EXHIBIT 4.02
FORM OF
SECURITIES PURCHASE AGREEMENT
BETWEEN
U.S. MEDSYS CORP.
AND
THE INVESTOR(S) SIGNATORY HERETO
SECURITIES PURCHASE AGREEMENT (the "Agreement"), between the persons
subscribing for Preferred Shares by their signatures hereto (each an "The
Investor"), and U.S. MedSys Corp., a corporation organized and existing under
the laws of the State of Colorado (the "Company"), effective as of the date of
acceptance by the Company as set forth on the signature page hereof.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
and the Investor shall purchase the Preferred Shares, as defined below.
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") or 4(6) of the United States Securities Act of
1933, as amended, and Regulation D ("Regulation D") and the other rules and
regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in the Company's
securities to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person, and includes any immediate family member of such Person, and any trust
established by or for the benefit of any one or more such persons exclusively.
Section 1.2. "Closing" shall mean the closing of the purchase and sale of the
Preferred Shares pursuant to Section 2.1.
Section 1.3. "Closing Date" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1 (a) hereto) and the
Closing shall have occurred.
Section 1.4. "Common Stock" shall mean the Company's no par value common stock.
Section 1.5. "Conversion Shares" shall mean the shares of Common Stock issuable
upon conversion of the Preferred Shares.
Section 1.6. "Damages" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorney's fees and
disbursements and reasonable costs and expenses of expert witnesses and
investigation).
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Section 1.7. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.8. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.9. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material respect.
Section 1.10. "Outstanding" when used with reference to shares of Common Stock,
shall mean, at any date as of which the number of such shares is to be
determined, all issued and outstanding shares, and shall include all such shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in such shares; provided, however, that "Outstanding" shall
not mean any such shares then directly or indirectly owned or held by or for the
account of the Company.
Section 1.11. "Person" shall mean any individual, firm, corporation,
partnership, association, trust or other entity or organization, as well as any
syndicate or group that would be deemed to be a Person under Section 13(d)(3) of
the Exchange Act.
Section 1.12. "Preferred Shares" shall mean the 75,000 shares being purchased by
the Investor of the 150,000 shares of the Company's $10.00 par value preferred
stock being offered for sale and designated as "Series A Convertible Preferred
Stock." The Preferred Shares shall be subject to the rights, preferences,
privileges, restrictions, and conversion terms as set forth in the "Designation
of Rights and Preferences of Series A Convertible Preferred Stock" in the form
annexed hereto as Exhibit A.
Section 1.13. "Principal Market" shall mean the OTC Bulletin Board, the American
Stock Exchange, the New York Stock Exchange, the NASDAQ National Market, or the
NASDAQ Small-Cap Market, whichever is at the time the principal trading exchange
or market for the Common Stock.
Section 1.14. "Purchase Price" shall mean Ten Dollars (US$10.00) per each
Preferred Share, for an aggregate Purchase Price of $750,000.
Section 1.15. "Registrable Securities" shall mean the Conversion Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC, and all Conversion Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Conversion Shares and Warrant
Shares have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares and Warrant Shares may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
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Section 1.16. "Registration Statement" shall mean a registration statement on
Form SB-2 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
Section 1.17. "Regulation D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.18. "SEC" shall mean the United States Securities and Exchange
Commission.
Section 1.19. "Section 4(2)" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.20. "Securities Act" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.21. "SEC Documents" shall mean the Company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 2004, and each report and registration
statement filed by the Company with the SEC pursuant to the Exchange Act or the
Securities Act since the filing of such Annual Report through the date hereof.
Section 1.22. "Warrant" shall mean a common stock purchase warrant to purchase
up to 500,000 shares of Common Stock on or before three years after the Closing
Date at an exercise price of $1.50 per share, subject to such other terms and
conditions as are set forth in the "Common Stock Purchase Warrant" substantially
in the form of Exhibit B, to be issued to the Investor for no additional
consideration at Closing.
Section 1.23. "Warrant Shares" shall mean all shares of Common Stock issuable
pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF PREFERRED SHARES
Section 2.1. Investment. Upon the terms and subject to the conditions set forth
herein, the Company agrees to sell, and the Investor agrees to purchase, the
Investment Shares as follows:
(a) Upon execution and delivery of this Agreement, the Investor shall
deliver the aggregate Purchase Price to the Company by wire transfer to the
following account:
Xxxxx Fargo Bank, N.A., San Francisco, CA
Wire Routing Transit Number (RTN): 000000000
For Further Credit to the Account of:
Futro & Associates, P.C. - Trust Account
Account No. 0849676242
(b) Within five (5) business days of receipt of the aggregate Purchase
Price, the Company shall deliver a certificate(s) representing the Preferred
Shares and the Warrant to the Investor.
