In no event may any dividends be paid on the Series B Preferred
Stock unless, at the time of such payment, any and all dividends then
accrued and payable on the shares of any Senior Stock shall have been paid
in full. If dividends are paid on the shares of Series B Preferred Stock
and shares of Parity Stock in an amount less than the total amount of such
dividends at the time accrued and payable on all of such shares, such
dividends shall be allocated pro rata (in proportion to the respective
amounts due with respect thereto) among all such shares of Series B
Preferred Stock and shares of Parity Stock at the time outstanding based on
the amount of dividends then due with respect to each such share. In no
event may any dividends be paid on any Junior Stock unless, at the time of
such payment, any and all dividends then accrued and payable on the shares
of the Series B Preferred Stock have been paid in full.
3. Preference on Liquidation.
(a) Upon the liquidation or dissolution of the Company ("Liquidation
Event"), the holders of Series B Preferred Stock shall be entitled to
receive out of the Company's assets, for each share of Series B Preferred
Stock outstanding at the time thereof, distributions in the amount of
$0.31755 (subject to adjustment from time to time as a result of a stock
split, stock combination or any other similar event affecting the
outstanding number of shares of Series B Preferred Stock) (as adjusted from
time to time, the "Original Issue Price") plus an amount equal to all
accumulated but unpaid dividends thereon, whether or not declared (the
Original Issue Price together with such dividends, the "Liquidation
Preference").
(b) Distributions of the Company's cash, securities and other assets
pursuant to this Section 3 shall be made to the holders of shares of Series
B Preferred Stock and all
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other Parity Stock in proportion to the total amounts to which the holders
of all shares of Series B Preferred Stock and all other Parity Stock are
entitled upon a Liquidation Event.
(c) No payment or distribution shall be made in respect of any shares
of Series B Preferred Stock pursuant to Section 3(a) unless, at the time of
such distribution, all amounts due in respect of any shares of Senior Stock
have been paid in full.
(d) No payment or distribution shall be made in respect of any shares
of Junior Stock unless, at the time of such distribution, the holders of
shares of Series B Preferred Stock shall have received the Liquidation
Preference with respect to each share.
(e) Upon the payment in full of all amounts due to a holder of Series
B Preferred Stock pursuant to this Section 3, such holder shall not be
entitled to any further participation in the assets of the Company.
4. Conversion.
4.1 Right to Convert.
(a) Each share of Series B Preferred Stock shall be convertible, at
the option of the holder thereof upon exercise in accordance with Section
4.1(b), without the payment of additional consideration, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Original Issue Price by the Series B Conversion Price (as
defined below) in effect at the time of conversion. The "Series B
Conversion Price" shall initially be equal to $0.31755. Such initial Series
B Conversion Price, and the rate at which shares of Series B Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below.
(b) A record holder of shares of Series B Preferred Stock may effect
the optional conversion thereof in accordance with Section 4.1(a) by making
a written demand for such conversion (a "Series B Conversion Demand") upon
the Company at its principal executive offices that sets forth (i) the
number of shares of Series B Preferred Stock to be converted; and (ii) the
proposed date of such conversion, which shall be a Business Day not less
than 5 Business Days after the date of such Series B Conversion Demand (the
"Series B Conversion Date"). The Series B Conversion Demand shall be
accompanied by the certificate representing such shares or, if such
certificate has been lost or stolen, a lost stock certificate affidavit and
indemnification agreement in form and substance satisfactory to the Company
and, if the Company shall so request, evidence that such holder shall have
posted a bond satisfactory to the Company. As soon as practicable after the
Series B Conversion Date, the Company shall issue and deliver to such
holder a certificate for the number of shares of Common Stock issuable upon
such conversion in accordance with the provisions hereof (rounded down to
the nearest whole share). Upon surrender of a certificate representing
Series B Preferred Stock to be converted in part, the Company shall after
the Series B Conversion Date issue a certificate representing the number of
full shares of Series B Preferred Stock not so converted.
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(c) All outstanding shares of Series B Preferred Stock to be converted
pursuant to the Series B Conversion Demand shall, on the Series B
Conversion Date, be converted into Common Stock for all purposes. On and
after the Series B Conversion Date, (i) no such shares of Series B
Preferred Stock shall be deemed to be outstanding or be transferable on the
books of the Company or the stock transfer agent, if any, for such shares
of Series B Preferred Stock, and (ii) the holder of such shares, as such,
shall not be entitled to receive any dividends or other distributions, to
receive notices or to vote such shares or to exercise or to enjoy any other
powers, preferences or rights in respect thereof, other than the right,
upon surrender of the certificate representing such shares, to receive a
certificate for the number of shares of Common Stock into which such shares
shall have been converted.
4.2 Adjustments to Series B Conversion Price.
(a) Definitions. For the purposes of this Section 4, the following
terms shall have the following meanings ascribed thereto:
(i) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or deemed to be issued pursuant to clause (b)
below) by the Company after the Initial Issuance Date, but shall not
include up to 4,211,799 shares of Common Stock issuable upon exercise
of options granted by the Company pursuant to a statutory employee
option plan approved in accordance with Section 6 below.
(ii) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding
Options.
(iii) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, but shall not include options to purchase up
to 4,211,799 shares of Common Stock granted by the Company pursuant to
a statutory employee option plan approved in accordance with Section 6
below.
(b) Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the initial issuance of shares of Series B Preferred Stock
(the "Initial Issuance Date") shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common
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Stock issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record
date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Series B Conversion
Price pursuant to the terms of Section 4.2(c) below, are revised
(either automatically pursuant to the provisions contained therein or
as a result of an amendment to such terms) to provide for either (1)
any increase or decrease in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such Option
or Convertible Security or (2) any increase or decrease in the
consideration payable to the Company upon such exercise, conversion or
exchange, then, effective upon such increase or decrease becoming
effective, the Series B Conversion Price computed upon the original
issue of such Option or Convertible Security (or upon the occurrence
of a record date with respect thereto) shall be readjusted to such
Series B Conversion Price as would have obtained had such revised
terms been in effect upon the original date of issuance of such Option
or Convertible Security. Notwithstanding the foregoing, no adjustment
pursuant to this clause (ii) shall have the effect of increasing the
Series B Conversion Price to an amount which exceeds the lower of (i)
the Series B Conversion Price on the original adjustment date, or (ii)
the Series B Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Series B
Conversion Price pursuant to the terms of Section 4.2(c) below (either
because the consideration per share of the Additional Shares of Common
Stock subject thereto was equal to or greater than the Series B
Conversion Price then in effect, or because such Option or Convertible
Security was issued before the Initial Issuance Date), are revised
after the Initial Issuance Date (either automatically pursuant to the
provisions contained therein or as a result of an amendment to such
terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the
Company upon such exercise, conversion or exchange, then such Option
or Convertible Security, as so amended, and the Additional Shares of
Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted
(either upon its original issuance or upon a revision of its terms) in
an adjustment to the Series B Conversion Price pursuant to the terms
of Section 4.2(c) below, the Series B Conversion Price shall be
readjusted to such Series B Conversion Price as would have obtained
had such Option or Convertible Security never been issued.
5
(c) Adjustment of Series B Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Company shall at any
time after the Initial Issuance Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.2(b)), without consideration or for a consideration
per share less than the applicable Series B Conversion Price in effect
immediately prior to such issue, then the Series B Conversion Price shall
be reduced, concurrently with such issue, to a price (calculated to the
nearest one-hundredth of a cent) determined in accordance with the
following formula:
CP(2) = CP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
(A) "CP(2)" shall mean the Series B Conversion Price in effect
immediately after such issue of Additional Shares of Common
Stock;
(B) "CP(1)" shall mean the Series B Conversion Price in effect
immediately prior to such issue of Additional Shares of
Common Stock;
(C) "A" shall mean the number of shares of Common Stock
outstanding and deemed outstanding immediately prior to such
issue of Additional Shares of Common Stock (treating for
this purpose as outstanding all shares of Common Stock
issuable upon exercise of Options outstanding immediately
prior to such issue or upon conversion of Convertible
Securities (including the Series B Preferred Stock)
outstanding immediately prior to such issue);
(D) "B" shall mean the number of shares of Common Stock that
would have been issued if such Additional Shares of Common
Stock had been issued at a price per share equal to CP(1)
(determined by dividing the aggregate consideration received
by the Company in respect of such issue by CP(1)); and
(E) "C" shall mean the number of such Additional Shares of
Common Stock issued in such transaction.
(d) Determination of Consideration. For purposes of this Section 4.2,
the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
6
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4.2(b), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(e) Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Series B Conversion Price pursuant to the terms of
Section 4.2(c) above then, upon the final such issuance, the Series B
Conversion Price shall be readjusted to give effect to all such issuances
as if they occurred on the date of the first such issuance (and without
additional giving effect to any adjustments as a result of any subsequent
issuances within such period).
(f) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Initial Issuance Date effect a
subdivision of the outstanding Common Stock without a comparable
subdivision of the Series B Preferred Stock or combine the outstanding
shares of Series B Preferred Stock without a comparable combination of the
Common Stock, the Series B Conversion Price in effect
7
immediately before that subdivision or combination shall be proportionately
decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to
such increase in the aggregate number of shares of Common Stock
outstanding. If the Company shall at any time or from time to time after
the Initial Issuance Date combine the outstanding shares of Common Stock
without a comparable combination of the Series B Preferred Stock or effect
a subdivision of the outstanding shares of Series B Preferred Stock without
a comparable subdivision of the Common Stock, the Series B Conversion Price
in effect immediately before the combination or subdivision shall be
proportionately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in the aggregate number of shares of Common
Stock outstanding. Any adjustment under this subsection shall become
effective at the close of business on the date the subdivision or
combination becomes effective.
4.3 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable on the Common Stock in additional shares of Common
Stock, then and in each such event the Series B Conversion Price in effect
immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Series B
Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series B Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter
the Series B Conversion Price shall be adjusted pursuant to this subsection
as of the time of actual payment of such dividends or distributions; and
provided further, however, that no such adjustment shall be made if the
holders of Series B Preferred Stock simultaneously receive (i) a dividend
or other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if all
outstanding shares of Series B Preferred Stock had been converted into
Common Stock on the date of such event or (ii) a dividend or other
distribution of shares of Series B Preferred Stock which are convertible,
as of the date of such event, into such number of shares of Common Stock as
is equal to the number of additional shares of Common Stock being issued
with respect to each share of Common Stock in such dividend or
distribution.
8
4.4 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of capital stock of the Company entitled to receive, a dividend or
other distribution payable in securities of the Company (other than a
distribution of shares of Common Stock in respect of outstanding shares of
Common Stock) or in other property, then and in each such event the holders
of Series B Preferred Stock shall receive, simultaneously with the
distribution to the holders of such capital stock, a dividend or other
distribution of such securities or other property in an amount equal to the
amount of such securities or other property as they would have received if
all outstanding shares of Series B Preferred Stock had been converted into
Common Stock on the date of such event.
4.5 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or
merger involving the Company in which the Common Stock (but not the Series
B Preferred Stock) is converted into or exchanged for securities, cash or
other property (other than a transaction covered by Sections 4.3 or 4.4),
then, following any such reorganization, recapitalization,
reclassification, consolidation or merger, each share of Series B Preferred
Stock shall thereafter be convertible in lieu of the Common Stock into
which it was convertible prior to such event into the kind and amount of
securities, cash or other property which a holder of the number of shares
of Common Stock of the Company issuable upon conversion of one share of
Series B Preferred Stock immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case,
appropriate adjustment (as determined in good faith by the Board) shall be
made in the application of the provisions in this Section 4 with respect to
the rights and interests thereafter of the holders of the Series B
Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of
the Series B Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other property
thereafter deliverable upon the conversion of the Series B Preferred Stock.
4.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant to
this Section 4, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series B Preferred Stock a certificate setting
forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property into which the Series B Preferred Stock
is convertible) and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, as promptly as reasonably
practicable after the written request at any time of any holder of Series B
Preferred Stock (but in any event not later than 10 days thereafter),
furnish or cause to be furnished to such holder a certificate setting forth
(i) the Series B Conversion Price then in effect, and (ii) the number of
shares of Common Stock and the amount, if any, of other securities, cash or
property which then would be received upon the conversion of Series B
Preferred Stock.
9
4.7 Notice of Record Date. In the event:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time issuable upon conversion of the
Series B Preferred Stock) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will send or cause to be sent to
the holders of the Series B Preferred Stock a notice specifying, as the
case may be, (i) the record date for such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
proposed to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at
the time issuable upon the conversion of the Series B Preferred Stock)
shall be entitled to exchange their shares of Common Stock (or such other
stock or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and
character of such exchange applicable to the Series B Preferred Stock and
the Common Stock. Such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice. Any
notice required by the provisions hereof to be given to a holder of shares
of Preferred Stock shall be deemed sent to such holder if deposited in the
United States mail, postage prepaid, and addressed to such holder at his,
her or its address appearing on the books of the Company.
4.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of
Series B Preferred Stock. Any fractional interest in a share of Common
Stock resulting from conversion of one or more shares of Series B Preferred
Stock shall be paid in cash (computed to the nearest cent) equal to such
fraction equal to the fair market value of a share of Common Stock as of
the date of such conversion, as reasonably determined by the Company.
4.9 Reserved Common Stock. The Company will at all times when any
shares of Series B Preferred Stock are outstanding, reserve and keep
available out of its authorized but unissued stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series B Preferred Stock
4.10 Provisional Conversion at the Option of the Corporation.
10
(a) The Company may, at its option, cause the conversion of all, but
not less than all, of the shares of the Series B Preferred Stock then
outstanding into such number of fully paid and nonassessable shares of
Common Stock, per share of Series B Preferred Stock so converted, as is
determined by dividing the Original Issue Price by the Series B Conversion
Price in effect at the time of conversion, if (x) the Closing Price (as
defined below) of the Common Stock has exceeded 400% of the then effective
Series B Conversion Price for at least 20 Trading Days (as defined below)
within a period of 30 consecutive Trading Days ending on the Trading Day
prior to the date on which the Company notifies the holders of the Series B
Preferred Stock (pursuant to Section 4.10(b) below) that it is exercising
its option to cause the conversion of the Series B Preferred Stock pursuant
to this Section 4.10 (the "Provisional Conversion Notice Date") and (y) the
actual average daily trading volume of the Common Stock, on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed, during the 30 consecutive
Trading Day period referred to in clause (x) above is at least 100,000
shares of Common Stock (subject to adjustment from time to time as a result
of a stock split, stock combination or any other similar event affecting
the outstanding number of shares of Common Stock).
(b) In order for the Company to exercise its rights to cause the
conversion of all of the Series B Preferred Stock pursuant to this Section
4.10, a written notice (the "Provisional Conversion Notice") shall be sent
by or on behalf of the Company, by first class mail, postage prepaid, to
the holders of record of the Series B Preferred Stock as they appear on the
stock register of the Company on the Provisional Conversion Notice Date
notifying such holders of the election of the Company to cause the
conversion of all of the Series B Preferred Stock and of the Provisional
Conversion Date (as defined below), which date shall not be less than 5
days nor be more than 10 days after the Provisional Conversion Notice Date.
(c) If a Provisional Conversion Notice shall have been given as
hereinbefore provided, then each holder of the Series B Preferred Stock
shall be entitled to all preferences and relative, participating, optional
and other special rights accorded by this certificate until and including
the Provisional Conversion Date. From and after the Provisional Conversion
Date, upon delivery by the Company of the Common Stock issuable upon
conversion of the Series B Preferred Stock, together with payment in full
of all accrued and unpaid dividends thereon as provided in Section 2(b),
the Series B Preferred Stock shall no longer be deemed to be outstanding,
and all rights of the holders of such Series B Preferred Stock (in their
capacity as holders of Series B Preferred Stock) shall cease and terminate.
(d) For purpose of this Section 4.10, following definitions shall
apply:
(i) "Closing Price" means, on any date of determination, the
closing price (or, if no closing price is reported, the last reported
sale price) per share reported by the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common
Stock is listed.
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(ii) "Provisional Conversion Date" means the date fixed for
conversion of shares of Series B Preferred Stock pursuant to this
Section 4.10.
(iii) "Trading Day" means a day on which the Common Stock (i) is
not suspended from trading on the Over-The-Counter Bulletin Board or
any other stock quotation system or exchange upon which the Common
Stock is listed and (ii) has traded at least once on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed.
5. Reacquired Shares. Any shares of Series B Preferred Stock converted,
exchanged, redeemed, purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares of Series B Preferred Stock shall upon their
cancellation become authorized but unissued shares of the Company's preferred
stock, par value $0.0001 per share, and, upon the filing of an appropriate
Certificate of Designation with the Secretary of State of the State of Delaware,
may be reissued as part of another class or series of the Company's preferred
stock, par value $0.0001 per share, including, without limitation, Series B
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth herein.
6. Voting Rights.
(a) Each share of Series B Preferred Stock shall entitle the holder
thereof to vote, in person, by proxy or at a special or annual meeting of the
stockholders of the Company, on all matters voted on by holders of Common Stock,
voting together as a single class with the holders of the Common Stock and all
other shares entitled to vote thereon as a single class with the Common Stock.
With respect to any such matters as to which holders of the Series B Preferred
Stock shall be entitled to vote, each issued and outstanding share of Series B
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of shares of Common Stock issuable upon
conversion thereof.
(b) The Company shall not, without the prior affirmative vote or
written consent of the Requisite Preferred Majority (as defined below):
(i) adversely alter or change, or engage in any action that would
result in any adverse alteration of or change to, the rights,
preferences or privileges of the Series A Preferred Stock or the
Series B Preferred Stock;
(ii) increase the authorized number of shares of the Series A
Preferred Stock or the Series B Preferred Stock;
(iii) create, authorize, sell or issue any new class or series of
the Company's capital stock or any bonds, notes or other obligations
convertible into, exchangeable for or having option rights to purchase
shares of such new class or series or reclassify any class or series
of the Company's capital stock;
(iv) increase the authorized number of members of the Board;
12
(v) amend or repeal any provision of, or add any provision to,
the Company's certificate of incorporation, certificates of
designations or bylaws (in any such case, whether by merger,
consolidation or otherwise) in a manner that adversely affects the
rights of the Series A Preferred Stock, the Series B Preferred Stock
or the holders thereof;
(vi) pay or set aside funds for the payment of any dividends or
make any distributions on any of the Company's capital stock (other
than the Series A Preferred Stock or the Series B Preferred Stock);
(vii) engage, or permit any of its subsidiaries to engage, in any
transaction with an affiliate of the Company or any of its
subsidiaries, or an affiliate of any such person;
(viii) make, or permit any of its subsidiaries to make, any
material change, directly or indirectly, in the nature of the
Company's or such subsidiary's business;
(ix) incur or become liable for, or permit any of its
subsidiaries to incur or become liable for, through guarantees or
otherwise, directly or indirectly, any indebtedness in excess of $5
million in the aggregate at any one time outstanding (calculated on a
consolidated basis for the Company and its subsidiaries);
(x) for so long as the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock shall collectively represent 5% of
the outstanding shares of capital stock of the Company or any
successor entity thereto (calculated on a fully diluted basis),
engage, or permit any of its subsidiaries to engage, in any merger,
consolidation, acquisition, recapitalization, joint venture or
partnership;
(xi) directly or indirectly dispose of all of the equity
interests in any of its direct or indirect subsidiaries or directly or
indirectly dispose of all or substantially all of the assets of the
Company or any of its direct or indirect subsidiaries;
(xii) authorize, approve or implement any employee option plan or
similar employee equity program (it being understood that (x) the
Company contemplates authorizing a 2005 Management Stock Option Plan
providing for the issuance of options for up to 4,211,799 shares of
Common Stock and (y) the Requisite Preferred Majority shall have the
right to approve the form and substance of such 2005 Management Stock
Option Plan pursuant to this clause (xii));
(xiii) permit any of its subsidiaries to issue any of its capital
stock or other equity securities to any person or entity other than
the Company or any of the Company's wholly-owned subsidiaries or
otherwise engage in any transaction, or permit any of its subsidiaries
to engage in any transaction, which results in the Company ceasing to
directly or indirectly own 100% of the issued and
13
outstanding capital stock and other equity securities of Aduromed
Corporation or any other direct or indirect subsidiary of the Company;
or
(xiv) enter into, or permit any of its subsidiaries to enter
into, any contract or other agreement to consummate any of the
foregoing.
(c) For the purposes hereof, the term "Requisite Preferred Majority"
shall mean the holders of more than 50% of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, voting together as a single class
on an as-converted basis.
7. No Impairment. The Company will not, through any reorganization,
transfer of assets, 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 to be observed or performed hereunder by the Company but will
at all times in good faith assist in the carrying out of all the provisions
hereunder and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights and liquidation
preferences granted hereunder of the holders of the Series B Preferred Stock
against impairment.
14
The Company has caused this Certificate of Designations to be signed
as of this 23rd day of Janaury, 2006.
GENERAL DEVICES, INC.
By: /s/ Xxxxx Xxxxxx, Xx.
------------------------------------
Name: Xxxxx Xxxxxx, Xx.
Title: President
15
EXHIBIT M
FORM OF FIRST CLOSING WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO GENERAL DEVICES, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
GENERAL DEVICES, INC.
COMMON STOCK WARRANT
No. __ Issue Date: __________
GENERAL DEVICES, INC., a corporation organized under the laws of the State
of Delaware, hereby certifies that, for value received, _________________, or
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the date hereof and
at any time or from time to time before 5:00 p.m., New York time, through the
close of business (New York time) on September 30, 2012 (the "Expiration Date"),
up to _______ fully paid and nonassessable shares of Common Stock of the
Company, par value $0.0001 per share ("Common Stock") at an exercise price of
$0.37883 per share, subject to adjustment hereunder (such exercise price, as
adjusted from time to time, the "Exercise Price").
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include General Devices, Inc. and any
corporation which shall succeed, or assume the obligations of, General Devices,
Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, par
value $0.0001 per share, and (b) any other securities into which or for which
any of the securities described in clause (a) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or
shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 3 or 4 or otherwise.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), up to _______ shares of Common Stock of the
Company, subject to adjustment pursuant to Sections 4 and 5 (such number of
shares of Common Stock, as adjusted from time to time, the "Warrant Shares
Number").
1.2 Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise.
2.2 Cash Exercise. Payment shall be made in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, for the number of shares of Common Stock (or Other
Securities) specified in such Exercise Notice (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
(or Other Securities) issuable to the Holder per the terms of this Warrant) and
the Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
2.3 Cashless Exercise. In lieu of payment of the Exercise Price as
provided above, the Holder may elect a cashless net exercise. In the case of
such cashless net exercise, the Holder shall surrender this Warrant for
cancellation and receive in exchange therefor the full number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) as is computed using the following formula:
2
X = Y * (A - B)
-----------
(A)
where:
X = the number of shares of Common Stock (or Other Securities) to be
issued to the Holder upon cashless exercise of this Warrant
Y = the total number of shares Common Stock (or Other Securities)
covered by this Warrant which the Holder has surrendered at such time
for cashless exercise (including both shares to be issued to the
Holder upon cashless exercise of this Warrant and shares to be
cancelled as payment therefor)
A = the Current Market Value as of the business day on which the Holder
surrenders this Warrant to the Company
B = the Exercise Price then in effect under this Warrant at the time at
which the Holder surrenders this Warrant to the Company
For purposes of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), it is intended, understood and acknowledged that
the Common Stock (or Other Securities) issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Common Stock (or Other Securities) shall be deemed to have commenced, on the
date this Warrant was originally issued.
2.4 Limitation on Exercise. Notwithstanding anything herein to the
contrary, from and after the date on which the Company shall have registered the
Common Stock (or Other Securities) under the Securities Act, in no event shall
the Holder be entitled to exercise any portion of this Warrant in excess of that
portion of this Warrant upon exercise of which the sum of (i) the number of
shares of Common Stock (or Other Securities) beneficially owned by the Holder
and its Affiliates (other than shares of Common Stock (or Other Securities)
which may be deemed beneficially owned through the ownership of the unexercised
portion of the Warrant or the unexercised or unconverted portion of any other
security of the Holder subject to a limitation on conversion analogous to the
limitations contained herein) and (ii) the number of shares of Common Stock (or
Other Securities) issuable upon the exercise of the portion of this Warrant with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its Affiliates of more than 4.99% of
the then outstanding shares of Common Stock (or Other Securities). As used
herein, the term "Affiliate" means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a person or entity, as such terms are used in and
construed under Rule 144 under the Securities Act. For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The Holder may waive the limitations set forth
herein by sixty-one (61) days written notice to the Company.