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(c) The Closing Date, for purposes of this Agreement, shall be on the date
of satisfaction of all obligations of the parties under this Section 2.1.
Section 2.2. Registration Rights. (a) The Company agrees that it will prepare
and file with the SEC a Registration Statement, at the sole expense of the
Company (except as provided below), that shall include the Registrable
Securities for resale by the Investor as a selling securityholder.
(b) If a Registration Statement is not effective by the 30th day after the
Closing Date, then the Company shall, as a penalty, issue 12,500 shares of
Common Stock to the Investor, and the Company shall also issue 12,500 shares of
Common Stock to the Investor for each subsequent 30-day period until the
Registration Statement is declared effective. A maximum of 100,000 shares of
Common Stock is issuable under this Section 2.2(b).
(c) The Company will maintain the Registration Statement or post-effective
amendment until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the Investor receives an opinion of counsel to the Company that the Registrable
Securities may be sold under the provisions of Rule 144 without limitation as to
volume, (iii) all Registrable Securities have been otherwise transferred to
Persons who may trade such shares without restriction under the Securities Act,
and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend, or (iv) all Registrable
Securities may be sold without any time, volume or manner limitations pursuant
to Rule 144(k) or any similar provision then in effect under the Securities Act
in the opinion of counsel to the Company.
(d) All fees, disbursements and out-of-pocket expenses and costs incurred
by the Company in connection with the preparation and filing of the Registration
Statement and in complying with applicable securities and "blue sky" laws
(including, without limitation, all attorneys' fees of the Company) shall be
borne by the Company. The Investor shall bear the cost of underwriting and/or
brokerage discounts, fees and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel.
(e) No provision contained herein shall preclude the Company from selling
securities pursuant to any Registration Statement in which it is required to
include Registrable Securities pursuant to this Agreement.
Section 2.3. Use of Proceeds. The Investor acknowledges that the Company plans
to use the proceeds from the offering for working capital to pursue its business
plan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Preferred Shares to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold such securities for any minimum or other
specific term and reserves the right to dispose of the Preferred Shares at any
time in accordance with federal and state securities laws applicable to such
disposition.
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Section 3.2. Sophisticated and Accredited The Investor. The Investor is a
sophisticated the Investor (as described in Rule 506(b)(2)(ii) of Regulation D)
and an accredited the Investor (as defined in Rule 501 of Regulation D), and the
Investor has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Preferred
Shares and the underlying Common Stock. The Investor acknowledges that an
investment in the Preferred Shares is speculative and involves a high degree of
risk.
Section 3.3. Authority. This Agreement and each agreement which is required to
be executed by the Investor has been duly authorized and validly executed and
delivered by the Investor and is a valid and binding agreement of the Investor
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
Section 3.4. Absence of Conflicts. The execution and delivery of this Agreement
and any other agreements executed in connection herewith, and the consummation
of the transactions contemplated thereby, and compliance with the requirements
thereof, will not violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Investor or (a) violate any provision
of any indenture, instrument or agreement to which the Investor is a party or is
subject, or by which The Investor or any of its assets is bound; (b) conflict
with or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by The Investor
to any third party; or (d) require the approval of any third-party (which has
not been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which The Investor is subject or to which
any of its assets, operations or management may be subject.
Section 3.5. Disclosure; Access to Information. The Investor has conducted a
review of the Company and has received all documents, records, books and other
publicly available information pertaining to the Investor's investment in the
Company that has been requested by the Investor. The Company is subject to the
periodic reporting requirements of the Exchange Act, and the Investor has
reviewed copies of all SEC Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that, except as may be set
forth in any Schedule of Exceptions attached hereto or as set forth in the SEC
Documents:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Colorado and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company is duly qualified and
is in good standing as a foreign corporation to do business in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, other than those in which the failure so
to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement and to issue the Preferred Shares, (ii) the execution, issuance and
delivery of this Agreement and the Preferred Shares by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary
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corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement and the
Preferred Shares have been duly executed and delivered by the Company and at the
Closing shall constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
Section 4.3. Capitalization. The authorized capital stock of the Company, as of
March 18, 2005, consists of 200,000,000 shares of Common Stock, of which
approximately 29,725,046 shares are outstanding, and 1,000,000 shares of
Preferred Stock, of which 150,000 shares are being designated as Series A
Convertible Preferred Stock for sale hereunder. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued and
are fully paid and non-assessable.