3. Effect of Merger or Reorganization, etc.; Adjustment of Exercise Price.
3
3.1 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or merger
involving the Company in which the Common Stock is converted into or exchanged
for securities, cash or other property, then, following any such reorganization,
recapitalization, reclassification, consolidation or merger, this Warrant shall
thereafter be exercisable in lieu of the Common Stock into which it was
exercisable prior to such event into the kind and amount of securities, cash or
other property which a holder of the number of shares of Common Stock of the
Company issuable upon exercise of this Warrant immediately prior to such
reorganization, recapitalization, reclassification, consolidation or merger
would have been entitled to receive pursuant to such transaction; and, in such
case, appropriate adjustment (as determined in good faith by the board of
directors of the Company (the "Board")) shall be made in the application of the
provisions of Section 3, 4 and 5 with respect to the rights and interests
thereafter of the Holders of this Warrant, to the end that the provisions set
forth in Section 3, 4 and 5 (including provisions with respect to changes in and
other adjustments of the Exercise Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or other property
thereafter deliverable upon the exercise of this Warrant.
3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1.
3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant. In the event this Warrant does not
continue in full force and effect after the consummation of the transactions
described in this Section 3, then the Company's securities and property
(including cash, where applicable) receivable by the Holders of the Warrant will
be delivered to Holder.
4. Extraordinary Events Regarding Common Stock.
4.1 Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time effect a subdivision of the outstanding Common
Stock (or Other Securities), the Exercise Price then in effect immediately
before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time combine the outstanding shares of Common Stock
(or Other Securities), the Exercise Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this clause
shall become effective at the close of business on the date the subdivision or
combination becomes effective.
4
4.2 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock (or Other
Securities) entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock (or Other Securities), then and in each such
event the Exercise Price then in effect shall be decreased as of the time of
such issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Exercise Price
then in effect by a fraction:
(i) the numerator of which shall be the total number of shares of
Common Stock (or Other Securities) issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date, and
(ii) the denominator of which shall be the total number of shares
of Common Stock (or Other Securities) issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
(or Other Securities) issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Exercise Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Exercise Price shall be adjusted
pursuant to this clause as of the time of actual payment of such dividends or
distributions.
4.3 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock (or Other
Securities) entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock (or Other
Securities), then and in each such event provision shall be made so that the
Holder shall receive upon exercise of this Warrant in addition to the number of
shares of Common Stock (or Other Securities) receivable thereupon, the amount of
securities of the Company that it would have received had this Warrant been
exercised into Common Stock (or Other Securities) on the date of such event and
had they thereafter, during the period from the date of such event to and
including the exercise date, retained such securities receivable by them as
aforesaid during such period, giving application to all adjustments called for
during such period with respect to the rights of the Holder.
4.4 Adjustment for Reclassification, Exchange, or Substitution. If the
Common Stock (or Other Securities) issuable upon the exercise of this Warrant
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Common
Stock (or Other Securities) into which this Warrant might have
5
been exercised immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
4.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 4, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price then in effect, and (iii) the Warrant
Shares Number and the amount, if any, of other property which then would be
received upon the exercise of this Warrant.
4.6 Warrant Shares Number. If any event shall occur that results in
any adjustment to the Exercise Price pursuant to this Section 4, then the
Warrant Shares Number, as in effect immediately prior to such event, shall be
adjusted such that the product of (a) the Exercise Price (as adjusted), times
(b) the Warrant Shares Number (as adjusted), in each case in effect immediately
following such event shall equal the product of (i) the Exercise Price, times
(b) the Warrant Shares Number, in each case in effect immediately prior to such
event.
5. Dilutive Issuances.
5.1 Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the issuance of this Warrant shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of
any class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares of Common Stock (or Other
Securities) (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue
or, in case such a record date shall have been fixed, as of the close of
business on such record date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Exercise Price pursuant
to the terms of Section 5.2 below, are revised (either automatically
pursuant to the provisions contained therein or as a result of an amendment
to such terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock (or Other Securities) issuable upon the
exercise, conversion or exchange of any such Option or Convertible Security
or (2) any increase or decrease in the consideration payable to the Company
upon such exercise, conversion or exchange, then, effective upon such
increase or decrease becoming effective, the Exercise Price computed upon
the original issue of such Option or Convertible Security (or upon the
occurrence of a record date with respect thereto) shall
6
be readjusted to such Exercise Price as would have obtained had such
revised terms been in effect upon the original date of issuance of such
Option or Convertible Security. Notwithstanding the foregoing, no
adjustment pursuant to this clause (ii) shall have the effect of increasing
the Exercise Price to an amount which exceeds the lower of (i) the Exercise
Price on the original adjustment date, or (ii) the Exercise Price that
would have resulted from any issuances of Additional Shares of Common Stock
between the original adjustment date and such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Exercise Price
pursuant to the terms of Section 5.2 below (either because the
consideration per share of the Additional Shares of Common Stock subject
thereto was equal to or greater than the Exercise Price then in effect, or
because such Option or Convertible Security was issued before the issuance
of this Warrant), are revised after the issuance of this Warrant (either
automatically pursuant to the provisions contained therein or as a result
of an amendment to such terms) to provide for either (1) any increase or
decrease in the number of shares of Common Stock (or Other Securities)
issuable upon the exercise, conversion or exchange of any such Option or
Convertible Security or (2) any increase or decrease in the consideration
payable to the Company upon such exercise, conversion or exchange, then
such Option or Convertible Security, as so amended, and the Additional
Shares of Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted (either
upon its original issuance or upon a revision of its terms) in an
adjustment to the Exercise Price pursuant to the terms of Section 5.2
below, the Exercise Price shall be readjusted to such Exercise Price as
would have obtained had such Option or Convertible Security never been
issued.
5.2 Adjustment of Exercise Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company shall at any time after the issuance of
this Warrant issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 5.1), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect immediately prior to such issue, then the Exercise Price shall
be reduced, concurrently with such issue, to a price (calculated to the nearest
one-hundredth of a cent) determined in accordance with the following formula:
EP(2) = EP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
"EP(2)" shall mean the Exercise Price in effect immediately after
such issue of Additional Shares of Common Stock;
"EP(1)" shall mean the Exercise Price in effect immediately prior
to such issue of Additional Shares of Common Stock;
7
"A" shall mean the number of shares of Common Stock (or Other
Securities) outstanding and deemed outstanding
immediately prior to such issue of Additional Shares of
Common Stock (treating for this purpose as outstanding
all shares of Common Stock (or Other Securities) issuable
upon exercise of Options outstanding immediately prior to
such issue or upon conversion of Convertible Securities
outstanding immediately prior to such issue);
"B" shall mean the number of shares of Common Stock (or Other
Securities) that would have been issued if such
Additional Shares of Common Stock had been issued at a
price per share equal to EP(1) (determined by dividing
the aggregate consideration received by the Company in
respect of such issue by EP(1)); and
"C" shall mean the number of such Additional Shares of Common
Stock issued in such transaction.
5.3 Determination of Consideration. For purposes of this Section 5,
the consideration received by the Company for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 5.1, relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of
8
such consideration) payable to the Company upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
5.4 Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Exercise Price pursuant to the terms of Section 5.2 above
then, upon the final such issuance, the Exercise Price shall be readjusted to
give effect to all such issuances as if they occurred on the date of the first
such issuance (and without additional giving effect to any adjustments as a
result of any subsequent issuances within such period).
5.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price then in effect, and (iii) the Warrant
Shares Number and the amount, if any, of other property which then would be
received upon the exercise of this Warrant.
5.6 Warrant Shares Number. If any event shall occur that results in
any adjustment to the Exercise Price pursuant to this Section 5, then the
Warrant Shares Number, as in effect immediately prior to such event, shall be
adjusted such that the product of (a) the Exercise Price (as adjusted), times
(b) the Warrant Shares Number (as adjusted), in each case in effect immediately
following such event shall equal the product of (i) the Exercise Price, times
(b) the Warrant Shares Number, in each case in effect immediately prior to such
event.
6. Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant. The Company will not,
by amendment of its charter or through 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. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock (or
Other Securities) obtainable upon the exercise of this Warrant and (b) take all
such actions as may be necessary or appropriate in order
9
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock (or Other Securities) upon the exercise of this Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to the Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
12. Definitions. For purposes of this Warrant, the following definitions
shall apply:
(a) "Additional Shares of Common Stock" shall mean all shares of
Common Stock (or Other Securities) issued (or deemed to be issued pursuant
to Section 5) by the Company after the date of issuance of this Warrant,
but shall not include up to 4,211,799 shares of Common Stock issuable upon
exercise of options granted by the
10
Company pursuant to a statutory employee benefit plan approved in
accordance with Section 7 of the Company's Series A Certificate of
Designations.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible
into or exchangeable for Common Stock (or Other Securities), but excluding
Options.
(c) "Current Market Value" means the fair market value of the
shares of Common Stock (or Other Securities), as determined as follows:
(i) if the Common Stock (or Other Securities) is traded on a
securities exchange or the NASDAQ Stock Market, the value shall
be deemed to be the average of the closing prices of the Common
Stock (or Other Securities) on such exchange or market over the
five (5) trading day period ending three (3) days prior to the
date of determination;
(ii) if the Common Stock (or Other Securities) is actively
traded over-the-counter, the value shall be deemed to be the
average of the closing bid prices over the five (5) trading day
period ending three (3) days prior to the date of determination;
or
(iii) if there is no active public market for the Common
Stock (or Other Securities), the value shall be the fair market
value thereof, as determined in good faith by the Board.
(d) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock (or Other Securities) or
Convertible Securities, but shall not include options to purchase up to
4,211,799 shares of Common Stock granted by the Company pursuant to a
statutory employee benefit plan approved in accordance with Section 7 of
the Company's Series A Certificate of Designations.
13. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. In
the event that any provision of this Warrant is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
[Signature page to follow]
11
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
GENERAL DEVICES, INC.
By:
------------------------------------
Name:
Title:
12
EXHIBIT N
SECOND CLOSING DISCLOSURE STATEMENT
4.2 (G) (i) Aduromed has a loan agreement with Crown Capital plc providing the
company with the right to convert principal outstanding of approximately $97,500
under a convertible promissory note into shares of Aduromed's Common stock at a
conversion price of $0.50 per share times 1.795. It is the intention of Aduromed
to pay off the outstanding amount of this indebtedness upon the Second Closing
and thereby to preempt any exercise of conversion rights.
(ii) Xxxxxx X. Xxxxx and Xxxx Xxxxx (the "Xxxxxx") each hold promissory
notes made in August, 2005, each of which may be converted into 190,000 shares
of the Common Stock of Aduromed. Each has entered into a novation agreement with
GDI and Aduromed whereby the notes will each exchanged for notes made by GDI in
the same amounts and upon the same terms, with the conversion rights under each
note converted into the right to purchase 190,000 X 1.795 shares of the Common
Stock of GDI (par value $0.0001 per share). The arrangement is contingent upon
the consummation of the transactions contemplated hereunder.
4.3 SUBSIDIARIES. GDI owns all the outstanding capital stock of a separate
special purpose corporation called GD MergerSub, Inc., incorporated under the
laws of Delaware is owned by GDI. That subsidiary has no assets or liabilities.
4.4 AGREEMENTS. See 4.2(g) above.
4.14 CONTRACTS AND COMMITMENTS. (i) Aduromed has received a P.O. from Aramark
dated December 5, 2005.
4.25 EMPLOYMENT AGREEMENTS. (i) Aduromed has entered into employment agreements
with Messrs. Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxxxxx, copies of which have been
delivered to Purchasers' representative.
(ii) Upon consummation of the transactions contemplated under this
Agreement and the Second Closing Related Agreements GDI shall have entered into
employment agreements with Messrs. Xxxxxx and Xxxxxxxx copies of which have been
delivered to Purchasers' representative.
EXHIBIT O
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Amended and Restated Registration Rights Agreement, dated as of January 23,
2006 (this "Amended and Restated Agreement"), by and among Aduromed Corporation,
a Delaware corporation ("Aduromed"), General Devices, Inc., Delaware corporation
("GDI"), and the Purchasers set forth on the signature pages hereto (the
"Purchasers"). Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed thereto in the Amended and Restated
Securities Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS, Aduromed and the Purchasers have heretofore entered into that
certain Registration Rights Agreement, dated as of September 30, 2005 (the
"Original Agreement");
WHEREAS, Aduromed has heretofore entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of January 23, 2006 (the "Merger
Agreement"), by and among Aduromed, GDI, GD MergerSub, Inc., a Delaware
corporation, and GD MergerSub II, Inc., a Delaware corporation ("MergerSub II"),
pursuant to which MergerSub agreed to merge with and into Aduromed (the
"Merger"), with Aduromed as the surviving entity of the Merger;
WHEREAS, in connection with the Merger, GDI has issued to the Purchasers
certain shares of GDI Series A Preferred and First Closing GDI Warrants;
WHEREAS, in connection with the Merger, Aduromed, GDI and the Purchasers
have heretofore entered into that certain Amended and Restated Securities
Purchase Agreement, dated as of January 23, 2006 (the "Amended and Restated
Purchase Agreement"), pursuant to which GDI has issued to the Purchasers certain
shares of GDI Series B Preferred and Second Closing GDI Warrants; and
WHEREAS, pursuant to the Original Agreement, in connection with the Merger,
Aduromed is required to cause GDI to enter into this Amended and Restated
Agreement with the Purchasers;
NOW, THEREFORE, in consideration of the foregoing, the agreements set forth
below, and other good and valuable consideration, the receipt of which is
acknowledged, the parties hereto hereby agree that the Original Agreement be,
and hereby is, amended and restated in its entirety as herein set forth:
1. Registration Rights.
1.1 Required Registration. GDI shall:
(x) prepare and file with the SEC a registration statement (the
"Required Registration Statement") on Form S-1 or SB-1 or a successor form or
another form selected by GDI that is available to GDI under the Securities Act
which conforms with applicable rules and regulations, as amended and
supplemented from time to time, covering the Registrable Securities, to permit,
when effective, the offer and re-sale from time to time of such Registrable
Securities in accordance with the methods of distribution provided by the
Purchasers, by the date which is not more than sixty (60) days after the
consummation of the Merger (the "Registration Statement Filing Deadline");
(y) use its reasonable best efforts to cause the Required
Registration Statement to be declared effective under the provisions of the
Securities Act within one hundred twenty (120) days after the consummation of
the Merger (the "Registration Statement Effectiveness Deadline"); and
(z) use its reasonable best efforts to cause such Required
Registration Statement to remain continuously effective until the earlier of (A)
the date when all Registrable Securities covered by the Required Registration
Statement have been sold thereunder, (B) the date on which all of the
Registrable Securities may be sold without any restriction pursuant to Rule 144
under the Securities Act, or any similar rule or regulation hereafter adopted by
the SEC, as determined by the counsel to GDI pursuant to a written opinion
letter and (C) the fifth anniversary of the effectiveness date of the Required
Registration Statement (such period, the "Required Effectiveness Period").
If: (i) the Required Registration Statement is not filed with the SEC on or
prior to the Registration Statement Filing Deadline, (ii) the Required
Registration Statement filed or required to be filed hereunder is not declared
effective by the SEC on or prior to the Registration Statement Effectiveness
Deadline or (iii) during the Required Effectiveness Period, the Required
Registration Statement ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective (any such
failure or breach, an "Event" and the date of the occurrence of such Event, the
"Event Date"), then on each monthly anniversary of each such Event Date and
until such time as all then continuing Events shall have been cured, GDI shall
pay to each Purchaser, as partial liquidated damages and not as a penalty, an
amount in cash equal to 1.5% of the aggregate purchase price paid by such
Purchaser for any Registrable Securities then held by such Purchaser for each
30-day period, or pro rata for any portion thereof, following such Event Date.
For the purposes of the foregoing, each month will be deemed to be thirty (30)
days in length. Any liquidated damages payable under this Section 1.1 shall be
in addition to any remedies available to the Purchasers at law or in equity by
reason of any breach of this Amended and Restated Agreement by GDI.
To the extent that the Registrable Securities are not sold under the
Required Registration Statement, the Purchasers shall have the registration
rights as enumerated in Sections 1.3 and 1.4 of this Amended and Restated
Agreement.
1.2 Current Public Information. GDI covenants that it will use
reasonable best efforts to file all reports required to be filed by it under the
Securities Act and the Exchange Act
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and the rules and regulations adopted by the SEC thereunder, and will use
reasonable best efforts to take such further action as the Purchasers may
reasonably request, all to the extent required to enable the holders of
Registrable Securities to sell Registrable Securities pursuant to Rule 144 or
Rule 144A adopted by the SEC under the Securities Act or any similar rule or
regulation hereafter adopted by the SEC. GDI shall, upon the request of a holder
of Registrable Securities (each a "Designated Holder" and collectively, the
"Designated Holders"), deliver to such Designated Holder a written statement as
to whether it has complied with such requirements.
1.3 Form S-3 Registration. If GDI is eligible to use Form S-3 under
the Securities Act (or any similar successor form) and shall receive from a
Purchaser and/or its permitted transferees (the "S-3 Initiating Holders") a
written request or requests that GDI effect a registration on such Form S-3,
including without limitation, pursuant to Rule 415 of the Securities Act and any
related qualification or compliance with respect to all or part of the
Registrable Securities owned by the S-3 Initiating Holders and its permitted
transferees (provided, that the S-3 Initiating Holders registering Registrable
Securities in such registration (together with all other holders of Registrable
Securities to be included in such registration) propose to sell their
Registrable Securities at an aggregate price (calculated based upon the Market
Price of the Registrable Securities on the date of filing of the Form S-3 with
respect to such Registrable Securities) to the public of no less than the lesser
of $500,000 or the remaining Registrable Securities), GDI shall (i) promptly
give written notice of the proposed registration, and any related qualification
or compliance, to all other holders of Registrable Securities; and (ii) as soon
as practicable, use reasonable best efforts to file and effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of the
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other holder in the group of
holders joining in such request as is specified in a written request given
within fifteen (15) days after the holder's receipt of such written notice from
GDI. No registration requested by any S-3 Initiating Holders pursuant to this
Section 1.3 shall be deemed a registration pursuant to Section 1.1.
1.4 Piggyback Registrations.
(a) Right to Piggyback. From and after the date hereof under the
earlier of (i) the fifth anniversary of the date hereof and (ii) the date on
which each Purchaser shall have sold all of their respective Registrable
Securities pursuant to the Required Registration Statement, whenever GDI
proposes to register any of its securities under the Securities Act (other than
pursuant to a registration pursuant to Section 1.3 or a registration on Form S-4
or S-8 or any successor or similar forms) and the registration form to be used
may be used for the registration of Registrable Securities, whether or not for
sale for its own account, GDI will give prompt written notice (but in no event
less than fifteen (15) days before the anticipated filing date) to all holders
of Registrable Securities, and such notice shall describe the proposed
registration and distribution and offer to all holders of Registrable Securities
the opportunity to register the number of Registrable Securities as each such
holder may request. GDI will include in such registration all Registrable
Securities with respect to which GDI has received written requests for
-3-
inclusion therein within ten (10) days after the holders' receipt of GDI's
notice (a "Piggyback Registration").
(b) Reasonable Efforts. GDI shall use all reasonable best efforts to
cause the managing underwriter or underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggyback Registration to be included on the same terms and conditions as any
similar securities of GDI or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof.
(c) Withdrawal. Any Designated Holder shall have the right to withdraw
its request for inclusion of its Registrable Securities in any Registration
Statement pursuant to this Section 1.4 by giving written notice to GDI of its
request to withdraw; provided, that in the event of such withdrawal (other than
pursuant to Section 1.4(e) hereof, GDI shall not be required to reimburse such
holder for the fees and expenses referred to in Section 1.6(b) hereof incurred
by or on behalf of such holder prior to such withdrawal. GDI may withdraw a
Piggyback Registration at any time prior to the time it becomes effective.
(d) Priority in Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of GDI, and the managing
underwriters advise GDI in writing (with a copy to each party hereto requesting
registration of Registrable Securities) that in their opinion the number of
Registrable Securities requested to be included on a secondary basis in such
registration exceeds the number which can be sold in such offering without
materially and adversely affecting the marketability of such primary or
secondary offering (the "GDI Offering Quantity"), then GDI will include in such
registration securities in the following priority:
(i) First, GDI will include the securities GDI proposes to sell.
(ii) Second, subject to any rights of other holders of securities
of GDI which are prior to the rights of the Purchasers to registration
pursuant to agreements set forth on the Disclosure Schedules to the
Securities Purchase Agreement, GDI will include all Registrable Securities
requested to be included by any Designated Holder may request to be so
included, and if the number of such Designated Holders' securities
requested to be included exceeds GDI Offering Quantity, then GDI shall
include only each such requesting Designated Holders' pro rata share of the
shares available for registration, based on the amount of securities held
by such holder, on an as converted basis.
(iii) Third, GDI will include other securities of GDI proposed to
be included in the registration.
(e) Cutback. If, as a result of the proration provisions of this
Section 1.4, any Designated Holders shall not be entitled to include all
Registrable Securities in a Piggyback Registration that such Designated Holders
has requested to be included, such holder may elect to withdraw his request to
include Registrable Securities in such registration but GDI shall be
-4-
required to reimburse such holder for the fees and expenses referred to in
Section 1.6(b) hereof incurred by such holder prior to such withdrawal.
1.5 Holdback Agreements.
(a) To the extent not inconsistent with applicable law, in connection
with a public offering of securities of GDI, upon the request of GDI or the
underwriter, in the case of an underwritten public offering, the underwriters
managing such underwritten offering of GDI's securities, each holder of
Registrable Securities who owns at least 5% of the outstanding capital stock of
GDI on an "as-converted" basis or is an officer or director of GDI will not
effect any public sale or distribution (other than those included in the
registration) of any securities of GDI, or any securities, options or rights
convertible into or exchangeable or exercisable for such securities during the
seven (7) days prior to and the 90-day period beginning on such effective date,
unless (in the case of an underwritten public offering) the managing
underwriters otherwise agree to a shorter period of time. Notwithstanding the
foregoing, no Designated Holder shall be required to enter into any such "lock
up" agreement unless and until all of GDI's executive officers and directors
execute substantially similar "lock up" agreements and GDI uses commercially
reasonable efforts to cause each holder of more than 5% of its outstanding
capital stock to execute substantially similar "lock up" agreements. Neither GDI
nor the underwriter shall amend, terminate or waive a "lock up" agreement unless
each "lock up" agreement with a Designated Holder is also amended or waived in a
similar manner or terminated, as the case may be. Notwithstanding anything to
the contrary in this Amended and Restated Agreement, the lock up provisions of
this Section 1.5(a) shall not be effective until after the Required Registration
Statement has become effective and it has remained effective for 120 days.
(b) GDI shall have the right at any time to require that the
Designated Holders of Registrable Securities suspend further open market offers
and sales of Registrable Securities pursuant to a Registration Statement filed
hereunder whenever in the reasonable judgment of GDI after consultation with
counsel there is or may be in existence a Changing Event (as defined in Section
1.6(a)(v)). GDI will give the Designated Holders notice of any such suspension
and will use all reasonable best efforts to minimize the length of such
suspension.
(c) In connection with the Required Registration Statement, GDI shall
cause each officer or director of GDI to agree to refrain from effecting any
public or private sale or distribution of any securities of GDI during the seven
(7) days prior to and the 90-day period following the effective date of the
Required Registration Statement.