Section 4.4. SEC Documents. The Company has delivered or made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with United States Generally Accepted Accounting
Principles, which was not fully reflected in, reserved against or otherwise
described in the financial statements or the notes thereto included in the SEC
Documents or was not incurred in the ordinary course of business consistent with
the Company's past practices since the last date of such financial statements.
Section 4.5. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investor's representations in Article III, the sale of the
Preferred Shares will not require registration under the Securities Act and/or
any applicable state securities law. When issued and paid for the Preferred
Shares will be duly and validly issued, fully paid, and non-assessable. Neither
the sales of the Preferred Shares pursuant to, nor the Company's performance of
its obligations under, this Agreement will (i) result in the creation or
imposition by the Company of any liens, charges, claims or other encumbrances
upon the Preferred Shares or any of the assets of the Company, or (ii) entitle
the holders of Outstanding Common Stock to preemptive or other rights to
subscribe to or acquire the Preferred Shares or other securities of the Company.
The Preferred Shares shall not subject the Investor to personal liability to the
Company or its creditors by reason of the possession thereof.
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Section 4.6. Corporate Documents. The Company has furnished or made available to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.7. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Preferred
Shares, do not and will not (i) result in a violation of the Company's Articles
of Incorporation or By-Laws or (ii) conflict with, or constitute a material
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal, state or local law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any material property or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate would not have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Preferred Shares in accordance with the terms hereof (other than
any SEC, Principal Market or state securities filings that may be required to be
made by the Company subsequent to Closing, and any registration statement that
may be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Investor herein.
Section 4.8. No Material Adverse Change. No Material Adverse Effect has occurred
or exists with respect to the Company, except as disclosed in the SEC Documents.
Section 4.9. No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its businesses,
properties, prospects, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement prior to the
date hereof by the Company but which has not been so publicly announced or
disclosed in the SEC Documents.
Section 4.10. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Preferred Shares in connection with the
transaction contemplated by this Agreement, have not made, at any time, any oral
communication in connection with the offer or sale of the same which contained
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
Section 4.11. No Misrepresentation. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to the Investor
pursuant to this Agreement, contains any untrue statement of a material fact
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or omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. No Short Positions. The Investor agrees that neither the Investor
nor any of his, her or its affiliates has entered, has the intention of
entering, or will, at any time during which the Investor holds any equity
securities of the Company, enter into any put option, short position or other
similar instrument or position with respect to the Common Stock of the Company.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market at all times while the
Investor holds Registrable Securities.
Section 6.2. Exchange Act Reporting. The Company will use its best efforts to
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act until the Investor has disposed of all of its
Registrable Securities.
Section 6.3. Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Section 6.4. Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investor such shares of stock and/or securities
as the Investor is entitled to receive pursuant to this Agreement.
Section 6.5. Issuance of Preferred Shares. The sale of the Preferred Shares
shall be made in accordance with the provisions and requirements of Section
4(2), Section 4(6) and/or Regulation D of the Securities Act and any applicable
state securities law. The Company shall make all necessary SEC and "blue sky"
filings required to be made by the Company in connection with the sale of the
Securities to the Investor as required by all applicable Laws, and, upon
request, shall provide a copy thereof to the Investor promptly after such
filing.
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ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and the Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to indemnify and hold
harmless the Investor, its Affiliates and their respective officers, directors,
partners and members (collectively, the "The Investor Indemnitees"), from and
against any and all losses, claims, Damages, judgments, penalties, liabilities
and deficiencies (collectively, "Losses"), and agrees to reimburse the Investor
Indemnitees for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of legal counsel), in each case promptly as incurred by the
Investor Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this
Agreement; or
(ii) any failure by the Company to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth in
this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement.
(b) The The Investor hereby agrees to indemnify and hold harmless
the Company, its Affiliates and their respective officers, directors, partners
and members (collectively, the "Company Indemnitees"), from and against any and
all Losses, and agrees to reimburse the Company Indemnitees for reasonable all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees and to
the extent arising out of or in connection with:
(iii) any misrepresentation, omission of fact, or breach of any of
the Investor's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Investor pursuant to this
Agreement; or
(iv) any failure by the Investor to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth in
this Agreement or any instrument, certificate or agreement entered into or
delivered by the Investor pursuant to this Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to
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the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
Section 7.4. Direct Claims. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investor and advisors to and
representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company). all SEC Documents
and other filings with the SEC, and all other publicly available corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably requested
by the Investor or any such representative or advisor.