1.6 Registration Procedures.
(a) Whenever any Registrable Securities are required to be registered
pursuant to this Amended and Restated Agreement, GDI will use reasonable best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended methods of disposition thereof, and pursuant
thereto GDI will as expeditiously as possible:
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(i) prepare and file with the SEC on any form, if not so
otherwise provided for, for which GDI qualifies, as soon as practicable
after the end of the period within which requests for registration may be
given to GDI, a Registration Statement with respect to the offer and sale
of such Registrable Securities and thereafter use reasonable best efforts
to cause such Registration Statement to become effective and remain
effective until the completion of the distribution contemplated thereby or
the required time period under this Amended and Restated Agreement,
whichever is shorter (and before filing such Registration Statement, GDI
will furnish to the counsel selected by the holders of a majority of the
Registrable Securities initiating such Registration Statement copies of all
such documents proposed to be filed); provided, however, that GDI may
postpone for not more than sixty (60) calendar days the filing or
effectiveness of any registration statement required pursuant to this
Amended and Restated Agreement other than a Required Registration Statement
required to be filed pursuant to Section 1.1 of this Amended and Restated
Agreement if the Board of Directors, in its good faith judgment, determines
that such registration could reasonably be expected to have a material
adverse effect on GDI and its stockholders for any reason including, but
not limited to, any proposal or plan by GDI to engage in any acquisition or
sale of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction then under
consideration (in which event, the Designated Holders shall be entitled to
withdraw such request, and if such request is withdrawn such registration
will not count as a registration statement pursuant to this Amended and
Restated Agreement) by delivering written notice to the Designated Holders
who requested inclusion of Registrable Securities in such Registration
Statement of its determination to postpone such Registration Statement;
provided, further, that (i) GDI shall not disclose any information that
could be deemed material non-public information to any holder of
Registrable Securities included in a Registration Statement that is subject
to such postponement, (ii) in no event may GDI postpone a filing requested
hereunder more than twice in any twelve (12) month period; provided, that
any two postponements must be at least three (3) months apart; provided,
further, that GDI shall delay the effectiveness of any such registration
statement if the SEC rules and regulations prohibit GDI from declaring a
Registration Statement effective because its financial statements are stale
at a time when its fiscal year has ended or it has made an acquisition
reportable under Item 2 of Form 8-K or any other similar situation until
the earliest time in which the SEC would allow GDI to declare a
Registration Statement effective (provided that GDI shall use its
reasonable best efforts to cure any such situation as soon as possible so
that the Registration Statement can be made effective at the earliest
possible time);
(ii) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for a period provided for in the applicable Section
above, or if not so provided, for a period of twelve (12) months (for a
registration pursuant to Rule 415 of the Securities Act) or, if such
Registration Statement relates to an underwritten offering, such period as
in the opinion of counsel for the underwriters a prospectus is required by
law to be delivered in connection with sales of
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Registrable Securities by an underwriter or dealer or (ii) such shorter
period as will terminate when all of the securities covered by such
Registration Statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such Registration Statement (but in any event not before the expiration
of any longer period required under the Securities Act), and to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until such time as all of
such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
Registration Statement. In the event GDI shall give any notice pursuant to
Section 1.5(b), the applicable time period mentioned in this Section
1.6(a)(ii) during which a Registration Statement is to remain effective
shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 1.5(b)
to and including the date when each seller of a Registrable Security
covered by such Registration Statement shall have received the copies of
the supplemented or amended prospectus contemplated by Section 1.6(a)(v);
(iii) furnish to each seller of Registrable Securities, prior to
filing a Registration Statement, such number of copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included
in such Registration Statement (including each preliminary prospectus) and
such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(iv) register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such seller and to keep each such registration or qualification (or
exemption therefrom) effective during the period which the Registration
Statement is required to be kept effective (provided, that GDI will not be
required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this subparagraph,
(ii) subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction);
(v) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event (a "Changing Event") as a
result of which, the prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, GDI will as soon as possible prepare and furnish to such seller (a
"Correction Event") a reasonable number of copies of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary
to
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make the statements therein not misleading in the light of the
circumstances under which they were made;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by GDI are then
listed and, if not so listed, to be listed on The Nasdaq Stock Market or
the Nasdaq SmallCap trading system or the Nasdaq OTC Bulletin Board;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
Registration Statement;
(viii) enter into such customary agreements (including
underwriting agreements in customary form with any underwriter, if any is
selected by GDI) and take all such other actions as the holders of a
majority of the Registrable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities, including causing its officers to
participate in "road shows" and other information meetings organized by an
underwriter, if any, provided that any underwriter shall have been selected
by GDI;
(ix) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such Registration Statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of GDI, and cause
GDI's employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant
or agent in connection with such Registration Statement;
(x) before filing a Registration Statement or prospectus or any
amendments or supplements thereto, GDI shall provide to counsel selected by
the Designated Holders holding a majority of the Registrable Securities
being registered in such registration ("Holders' Counsel") and any other
Inspector (as defined below) with an adequate and appropriate opportunity
to review and comment on such Registration Statement and each prospectus
included therein (and each amendment or supplement thereto) to be filed
with the SEC, subject to such documents being under GDI's control, and GDI
shall notify the Holders' Counsel and each seller of Registrable Securities
of any stop order issued or threatened by the SEC;
(xi) otherwise comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of GDI's first full
calendar quarter after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder;
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(xii) in the event of the issuance of any stop order suspending
the effectiveness of a Registration Statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any securities included in such Registration Statement for
sale in any jurisdiction, GDI will use its reasonable best efforts promptly
to obtain the withdrawal of such order;
(xiii) obtain one or more comfort letters, dated the effective
date of such Registration Statement (and, if such registration includes an
underwritten offering, dated the date of the closing under the underwriting
agreement), signed by GDI's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being
sold reasonably request;
(xiv) provide a legal opinion of GDI's outside counsel, dated the
effective date of such Registration Statement (and, if such registration
includes an underwritten offering, dated the date of the closing under the
underwriting agreement), with respect to the Registration Statement, each
amendment and supplement thereto, the prospectus included therein
(including the preliminary prospectus) and such other documents relating
thereto in customary form and covering such matters of the type customarily
covered by legal opinions of such nature;
(xv) subject to execution and delivery of mutually satisfactory
confidentiality agreements, make available at reasonable times for
inspection by any seller of Registrable Securities, any managing
underwriter participating in any disposition of such Registrable Securities
pursuant to a Registration Statement, Holders' Counsel and any attorney,
accountant or other agent retained by any managing underwriter (each, an
"Inspector" and collectively, the "Inspectors"), during normal business
hours of GDI at GDI's corporate office in New York, New York and without
unreasonable disruption of GDI's business or unreasonable expense to GDI
and solely for the purpose of due diligence with respect to the
registration statement, non-confidential, legally disclosable, financial
and other records and pertinent corporate documents of GDI and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause
GDI's and its subsidiaries' officers, directors and employees, and the
independent public accountants of GDI, to make available for inspection, at
such parties' offices during their respective normal business hours and
without unreasonable disruption of their business or unreasonable expense
to GDI and solely for the purpose of due diligence with respect to a
registration statement covering Registrable Securities pursuant to this
Amended and Restated Agreement all information reasonably requested by any
such Inspector in connection with such Registration Statement, provided,
that, in each instance the Inspectors execute customary confidentiality
agreements prepared by GDI pursuant to which such Inspectors agree not to
divulge information of a non-public nature and covenant not to act upon
such information in any manner in violation of applicable law;
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(xvi) subject to execution and delivery of mutually satisfactory
confidentiality agreements, keep Holders' Counsel advised as to the
initiation and progress of any registration hereunder including, but not
limited to, providing Holders' Counsel with all correspondence with the
SEC;
(xvii) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD; and
(xviii) take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
(b) Registration Expenses. All expenses incident to GDI's performance
of or compliance with this Amended and Restated Agreement including, without
limitation, all registration and filing fees payable by GDI, fees and expenses
of compliance by GDI with securities or blue sky laws, printing expenses of GDI,
messenger and delivery expenses of GDI, and fees and disbursements of counsel
for GDI, one counsel selected by the Purchasers and all independent certified
public accountants of GDI, underwriters (excluding discounts and commissions,
which will be paid by the sellers of Registrable Securities) and other Persons
retained by GDI will be borne by GDI, and GDI will pay its internal expenses
(including, without limitation, all salaries and expenses of its employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance of GDI and the expenses
and fees for listing the securities to be registered on each securities exchange
on which similar securities issued by GDI are then listed or on The Nasdaq
National Market, Nasdaq SmallCap Market or the OTC Bulletin Board trading
system. GDI shall have no obligation to pay any underwriting discounts or
commissions attributable to the sale of Registrable Securities and any of the
expenses incurred by any holder of Registrable Securities which are not payable
by GDI, such costs to be borne by such holder or holders, including, without
limitation, underwriting fees, discounts and expenses, if any, applicable to any
holder's Registrable Securities; selling commissions or stock transfer taxes
applicable to the Registrable Securities registered on behalf of any holder; any
other expenses incurred by or on behalf of such holder in connection with the
offer and sale of such Holder's Registrable Securities other than expenses which
GDI is expressly obligated to pay pursuant to this Amended and Restated
Agreement.
1.7 Indemnification.
(a) Each of GDI and Aduromed agrees to indemnify and hold harmless, to
the fullest extent permitted by law, each holder of Registrable Securities and
its general or limited partners, officers, directors, members, managers,
employees, advisors, representatives, agents and Affiliates (collectively, the
"Representatives") from and against any loss, claim, damage, liability,
attorney's fees, cost or expense and costs and expenses of investigating and
defending any such claim (collectively, the "Losses"), joint or several, and any
action in respect thereof to which such holder of Registrable Securities or its
Representatives may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether
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commenced or threatened, in respect thereto) arise out of or are based upon (i)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, prospectus or preliminary or summary prospectus or any
amendment or supplement thereto or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and GDI shall reimburse each such holder
of Registrable Securities and its Representatives for any reasonable legal or
any other expenses incurred by them in connection with investigating or
defending or preparing to defend against any such Loss, action or proceeding;
provided, however, that GDI shall not be liable to any such holder or other
indemnitee in any such case to the extent that any such Loss (or action or
proceeding, whether commenced or threatened, in respect thereof) arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission, made in such Registration Statement, any such prospectus or
preliminary or summary prospectus or any amendment or supplement thereto, in
reliance upon, and in conformity with, written information prepared and
furnished to GDI by such holder expressly for use therein or by failure of any
holder of Registrable Securities to deliver a copy of the Registration Statement
or prospectus or any amendments or supplements thereto in violation of
applicable law after GDI has furnished such holder of Registrable Securities
with copies of the same in such number as requested by such holder. In
connection with an underwritten offering, GDI will indemnify such underwriters,
their officers and directors and each Person who controls such underwriters
(within the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any Registration Statement in which the holders
of Registrable Securities are participating pursuant to this Amended and
Restated Agreement, the holders of Registrable Securities will furnish to GDI in
writing such information as GDI reasonably requests for use in connection with
any such Registration Statement or prospectus and, to the fullest extent
permitted by law, each such holder of Registrable Securities will indemnify and
hold harmless GDI and its Representatives from and against any Losses, severally
but not jointly, and any action in respect thereof to which GDI and its
Representatives may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (i) any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement, prospectus or preliminary or summary prospectus or any amendment or
supplement thereto, or (ii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but, in each case, only to the extent that such untrue statement or
omission is made in such Registration Statement, any such prospectus or
preliminary or summary prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information prepared and furnished
to GDI by such holder of Registrable Securities expressly for use therein or by
failure of such holder of Registrable Securities to deliver a copy of the
Registration Statement or prospectus or any amendments or supplements thereto in
violation of applicable law after GDI has furnished such holder of Registrable
Securities with copies of the same in such number as requested by such holder;
provided, however, that such holder of Registrable Securities shall not be
liable in any such case to the extent that prior to the filing of any such
Registration Statement or prospectus or
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amendment or supplement thereto, such holder of Registrable Securities has
furnished in writing to GDI information expressly for use in such Registration
Statement or prospectus or any amendment or supplement thereto which corrected
or made not misleading information previously furnished to GDI; provided,
further, however, that the obligation to indemnify will be individual to each
such holder of Registrable Securities and will be limited to the net amount of
proceeds received by such holder of Registrable Securities from the sale of
Registrable Securities pursuant to such Registration Statement. In no event,
however, shall any holder be liable for indirect, incidental or consequential or
special damages.
(c) Promptly after receipt by any Person in respect of which indemnity
may be sought pursuant to Section 1.7(a) or 1.7(b) (an "Indemnified Party") of
notice of any claim or the commencement of any action, the Indemnified Party
shall, if a claim in respect thereof is to be made against the Person against
whom such indemnity may be sought (an "Indemnifying Party"), promptly notify the
Indemnifying Party in writing of the claim or the commencement of such action;
provided, that the failure to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability which it may have to an Indemnified
Party otherwise than under Section 1.7(a) or 1.7(b) except to the extent of any
actual prejudice resulting therefrom. If any such claim or action shall be
brought against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party and its
Representatives who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the written opinion of counsel to such Indemnified Party, representation
of both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such claim or proceeding other than the
payment of monetary damages by the Indemnifying Party on behalf of the
Indemnified Party. Whether or not the defense of any claim or action is assumed
by
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the Indemnifying Party, such Indemnifying Party will not be subject to any
liability for any settlement made without its consent, which consent will not be
unreasonably withheld.
(d) If the indemnification provided for in this Section 1.7 is
unavailable to the Indemnified Parties in respect of any Losses referred to
herein, 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 benefits received by GDI on the one hand and the holders of the
Registrable Securities on the other from the offering of the Registrable
Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also
the relative fault of GDI on the one hand and the holders of the Registrable
Securities on the other in connection with the statements or omissions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative fault of GDI on the one hand and of each holder of the Registrable
Securities on the other shall be determined by reference to, among other things,
whether any action taken, including any untrue or alleged untrue statement of a
material fact, or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
GDI and the holders of the Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Section 1.7(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the Losses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 1.7, no holder of the Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such holder were
offered to the public exceeds the amount of any Losses which such holder has
otherwise paid by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Each holder's obligations to contribute pursuant to this
Section 1.7 is several in the proportion that the proceeds of the offering
received by such holder of the Registrable Securities bears to the total
proceeds of the offering received by all the holders of the Registrable
Securities and not joint.
1.8 Participation in Underwritten Registrations.
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-
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allotment or "green shoe" option requested by the managing underwriter(s),
provided, that each holder of Registrable Securities shall not be required to
sell more than the number of Registrable Securities that such holder has
requested GDI to include in any registration) and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Amended and Restated Agreement.
(b) Each Person that is participating in any registration under this
Amended and Restated Agreement agrees that, upon receipt of any notice from GDI
of the happening of any event of the kind described in Section 1.6(a)(v) above,
such Person will forthwith discontinue the disposition of its Registrable
Securities pursuant to the Registration Statement and all use of the
Registration Statement or any prospectus or related document until such Person's
receipt of the copies of a supplemented or amended prospectus as contemplated by
such Section 1.6(a)(v) and, if so directed by GDI, will deliver to GDI (at GDI's
expense) all copies, other than permanent file copies, then in holder's
possession of such documents at the time of receipt of such notice. Furthermore,
each holder agrees that if such holder uses a prospectus in connection with the
offering and sale of any of the Registrable Securities, the holder will use only
the latest version of such prospectus provided by GDI.
2. Transfers of Certain Rights.
2.1 Transfer. The rights granted to a Purchaser under this Amended and
Restated Agreement may be transferred by such Purchaser in connection with a
transfer by such Purchaser of any Registrable Security.
2.2 Transferees. Any permitted transferee to whom rights under this
Amended and Restated Agreement are transferred shall, as a condition to such
transfer, deliver to GDI a written instrument by which such transferee agrees to
be bound by the obligations imposed upon a Purchaser under this Amended and
Restated Agreement to the same extent as if such transferee were a Purchaser
hereunder. Any purported transfer that does not comply with the terms of this
Section 2.2 shall be deemed null and void.
3. Certain Definitions. The following capitalized terms shall have the
meanings ascribed to them below:
"Affiliate" means any Person that directly or indirectly controls, or
is under control with, or is controlled by such Person. As used in this
definition, "control" (including with its correlative meanings, "controlled by"
and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Closing Price" means, with respect to the Registrable Securities (a)
if the shares are listed or admitted for trading on any national securities
exchange or included in The Nasdaq National Market or Nasdaq SmallCap Market,
the last reported sales price as reported on such
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exchange or market; (b) if the shares are not listed or admitted for trading on
any national securities exchange or included in The Nasdaq National Market or
Nasdaq SmallCap Market, the average of the last reported closing bid and asked
quotation for the shares as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or a similar service if NASDAQ is
not reporting such information; (c) if the shares are not listed or admitted for
trading on any national securities exchange or included in The Nasdaq National
Market or Nasdaq SmallCap Market or quoted by NASDAQ or a similar service, the
average of the last reported bid and asked quotation for the shares as quoted by
a market maker in the shares (or if there is more than one market maker, the bid
and asked quotation shall be obtained from two market makers and the average of
the lowest bid and highest asked quotation). In the absence of any available
public quotations for the GDI Common Stock, the Board and a majority of the
Holders shall determine in good faith the fair value of the GDI Common Stock
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Market Price" means, on any date of determination, the average of the
daily Closing Price of the Registrable Securities for the immediately preceding
five (5) on which the national securities exchanges are open for trading.
"Person" means any individual, company, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
governmental body or other entity.
"Registrable Securities" means (i) the GDI Conversion Shares, (ii) the
GDI Warrants and the GDI Warrant Shares, and (iii) any shares of GDI Common
Stock issued or issuable directly or indirectly with respect to the securities
referred to in clauses (i) and (ii) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Registration Statement" means any registration statement of GDI filed
under the Securities Act which covers any of the Registrable Securities pursuant
to the provisions of this Amended and Restated Agreement, including the
prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such registration statement.
"SEC" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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4. Miscellaneous.
4.1 Recapitalizations, Exchanges, etc. The provisions of this Amended
and Restated Agreement shall apply to the full extent set forth herein with
respect to (i) the Registrable Securities, (ii) any and all shares of GDI Common
Stock into which the Registrable Securities are converted, exchanged or
substituted in any recapitalization or other capital reorganization by GDI and
(iii) any and all equity securities of GDI or any successor or assign of GDI
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in conversion of, in exchange for or in substitution of,
the Registrable Securities and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof. GDI shall cause any successor or assign
(whether by merger, consolidation, sale of assets or otherwise) to enter into a
new registration rights agreement with the Purchasers on terms substantially the
same as this Amended and Restated Agreement as a condition of any such
transaction.
4.2 No Inconsistent Agreements. GDI has not and shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Purchasers in this Amended and Restated Agreement or grant
any additional registration rights to any Person or with respect to any
securities which are not Registrable Securities which are prior in right to or
materially inconsistent with the rights granted in this Amended and Restated
Agreement.
4.3 Amendments and Waivers. The provisions of this Amended and
Restated Agreement may be amended and GDI may take action herein prohibited, or
omit to perform any act herein required to be performed by it, if, but only if,
GDI has obtained the written consent of a majority in interest of the
Registrable Securities (and the securities convertible into or exercisable to
acquire the those securities) then in existence.
4.4 Severability. Whenever possible, each provision of this Amended
and Restated Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Amended and
Restated Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Amended and Restated Agreement.
4.5 Counterparts. This Amended and Restated Agreement may be executed
in one or more counterparts each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
4.6 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy, telex or similar
writing) and shall be deemed given or made as of the date delivered, if
delivered personally or by telecopy (provided that delivery by telecopy shall be
followed by delivery of an additional copy personally, by mail or overnight
courier), one day after being delivered by overnight courier or four business
days after being mailed by registered or certified mail (postage prepaid for the
most expeditious form of
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delivery, return receipt requested), to the parties at the following addresses
(or to such other address or telex or telecopy number as a party may have
specified by notice given to the other party pursuant to this provision):
If to Aduromed or GDI, to:
Xxxxxx X. Xxxxxx, President
Aduromed Corporation
000 Xxxxxxxxx Xxxxxx, Xxxxx 00-00
Xxxxxx, XX 00000
Fax Number: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx X. Xxx, Esq.
Stairs Xxxxxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax Number: (000) 000-0000
If to the Purchaser, to:
The address or facsimile number of each Purchaser as recorded in
the stockholders records of GDI.
4.7 Governing Law. This Amended and Restated Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of laws rules or provisions.
4.8 Forum; Service of Process. Any legal suit, action or proceeding
brought by any party or any of its affiliates arising out of or based upon this
Amended and Restated Agreement shall be instituted in any federal or state court
in New York County, New York, and each party waives any objection which it may
now or hereafter have to the laying of venue or any such proceeding, and
irrevocably submits to the jurisdiction of such courts in any such suit, action
or proceeding.
4.9 Captions. The captions, headings and arrangements used in this
Amended and Restated Agreement are for convenience only and do not in any way
limit or amplify the terms and provisions hereof.
4.10 No Prejudice. The terms of this Amended and Restated Agreement
shall not be construed in favor of or against any party on account of its
participation in the preparation hereof.
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4.11 Words in Singular and Plural Form. Words used in the singular
form in this Amended and Restated Agreement shall be deemed to import the
plural, and vice versa, as the sense may require.
4.12 Remedy for Breach. GDI hereby acknowledges that in the event of
any breach or threatened breach by GDI of any of the provisions of this Amended
and Restated Agreement, the holders of the Registrable Securities would have no
adequate remedy at law and could suffer substantial and irreparable damage.
Accordingly, GDI hereby agrees that, in such event, the holders of the
Registrable Securities shall be entitled, and notwithstanding any election by
any holder of the Registrable Securities to claim damages, to obtain a temporary
and/or permanent injunction to restrain any such breach or threatened breach or
to obtain specific performance of any such provisions, all without prejudice to
any and all other remedies which any holder of the Registrable Securities may
have at law or in equity.
4.13 Successors and Assigns; Third Party Beneficiaries. This Amended
and Restated Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto, each subsequent holder of the
Registrable Securities and their respective permitted successors and assigns and
executors, administrators and heirs. Holders of the Registrable Securities are
intended third party beneficiaries of this Amended and Restated Agreement and
this Amended and Restated Agreement may be enforced by such holders.
4.14 Entire Agreement. This Amended and Restated Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Registration Rights Agreement to be duly executed as of the date and
year first written above.
GENERAL DEVICES, INC.
By:
------------------------------------
Name:
Title:
ADUROMED CORPORATION
By:
------------------------------------
Name:
Title:
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PURCHASERS:
PEQUOT SCOUT FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
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PEQUOT MARINER MASTER FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
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PEQUOT NAVIGATOR OFFSHORE FUND, INC.
By: Pequot Capital Management, Inc.,
its Investment Advisor
By:
------------------------------------
Name:
Title:
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PEQUOT DIVERSIFIED MASTER FUND, LTD.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
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PREMIUM SERIES PCC LIMITED CELL 33
By:
------------------------------------
Name:
Title:
-25-
SHERLEIGH ASSOCIATES INC. DEFINED
BENEFIT PENSION PLAN
By:
------------------------------------
Name:
Title:
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EXHIBIT P
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Amended and
Restated Agreement"), dated as of January 23, 2006, is by and among Aduromed
Corporation, a Delaware corporation ("Aduromed"), General Devices, Inc.,
Delaware corporation ("GDI"), each holder of GDI Series A Preferred and GDI
Series B Preferred (collectively, the "Preferred Holders") and the Persons
holding a majority of the issued and outstanding shares of GDI's Common Stock
set forth on Annex A hereto (collectively the "Common Holders" and together with
the Preferred Holders, the "Stockholders"). Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Amended and Restated Securities Purchase Agreement (as defined below).
WHEREAS, Aduromed, the Preferred Holders and certain other Persons have
heretofore entered into that certain Stockholders Agreement, dated as of
September 30, 2005 (the "Original Agreement");
WHEREAS, Aduromed has heretofore entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of January 23, 2006 (the "Merger
Agreement"), by and among Aduromed, GDI, GD MergerSub, Inc., a Delaware
corporation, and GD MergerSub II, Inc., a Delaware corporation ("MergerSub"),
pursuant to which MergerSub agreed to merge with and into Aduromed (the
"Merger"), with Aduromed as the surviving entity of the Merger;
WHEREAS, in connection with the Merger, GDI has issued to the Preferred
Holders certain shares of GDI Series A Preferred and First Closing GDI Warrants;
and
WHEREAS, in connection with the Merger, Aduromed, GDI and the Preferred
Holders have heretofore entered into that certain Amended and Restated
Securities Purchase Agreement, dated as of January 23, 2006 (the "Amended and
Restated Purchase Agreement"), pursuant to which GDI has issued to the Preferred
Holders certain shares of GDI Series B Preferred and Second Closing GDI
Warrants; and
WHEREAS, pursuant to the Original Agreement, in connection with the Merger,
Aduromed is required to cause GDI to enter into this Amended and Restated
Agreement with the Preferred Holders and the other parties hereto;
NOW, THEREFORE, in consideration of the foregoing, the agreements set forth
below, and other good and valuable consideration, the receipt of which is
acknowledged, the parties hereto hereby agree that the Original Agreement be,
and hereby is, amended and restated in its entirety as herein set forth:
1. Definitions. As used in this Amended and Restated Agreement, the
following terms shall have the meanings set forth below:
"Aduromed" has the meaning set forth in the preamble to this Amended
and Restated Agreement.
"Affiliate" shall mean any Person who is an "affiliate" as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act. In
addition, any limited partner or member, as the case may be, of a Stockholder
shall be deemed to be an Affiliate of such Stockholder.
"Amended and Restated Agreement" means this Amended and Restated
Stockholders Agreement as the same may be amended, restated, supplemented or
modified in accordance with the terms herein.
"Board of Directors" means the Board of Directors of GDI.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Charter Documents" means the certificate of incorporation and bylaws
of GDI as in effect from time to time.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Holders" has the meaning set forth in the preamble to this
Amended and Restated Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"GDI" has the meaning set forth in the preamble to this Amended and
Restated Agreement.
"Issuance Notice" has the meaning set forth in Section 2.3(a) of this
Amended and Restated Agreement.
"Management Designees" has the meaning set forth in Section 3.3(c) of
this Amended and Restated Agreement.
"Permitted Securities" means (i) the GDI Series A Preferred, GDI
Series B Preferred and GDI Warrants issued or to be issued pursuant to the
Merger Agreement and/or Amended and Restated Securities Purchase Agreement, (ii)
the GDI Conversion Shares issuable upon conversion of the GDI Series A Preferred
and GDI Series B Preferred, (iii) the GDI Warrant Shares issuable upon exercise
of the GDI Warrants and (iv) any Securities issuable pursuant to an employee
stock option plan approved by each of the Preferred Designees.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
2
"Preemptive Interests" has the meaning set forth in Section 2.3 of
this Amended and Restated Agreement.