Section 8.2. Non-Disclosure of Non-Public Information. (a) The Company shall not
disclose material non-public information to the Investor, advisors to or
representatives of the Investor unless prior to disclosure of such information
the Company identifies such information as being non-public information and
provides the Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review. The Company
may, as a condition to disclosing any non-
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public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any the Investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts.
ARTICLE IX
LEGENDS
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Preferred Shares, the Warrant and Registrable Securities will bear
the following legend or equivalent (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.
Section 9.2. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 9.1 has been or shall be placed on the Warrant
or the share certificates representing the Preferred Shares and Registrable
Securities and no instructions or "stop transfer orders," so called, "stock
transfer restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article IX. The Company will not engage an independent transfer agent
with respect to the Preferred Shares or the Warrant.
Section 9.3. The Investor's Compliance. Nothing in this Article shall affect in
any way the Investor's obligations to comply with all applicable securities laws
upon resale of the Preferred Shares, the Warrant and the Registrable Securities.
ARTICLE X
CHOICE OF LAW
Section 10.1. Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado. Any dispute
under this Agreement or any Exhibit attached hereto shall be submitted to
arbitration under the American Arbitration Association (the "AAA") in Denver,
Colorado, and shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter referred to as
the "Board of Arbitration") selected as according to the rules governing the
AAA. The Board of Arbitration shall meet on consecutive business days in Denver,
Colorado, and shall reach and render a decision in writing (concurred in by a
majority of the members of the Board of Arbitration) with respect to the amount,
if any, which the losing party is required to
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pay to the other party in respect of a claim filed. In connection with rendering
its decisions, the Board of Arbitration shall adopt and follow the laws of the
State of Colorado. To the extent practical, decisions of the Board of
Arbitration shall be rendered no more than thirty (30) calendar days following
commencement of proceedings with respect thereto. The Board of Arbitration shall
cause its written decision to be delivered to all parties involved in the
dispute. Any decision made by the Board of Arbitration (either prior to or after
the expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the parties to the dispute, and entitled to be enforced to the
fullest extent permitted by law and entered in any court of competent
jurisdiction. The non-prevailing party to any arbitration (as determined by the
Board of Arbitration) shall pay the expenses of the prevailing party including
reasonable attorney's fees, in connection with such arbitration.
ARTICLE XI
ASSIGNMENT
Section 11.1. Assignment. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
ARTICLE XII
NOTICES
Section 12.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be deemed to have been given or made
upon receipt and shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, or (iii)
delivered by reputable air courier service with charges prepaid. In all cases,
at the same time any such communication is made or given, a copy shall be
delivered by facsimile, and the receiving party shall promptly acknowledge
receipt by return facsimile. The addresses for such communications shall be as
set forth on the signature page. Either party hereto may from time to time
change its address or facsimile number for notices under this Section 12.1 by
giving written notice of such changed address or facsimile number to the other
party hereto as provided in this Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of any exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.
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Section 13.3. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant or a certificate representing the Preferred Shares or
the Registrable Securities and (ii) in the case of any such loss, theft or
destruction of such certificate, upon delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company (which shall
not exceed that required by the Company's transfer agent in the ordinary course)
or (iii) in the case of any such mutilation, on surrender and cancellation of
such certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new certificate of like tenor.
Section 13.6. Fees and Expenses. Each of the Company and the Investor agrees to
pay its own expenses incident to the performance of its obligations hereunder.
Section 13.7. Brokerage. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party. The Company
on the one hand, and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized:, as of the dates set
forth below.
Address: THE INVESTOR:
_______________________________ _________________________________________
Print Name of The Investor (to appear on
certificates)
_______________________________ By:______________________________________
_______________________________ Print Name:______________________________
Telephone:_____________________ Title:___________________________________
Fax:___________________________ Email:___________________________________
Tax ID No.:____________________ Date:____________________________________
ACCEPTED: U.S. MEDSYS CORP.
DATED:_______________________ By: __________________________________
Its: __________________________________
U.S. MedSys Corp.
000 Xxxxx 00 Xxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
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