"Preemptive Purchaser" has the meaning set forth in Section 2.3(b)(i)
of this Amended and Restated Agreement.
"Preferred Designees" has the meaning set forth in Section 3.3(b) of
this Amended and Restated Agreement.
"Preferred Holders" has the meaning set forth in the preamble to this
Amended and Restated Agreement.
"Pro Rata Share" means, with respect to any Preferred Holder, a
quotient, expressed as a percentage, (i) the numerator of which is equal to the
aggregate number of shares of GDI Series A Preferred and GDI Series B Preferred
then held by such Preferred Holder and (ii) the denominator of which is equal to
the aggregate number of shares of GDI Series A Preferred and GDI Series B
Preferred then held by all Preferred Holders.
"Response Notice" has the meaning set forth in Section 2.3(b)(i) of
this Amended and Restated Agreement.
"Securities" means, collectively, the Shares, the Warrants and any
other equity security of GDI now or hereafter issued and outstanding.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Shares" means, collectively, all shares, whether now owned or
hereafter acquired, of GDI Common Stock, GDI Series A Preferred, GDI Series B
Preferred, GDI Warrant Shares, GDI Conversion Shares or of any other series or
class of capital stock of GDI.
"Stockholders" means, collectively, (a) the Preferred Holders, (b) the
Common Holders and (c) any other Person that becomes a party hereto and has
agreed to be or is bound by the terms and conditions of this Amended and
Restated Agreement as a "Stockholder" hereunder.
"Stockholders Meeting" has the meaning set forth in Section 3.1 of
this Amended and Restated Agreement.
"Subsequent Issuance Notice" has the meaning set forth in Section
2.3(b)(ii) of this Amended and Restated Agreement.
"Subsequent Response Notice" has the meaning set forth in Section
2.3(b)(ii) of this Amended and Restated Agreement.
"Transfer" means any transfer, exchange, sale or other disposition.
3
"Unrestricted Additional Securities" has the meaning set forth in
Section 2.3(c) of this Amended and Restated Agreement.
"Unrestricted Securities" has the meaning set forth in Section
2.3(b)(ii) of this Amended and Restated Agreement.
"Written Consent" has the meaning set forth in Section 3.1 of this
Amended and Restated Agreement.
2. After-Acquired Securities; Agreement to be Bound; Preemptive Rights.
2.1 After-Acquired Securities. All of the provisions of this Amended
and Restated Agreement shall apply to all of the Securities now owned or which
may be issued or Transferred hereafter to a Stockholder in consequence of any
additional issuance, purchase, exchange or reclassification of any of such
Securities, any exercise of any security convertible or exercisable into a
Security, any corporate reorganization, or any other form of recapitalization,
consolidation, merger, share split or share dividend, or which are acquired by a
Stockholder in any other manner. No Stockholder may Transfer any Security unless
the transferee thereof shall, as a condition precedent to such Transfer, agree
in writing to be bound by the terms and conditions of this Amended and Restated
Agreement as a "Stockholder" hereunder.
2.2 Agreement to be Bound. GDI shall not issue any Securities to any
Person not a party to this Amended and Restated Agreement unless such Person has
agreed in writing to be bound by the terms and conditions of this Amended and
Restated Agreement as a "Stockholder" hereunder. Upon becoming a party to this
Amended and Restated Agreement, such Person shall be deemed to be, and shall be
subject to the same obligations as, a Stockholder, Preferred Holder or Common
Holder, as applicable, hereunder. Any issuance of Securities by GDI in violation
of this Section 2.2 shall be null and void ab initio and neither GDI nor any
transfer agent shall give effect in GDI's stock records to such attempted
issuance. The foregoing provisions shall not, in any case, be applicable to any
issuance or Transfer of Shares made to underwriters in connection with an
underwritten public offering of such Shares registered under the Securities Act
or any issuance or Transfer of Shares that is conducted publicly through one or
more registered broker dealers over a stock exchange or interdealer quotation
service where the Shares are listed or quoted.
2.3 Preemptive Rights. After the date hereof, in the event that GDI
proposes to issue any Securities other than Permitted Securities (collectively,
"Preemptive Interests"), GDI shall comply with the provisions of this Section
2.3.
(a) Issuance Notice. GDI shall give the Preferred Holders written
notice of GDI's intention to issue such Preemptive Interests (the "Issuance
Notice"), describing the material terms of the Preemptive Interests, the price
at which such Preemptive Interests will be issued or sold and the material terms
upon which GDI proposes to issue or sell such Preemptive Interests, including
the anticipated date of such issuance or sale.
(b) Response Notice.
4
(i) Each Preferred Holder shall have thirty (30) days from
the date the Issuance Notice is received to agree to purchase all (but not less
than all) of such Preferred Holder's Pro Rata Share of such Preemptive Interests
by giving written notice to GDI of its desire to purchase such Preferred
Holder's Pro Rata Share of such Preemptive Interests (the "Response Notice").
Such Response Notice shall constitute the irrevocable agreement of such
Preferred Holder (a "Preemptive Purchaser") to purchase all (but not less than
all) of such Preemptive Purchaser's Pro Rata Share of the Preemptive Interests
at the price and upon the terms stated in the Issuance Notice.
(ii) In the event any Preemptive Interests remain
unsubscribed thirty (30) days after delivery of the Issuance Notice (the
"Unsubscribed Securities"), GDI shall promptly issue a subsequent Issuance
Notice (the "Subsequent Issuance Notice") to each Preemptive Purchaser. Each
Preemptive Purchaser shall have ten (10) days from the date the Subsequent
Issuance Notice is received to agree to purchase all or any portion of the
Unsubscribed Securities by giving a second Response Notice (the "Subsequent
Response Notice") and stating therein the quantity of Unsubscribed Securities to
be purchased. Such Subsequent Response Notice shall constitute the irrevocable
agreement of such Preemptive Purchaser to purchase the quantity of Unsubscribed
Securities indicated in such Subsequent Response Notice at the price and upon
the terms stated in the Issuance Notice. If such Preemptive Purchasers subscribe
for more than the Unsubscribed Securities available, the Unsubscribed Securities
shall be allocated among each such Preemptive Purchaser in proportion to each
such Preemptive Purchaser's respective Pro Rata Share.
(c) Unsubscribed Securities. In the event any Unsubscribed
Securities remain unsubscribed ten (10) days after delivery of the Subsequent
Issuance Notice (the "Unrestricted Additional Securities"), GDI shall have the
right, but not the obligation, to issue and sell such Unrestricted Additional
Securities to any Person within ninety (90) days from the date of the initial
Issuance Notice at a price and upon the terms that are not materially less
favorable to GDI than those specified in the Issuance Notice. If GDI proposes to
issue any Preemptive Interests after such 90-day period or at a price or upon
terms that are materially less favorable to GDI than those specified in the
Issuance Notice, it must again comply with this Section 2.3.
(d) Closings of Sales of Preemptive Interests. Any purchase of
Preemptive Interests by any Preemptive Purchaser pursuant to the this Section
2.3 shall be consummated on the closing date specified in the Issuance Notice
(or, if other Persons are purchasing Unrestricted Additional Securities, the
date on which such Unrestricted Additional Securities are first issued and sold
to such other Persons).
3. Corporate Governance.
3.1 General. From and after the execution of this Amended and Restated
Agreement, each Stockholder shall vote its Shares at any regular or special
meeting of stockholders of GDI (a "Stockholders Meeting") or in any written
consent executed in lieu of such a meeting of stockholders (a "Written
Consent"), and shall take all other actions necessary, to give effect to the
provisions of this Amended and Restated Agreement (including, without
limitation, Section 3.3 hereof) and to ensure that the Charter Documents do not,
at any time
5
hereafter, conflict in any respect with the provisions of this Amended and
Restated Agreement, it being understood and agreed by the parties hereto that
the Charter Documents do not, as of the date hereof, conflict in any respect
with the provisions of this Amended and Restated Agreement. In addition, each
Stockholder shall vote its Shares at any Stockholders Meeting or act by Written
Consent with respect to such Shares, upon any matter submitted for action by
GDI's stockholders or with respect to which such Stockholder may vote or act by
Written Consent, in conformity with the specific terms and provisions of this
Amended and Restated Agreement and the Charter Documents.
3.2 Stockholder Actions. In order to effectuate the provisions of this
Section 4, each Stockholder (a) hereby agrees that when any action or vote is
required to be taken by such Stockholder pursuant to this Amended and Restated
Agreement, such Stockholder shall use its reasonable best efforts to call, or
cause the appropriate officers and directors of GDI to call, a Stockholders
Meeting, or to execute or cause to be executed a Written Consent to effectuate
such stockholder action, (b) shall use its reasonable best efforts to cause the
Board of Directors to adopt, either at a meeting of the Board of Directors or by
unanimous written consent of the Board of Directors, all the resolutions
necessary to effectuate the provisions of this Amended and Restated Agreement,
and (c) shall use its reasonable best efforts to cause the Board of Directors to
cause the Secretary of GDI, or if there be no Secretary, such other officer of
GDI as the Board of Directors may appoint to fulfill the duties of Secretary,
not to record any vote or consent contrary to the terms of this Section 3.
3.3 Election of Directors; Number and Composition. Each Stockholder
shall vote its Shares at any Stockholders Meeting, or act by Written Consent
with respect to such Shares, and take all other actions necessary to ensure:
(a) that the number of directors constituting the entire Board of
Directors shall be seven;
(b) for so long as the Preferred Holders own at least ten (10%)
percent of the outstanding shares of GDI Common Stock (calculated as if all
shares of GDI Series A Preferred and GDI Series B Preferred shall have been
converted into shares of GDI Common Stock and all GDI Warrants shall have been
exercised for shares of GDI Common Stock), the election to the Board of
Directors of at least two members (the "Preferred Designees") designated by the
holders of at least a majority of the outstanding shares of the GDI Series A
Preferred and GDI Series B Preferred (or any shares of GDI Common Stock into
which such shares of GDI Series A Preferred or GDI Series B Preferred shall have
been converted);
(c) for so long as Xxxxxx Xxxxxx is employed as the Chief
Executive Officer of GDI, the election to the Board of Directors of five members
(the "Management Designees") designated by Xxxxxx Xxxxxx;
(d) for so long as the Preferred Holders own at least ten (10%)
percent of the outstanding shares of GDI Common Stock (calculated as if all
shares of GDI Series A Preferred and GDI Series B Preferred shall have been
converted into shares of GDI Common Stock and all GDI Warrants shall have been
exercised for shares of GDI Common Stock), that at least one Preferred Designee
shall be appointed to each committee of the Board of Directors
6
including any audit committee, compensation committee or executive committee of
the Board of Directors; and
(e) the boards of directors of each subsidiary of GDI shall be
comprised of the same Persons that are from time to time members of the Board of
Directors.
3.4 Removal and Replacement of Designees.
(a) Removal of Designees.
(i) If at any time, the holders of at least a majority of
the outstanding shares of the GDI Series A Preferred and GDI Series B Preferred
notifies the other Stockholders of their wish to remove at any time and for any
reason (or no reason) any of the Preferred Designees, then each Stockholder
shall vote all of its Shares so as to remove such Preferred Designee.
(ii) If at any time, Xxxxxx Xxxxxx notifies the other
Stockholders of his wish to remove at any time and for any reason (or no reason)
any of the Management Designees, then each Stockholder shall vote all of its
Shares so as to remove such Management Designee.
(b) Replacement of Designees.
(i) If at any time, a vacancy is created on the Board of
Directors by reason of the incapacity, death, removal or resignation of any of
the Preferred Designees, then the holders of at least a majority of the
outstanding shares of the GDI Series A Preferred and GDI Series B Preferred
shall designate an individual who shall be elected to fill the vacancy until the
next Stockholders Meeting. Upon receipt of notice of the designation of a
nominee pursuant to this Section 3.4(b)(i) each Stockholder shall, as soon as
practicable after the date of such notice, take all reasonable actions,
including the voting of its Shares, to elect the director so designated to fill
the vacancy.
(ii) If at any time, a vacancy is created on the Board of
Directors by reason of the incapacity, death, removal or resignation of any of
the Management Designees, then Xxxxxx Xxxxxx shall designate an individual who
shall be elected to fill the vacancy until the next Stockholders Meeting. Upon
receipt of notice of the designation of a nominee pursuant to this Section
3.4(b)(ii) each Stockholder shall, as soon as practicable after the date of such
notice, take all reasonable actions, including the voting of its Shares, to
elect the director so designated to fill the vacancy.
3.5 Reimbursement of Expenses. Preferred Designees and Management
Designees will be entitled to reimbursement by GDI for reasonable out-of-pocket
expenses incurred in connection with the performance of their duties as members
of the Board of Directors, including, without limitation, travel expenses
incurred in connection with their attendance at meetings of the Board of
Directors.
7
3.6 Director's and Officer's Indemnification and Insurance. For so
long as any Preferred Director or Management Designee serves on the Board of
Directors or the board of directors of any of GDI's subsidiaries, and for a
period of at least six (6) years thereafter, GDI and the Stockholders hereby
agree to (i) provide in the certificate of incorporation of GDI and each of its
subsidiaries on whose boards of directors such Preferred Designee or Management
Director serves, and their respective by-laws, for indemnification and
reimbursement of expenses of directors and officers to the fullest extent and in
the manner permitted by the General Corporation Law of Delaware or the general
corporation law of the state of its incorporation, as applicable; and (ii)
purchase and maintain director and officer insurance in an amount of at least $1
million on behalf of any Person who is or was a director or an officer of GDI
and its subsidiaries on whose boards such Preferred Designee or Management
Director serves, or is or was serving at the request of GDI or such subsidiary
as a director or an officer of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against such Person and
incurred by him or her in any such capacity, or arising out of his or her status
as such. As soon as practicable following the date hereof, GDI shall purchase
satisfactory director's and officer's insurance, subject to the approval of the
Board of Directors.
3.7 Directors' Meetings. GDI shall call, and use its best efforts to
have, regular meetings of the Board of Directors not less frequently than
quarterly.
3.8 Observer. For so long as the Preferred Holders own at least ten
(10%) percent of the outstanding shares of GDI Common Stock (calculated as if
all shares of GDI Series A Preferred and GDI Series B Preferred shall have been
converted into shares of GDI Common Stock and all GDI Warrants shall have been
exercised for shares of GDI Common Stock), the holders of at least a majority of
the shares of GDI Series A Preferred and GDI Series B Preferred outstanding
shall have the right to have, in addition to any Preferred Designee, one
representative present at all meetings of the Board of Directors and all
committees of the Board of Directors.
3.9 Employment Agreements.
(a) Promptly following the date hereof, Aduromed , GDI and Xxxxxx
Xxxxxx shall enter into an amended and restated employment agreement, on terms
substantially identical to those set forth in the existing employment agreement
between Aduromed and Xxxxxx Xxxxxx, providing that Xxxxxx Xxxxxx shall be
engaged as Chief Executive Officer and President of GDI.
(b) Promptly following the date hereof, Aduromed , GDI and Xxxxx
Xxxxxx shall enter into an amended and restated employment agreement, on terms
substantially identical to those set forth in the existing employment agreement
between Aduromed and Xxxxx Xxxxxx, providing that Xxxxx Xxxxxx shall be engaged
as Chief Financial Officer and Treasure of GDI.
4. Information Rights. GDI shall furnish the following information to each
Preferred Holder for so long as such Preferred Holder owns any shares of GDI
Series A Preferred or GDI Series B Preferred:
8
(a) within ninety (90) days after the end of each fiscal year of
GDI, an audited consolidated balance sheet of GDI and its subsidiaries as of the
end of such fiscal year and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year then ended (provided,
that, at any time that GDI has at least one class of equity securities
registered under the Securities Act, in the event that GDI shall timely and
properly file with the Commission, in accordance with applicable Commission
rules and regulations, a request for extension of the time period in which GDI
is obligated to file with the Commission the financial statements referenced in
this clause (a), the time period in which GDI must deliver to the Preferred
Holders such financial statements pursuant to this clause (a) shall be
correspondingly be extended);
(b) within forty-five (45) days after the end of each fiscal
quarter (other than the last fiscal quarter in each fiscal year), an unaudited
consolidated balance sheet of GDI and its subsidiaries and the related unaudited
consolidated statements of income, stockholders' equity and cash flows, such
consolidated balance sheet to be as of the end of such quarter and such
consolidated statements of income, stockholders' equity and cash flows to be for
such quarter and for the period from the beginning of the fiscal year to the end
of such quarter (provided, that, at any time that GDI has at least one class of
equity securities registered under the Securities Act, in the event that GDI
shall timely and properly file with the Commission, in accordance with
applicable Commission rules and regulations, a request for extension of the time
period in which GDI is obligated to file with the Commission the financial
statements referenced in this clause (b), the time period in which GDI must
deliver to the Preferred Holders such financial statements pursuant to this
clause (b) shall be correspondingly be extended);
(c) if prepared by GDI in the ordinary course of business, as
promptly as reasonably practicable following such preparation, monthly unaudited
consolidated balance sheets of GDI and its subsidiaries and the related monthly
unaudited consolidated statements of income, stockholders' equity and cash
flows;
(d) at least thirty (30) days prior to the start of each fiscal
year, a copy of GDI's proposed annual budget for such fiscal year; and
(e) such additional information about GDI and its subsidiaries as
such Preferred Holder reasonably requests.
5. Stock Certificate Legend. A copy of this Amended and Restated Agreement
shall be filed with the Secretary of GDI and kept with the records of GDI. Each
certificate representing Securities now held or hereafter acquired by any
Stockholder shall for as long as this Amended and Restated Agreement is
effective bear legends substantially in the following forms:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL
RESTRICTIONS ON VOTING AS SET FORTH IN THE AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT, DATED JANUARY 23, 2006, AMONG THE COMPANY AND
CERTAIN STOCKHOLDERS OF THE COMPANY NAMED THEREIN, A COPY OF
9
WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL
NOT REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY
UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF
THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT.
If any Securities shall cease to be subject to the restrictions on Transfer
and voting set forth in this Amended and Restated Agreement, GDI shall, upon the
written request of the holder thereof, issue to such holder a new certificate
evidencing such Securities without the legend required by this Section 5
endorsed thereon.
6. Miscellaneous.
6.1 Notices. All notices, demands or other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first class mail, return receipt requested, telecopier (provided that
delivery by telecopier shall be followed by delivery of an additional copy
personally, by mail or overnight courier), courier service, overnight mail or
personal delivery:
(i) if to Aduromed or GDI:
Xxxxxx X. Xxxxxx, President
Aduromed Corporation
000 Xxxxxxxxx Xxxxxx, Xxxxx 00-00
Xxxxxx, XX 00000
Fax Number: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx X. Xxx, Esq.
Stairs Xxxxxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax Number: (000) 000-0000
(ii) if to any Stockholder, at its address as it appears on the record
books of GDI.
Any party may by notice given in accordance with this Section 6.1 designate
another address or Person for receipt of notices hereunder. All such notices,
demands and other communications shall be deemed to have been duly given when
delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial courier service; five (5) Business Days after being
deposited in the mail, postage prepaid, if mailed; and when receipt is
mechanically acknowledged, if telecopied.
10
6.2 Successors and Assigns. This Amended and Restated Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors, heirs, legatees and legal representatives.
6.3 Amendment and Waiver.
(a) Except as specifically set forth in this Amended and Restated
Agreement, no failure or delay on the part of any party hereto in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the parties hereto at law, in equity or
otherwise.
(b) Except as specifically set forth in this Amended and Restated
Agreement, any amendment, supplement or modification of or to any provision of
this Amended and Restated Agreement, any waiver of any provision of this Amended
and Restated Agreement, and any consent to any departure by any party from the
terms of any provision of this Amended and Restated Agreement, shall be
effective only if it is made or given in writing and signed by (i) GDI and (ii)
Stockholders holding a majority of the Shares held by the Stockholders
(calculated on an as converted into GDI Common Stock basis). Any such amendment,
supplement, modification, waiver or consent shall be binding upon GDI, Aduromed
and all of the Stockholders.
(c) Notwithstanding anything set forth to the contrary herein, no
amendment, supplement, waiver or modification of any provision of this Amended
and Restated Agreement shall be effective without the written consent of
Preferred Holders holding at least a majority of the GDI Series A Preferred and
GDI Series B Preferred then outstanding.
6.4 Counterparts. This Amended and Restated Agreement may be executed
in counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
6.5 Specific Performance. The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
6.6 Headings. The headings in this Amended and Restated Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.7 GOVERNING LAW. THIS AMENDED AND RESTATED AGREEMENT SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION. ALL
ACTIONS AND PROCEEDINGS
11
ARISING OUT OF OR RELATING TO THIS AMENDED AND RESTATED AGREEMENT SHALL BE
BROUGHT BY THE PARTIES AND HEARD AND DETERMINED ONLY IN A FEDERAL OR STATE COURT
LOCATED IN THE STATE OF NEW YORK AND THE PARTIES HERETO CONSENT TO JURISDICTION
BEFORE AND WAIVE ANY OBJECTIONS TO THE VENUE OF SUCH FEDERAL AND NEW YORK
COURTS. THE PARTIES HERETO AGREE TO ACCEPT SERVICE OF PROCESS IN CONNECTION WITH
ANY SUCH ACTION OR PROCEEDING IN ANY MANNER PERMITTED FOR A NOTICE HEREUNDER.
6.8 Severability. If any provision of this Amended and Restated
Agreement is held by a court of competent jurisdiction to be void, invalid or
otherwise unenforceable, in whole or in part, then such provision shall be
severed from this Amended and Restated Agreement and shall be inoperative, the
remaining portions of this Amended and Restated Agreement shall remain in effect
and the parties hereto will use their best efforts to substitute for the void,
invalid or unenforceable provision a new provision of like economic intent and
effect.
6.9 Confidentiality. Except as may be required by applicable law or as
otherwise agreed among the parties hereto, without the prior affirmative vote or
written consent of at least a majority of the members of the Board of Directors,
neither GDI, Aduromed, the Stockholders nor any of their respective Affiliates
shall at any time publicly divulge, disclose, disseminate, announce or release
any information to any Person concerning this Amended and Restated Agreement,
the transactions contemplated hereby, any trade secrets or other confidential
information of GDI, Aduromed or the Stockholders, without first obtaining the
prior written consent of the other parties hereto; provided, however, that (i)
the Stockholders shall be entitled to disclose information with respect to their
investment in GDI and Aduromed on any reports that the Stockholders furnish to
their investors or as otherwise required by applicable law and (ii) GDI and
Aduromed shall be entitled to disclose its trade secrets or other confidential
information not related to this Amended and Restated Agreement or the
transactions contemplated hereby in any manner consistent with good business
practice.
6.10 Entire Agreement. This Amended and Restated Agreement, together
with the exhibits hereto, is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein. This Amended and Restated Agreement, together with the exhibits hereto,
supersedes all prior agreements and understandings among the parties with
respect to such subject matter.
6.11 Further Assurances. Each of the parties shall, and shall cause
their respective Affiliates to, execute such instruments and take such action as
may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby.
6.12 Recapitalizations, Exchanges, etc. GDI shall cause any successor
or assign (whether by merger, consolidation, sale of assets or otherwise) to
enter into a new stockholders agreement with the Stockholders on terms
substantially the same as this Amended and Restated Agreement as a condition of
any such transaction.
12
6.13 No Third Party Beneficiaries. This Amended and Restated Agreement
is entered into solely among, and may be enforced only by, the parties hereto.
This Amended and Restated Agreement shall not be deemed to create any rights in
any third parties, including suppliers, customers and employees of any party, or
to create any obligations of a party to any such third parties.
6.14 Term and Termination. The provisions of Section 2.3 of this
Amended and Restated Agreement shall terminate on the date on which GDI
consummates an underwritten public offering of its common stock, with an
aggregate price to the public of not less than $50 million (without deduction
for underwriting fees, commissions or discounts), pursuant to an effective
registration statement under the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of GDI (or such successor entity) following which such
common stock is listed on a national securities exchange or the National
Association of Securities Dealers National Market System.
[Signatures Follow]
13
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Amended and Restated Stockholders Agreement on the date first
written above.
GDI:
GENERAL DEVICES, INC.
By:
------------------------------------
Name:
Title:
ADUROMED:
ADUROMED CORPORATION
By:
------------------------------------
Name:
Title:
STOCKHOLDERS:
PEQUOT SCOUT FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
PEQUOT MARINER MASTER FUND, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
PEQUOT NAVIGATOR OFFSHORE FUND, INC.
By: Pequot Capital Management, Inc.,
its Investment Advisor
By:
------------------------------------
Name:
Title:
PEQUOT DIVERSIFIED MASTER FUND, LTD.
By: Pequot Capital Management, Inc.,
its Investment Manager
By:
------------------------------------
Name:
Title:
PREMIUM SERIES PCC LIMITED CELL 33
By:
------------------------------------
Name:
Title:
SHERLEIGH ASSOCIATES INC. DEFINED
BENEFIT PENSION PLAN
By:
------------------------------------
Name:
Title:
