EXHIBIT 10.31
ECHOCATH, INC.
SUBSCRIPTION AGREEMENT
EchoCath Inc.
X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx XxXxxxxxxxx, President
Gentlemen:
I. Subscription. The undersigned, intending to be legally
bound, hereby irrevocably agrees to purchase from EchoCath,
Inc., a New Jersey corporation (the "Company"), the number
of shares (the "Shares") of the Company's Series B
Cumulative Convertible Preferred Stock (the "Preferred
Stock"), set forth on the signature page hereof, at a
purchase price of $5.00 per Share.
II. Payment. The undersigned will pay for the subscription
on the date hereof by check payable in U.S. dollars, or by
wire transfer in US. dollars to an account designated by the
Company. The Company will file a Certificate of Amendment
for the Preferred Stock in the form of Exhibit A attached
hereto and will issue certificates representing the Shares
within 30 days of the date hereof.
III. Acceptance of Subscription. The undersigned
understands and agrees that the Company in its sole
discretion reserve the right to accept or reject this or any
other subscription for Shares, in whole or in part,
notwithstanding prior receipt by the undersigned of notice
of acceptance of this subscription. The Company shall have
no obligation hereunder until the Company shall accept and
agree to the terms of this Subscription Agreement, as
evidenced by the execution and delivery to the undersigned
of an executed copy of this Subscription Agreement. If this
subscription is rejected in whole, this Subscription
Agreement and all funds received from the undersigned will
be returned without interest or deduction, and the
Subscription Agreement shall thereafter be of no further
force or effect. If this subscription is rejected in part,
the funds for such rejected portion of this subscription
will be returned without interest or deduction, and this
Subscription Agreement shall continue in force and effect to
the extent this subscription was accepted.
IV. Representations and Warranties. The undersigned hereby
acknowledges, represents, warrants to and agrees with the
Company as follows:
(a) None of the Shares are registered under the
Securities Act of 1933, as amended (the "Securities
Act") or any state securities laws. The undersigned
understands that the offering and sale of the Shares is
intended to be exempt from registration under the
Securities Act, by virtue of Section 4(2) and the rules
and regulations promulgated thereunder, based, in part,
upon the representations, warranties and agreements
contained in this Subscription Agreement;
(b) The undersigned has access to the same kind of
information which would be available in registration
statements filed by the Company under the Securities
Act;
(c) Neither the Securities and Exchange Commission
(the "Commission") nor any state securities commission
has approved the Shares offered or passed upon or
endorsed the merits of the offering, and the offering
of the Shares has not been reviewed by any Federal,
state or other regulatory authority;
(d) The undersigned acknowledges that prior to the
date hereof it has received and reviewed a copy of the
Company's annual report on Form 1O-KSB, which annual
report is attached hereto as Exhibit B;
(e) The undersigned acknowledges that all documents,
records, and books pertaining to the investment in the
Shares have been made available for inspection by it,
its attorney, accountant, purchaser representative or
tax advisor (collectively, the "(Advisors");
(f) The undersigned and the Advisors have had a
reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of
the Company concerning the offering of the Shares and
all such questions have been answered to the full
satisfaction of the undersigned and its Advisors;
(g) In evaluating the suitability of an investment in
the Company, the undersigned has not relied upon any
representation or other information (oral or written)
other than as contained in documents or answers to
questions so furnished to the undersigned or its
Advisors by the Company;
(h) The undersigned is unaware of; and in no way
relying on, any form of general solicitation or general
advertising in connection with the offer and sale of
the Shares;
(i) The undersigned has such knowledge and experience
in financial, tax, and business matters so as to enable
it to utilize the information made available to it in
connection with the offering of the Shares to evaluate
the merits and risks of an investment in the Shares and
to make an informed investment decision with respect
thereto;
(j) The undersigned is not relying on the Company
respecting the tax and other economic considerations of
an investment m the Shares, and the undersigned has
relied on the advice of; or has consulted with, only
its own Advisors;
(k) The undersigned is acquiring the Shares solely for
its own account for investment and not with a view to
resale or distribution and the undersigned will not
sell or transfer the Shares until they are registered
for resale under the Securities Act or an exemption
therefrom is available;
(l) The undersigned must bear the economic risk of the
investment indefinitely because none of the Shares may
be sold, hypothecated or otherwise disposed of unless
subsequently registered under the Act and applicable
state securities laws or an exemption from registration
is available. Legends shall be placed on the Shares to
the effect that they have not been registered under the
Securities Act or applicable state securities laws and
appropriate notations thereof will be made in each of
the Company's stock books;
(m) The undersigned has adequate means of providing
for the undersigned's current needs and foreseeable
personal contingencies and has no need for the
undersigned's investment in the Shares to be liquid;
(n) The undersigned is aware that an investment in the
Shares involves a number of very significant risks and
is able to bear the loss of its entire investment;
(o) The undersigned represents that it was not formed
for the specific purpose of acquiring the Shares, such
entity is validly existing under the laws of the state
of its organization, the consummation of the
transactions contemplated hereby is authorized by, and
will not result in a violation of state law or its
charter or other organizational documents, such entity
has full power and authority to execute and deliver
this Subscription Agreement and all other related
agreements or certificates and to carry out the
provisions hereof and thereof, this Subscription
Agreement bas been duty authorized by all necessary
action, this Subscription Agreement has been duly
executed and delivered on behalf of such entity and is
a legal, valid and binding obligation of such entity.
V. Indemnification. The undersigned agrees to indemnity
and hold harmless each of the Company, their respective
officers, directors, employees, agents, and affiliates
against all losses, liabilities, claims, damages, and
expenses (including, but not limited to, any and all
expenses incurred in investigating, preparing, or defending
against any litigation commenced or threatened) arising out
of any false representation or warranty or breach by the
undersigned of any Agreement herein or in any other document
delivered in connection with this Subscription Agreement.
VI. Registration of the Shares.
(a) Piggyback Registration Rights.
(i) If, at any time commencing after the date of
this Subscription Agreement and expiring five (5)
years thereafter, the Company proposes to file a
registration statement or statements under the
Securities Act for the public sale of the
Company's Class A Common Stock, no par value (the
"Common Stock"), for cash (other than in
connection with a merger or pursuant to Form X-0,
Xxxx X-0 or comparable registration statement) it
will give written notice, at least thirty (30)
days prior to the filing of each such registration
statement, to the undersigned of its intention to
do so. If the undersigned notifies the Company in
writing within ten (10) business days after
receipt of any such notice of its desire to
include the shares of the Common Stock, which may
be issued upon conversion of the Shares (the
"Common Shares") in such proposed registration
statement, the Company shall afford the
undersigned the opportunity to have the Common
Shares registered under such registration
statement; provided, however, that in the case of
an underwritten offering, if the Company notifies
the undersigned in writing that the managing
underwriter of such offering has notified the
Company that the inclusion in the registration
statement of any portion of the Common Shares
would have an adverse effect on such underwritten
offering, then the managing underwriter may limit
the number of Common Shares to be included in such
registration statement only to the extent
necessary to avoid such adverse effect; provided,
further, however, that in the event any shares of
Common Stock issued pursuant to any of the
securities issued in the Company's initial public
offering ("IPO Securities") are to be included in
such underwritten offering, and the managing
underwriter shall have determined to limit the
number of Common Shares or IPO Securities to be so
included, then such limitation shall be applied to
The Common Shares and the IPO Securities, pro rata
based on the number of Common Shares and IPO
Securities requested to be included in such
underwritten offering; and provided, further,
however that in the event securities of the
Company, other than IPO Securities, held by any
person or entity other than the Company or the
undersigned ( "Third Party Securities") are to be
included in such underwritten offering, and the
managing underwriter shall have determined to
limit the number of Common Stock, IPO Securities
or Third Party Securities to be so included, then
such limitation shall be applied to the Common
Shares, the IPO Securities and the Third Party
Securities, based on the number of Common Shares,
IPO Securities and Third Party Securities
requested to be included in such underwritten
offering so that the amount of Third Party
Securities are reduced by a percentage which is
twice as great as the percentage which the Common
Shares and the IPO Securities are reduced.
Notwithstanding the provisions of this Section
VI(a)(i), the Company shall have the right at any
time after it shall have given written notice
pursuant to this Section VI(a)(i) (irrespective of
whether a written request for inclusion of any
such securities shall have been made) to elect not
to file any such proposed registration statements
or to withdraw the same after
the filing but prior to the effective date
thereof.
(ii) Following the effective date of a
registration statement filed pursuant to Section
VI(a)(i), the Company shall, upon the written
request of the undersigned, forthwith supply such
reasonable number of copies of the registration
statement, prospectus and other documents
necessary or incidental to the registration as
shall be reasonably requested by the undersigned
to permit the undersigned to make a public
distribution of the Common Shares. The Company
will use its reasonable efforts to qualify the
Common Shares for sale in such states as the
undersigned shall reasonably request, provided
that no such qualification will be required in any
jurisdiction where, solely as a result thereof,
the Company would be subject to general service of
process or to taxation or qualification as a
foreign corporation doing business in such
jurisdiction. The obligations of the Company
hereunder with respect to the Common Shares are
expressly conditioned on the undersigned
furnishing to the Company such appropriate
information concerning the undersigned and the
Common Shares as the Company may reasonably
request.
(iii) The Company shall bear the entire cost and
expense of the registration of the Common Shares
pursuant to Section VI(a)(i); provided, however,
that the undersigned shall be solely responsible
for the fees of any counsel retained by the
undersigned in connection with such registration
and any transfer taxes or underwriting discounts,
commissions or fees applicable to the Common
Shares sold by the undersigned pursuant thereto.
(iv) Neither the filing of a registration
statement by the Company pursuant to this Section
VI(a) nor the making of any request for
prospectuses by the undersigned shall impose upon
the undersigned any obligation to sell the Common
Shares.
(v) The undersigned, upon receipt of notice from
the Company that an event has occurred which
requires a post-effective amendment to a
registration statement or a supplement to a
prospectus included therein, shall promptly
discontinue the sale of the Common Shares until
the undersigned receives a copy of a supplemented
or amended prospectus from the Company, which the
Company shall provide as soon as practicable after
such notice.
(vi) Not withstanding anything else to the
contrary contained in this Subscription Agreement,
if the undersigned requests to have any of the
Common Shares registered under the Securities Act
pursuant to this Section VI(a), and if such Common
Shares are so registered, then this Section VI(a)
shall be of no further force or effect.
(b) Demand Registration.
(i) At any time commencing September 1, 1997 and
expiring five (5) years from the date of this
Subscription Agreement, the undersigned shall have
the right (which right is in addition to the
registration rights under Section VI(a) hereof),
exercisable by written notice to the Company, to
have the Company prepare and file with the
Commission, on one occasion, a registration
statement and such other documents, including a
prospectus, as may be necessary in the opinion of
counsel for the Company, in order to comply with
the provisions of the Securities Act, so as to
permit a public offering and sale of the Common
Shares.
(ii) If the undersigned exercises its
registration request, pursuant to Section V1(b)(i)
above, between September 1st and November 1st (the
"Window Period") of any given year, the
registration costs and filing fees incurred in
connection with such registration (the "Costs")
shall be divided evenly between the undersigned
and the Company; provided, however, that the Costs
payable by the undersigned shall be capped at
$25,000. If the undersigned exercises such
registration request on a date outside of the
Window Period, the Costs shall be divided evenly
between the undersigned and the Company; provided,
however, that the Costs payable by the undersigned
shall be capped at $40,000. Costs shall not
include any amounts payable to the undersigned's
counsel, any transfer taxes or underwriting
discounts, commissions or fees applicable to the
Common Shares, which shall be payable solely by
the undersigned. Notwithstanding the foregoing,
if the registration statement to which the Costs
are associated is, due solely to actions of the
Company, not declared effective by the Commission
within six months from the date it is first filed
with the Commission, then the Company shall pay
all Costs associated with such registration
statement.
(iii) In connection with any registration under
Section V1(b) hereof, the Company covenants and
agrees as follows:
a. The Company shall use its best efforts to
file a registration statement within sixty
(60) days of receipt of any demand therefor,
except that if such demand is made during the
Window Period, the Company shall use its best
efforts to file a registration statement
within 60 days of the end of the Window
Period, shall use its best efforts to have
any registration statements declared
effective at the earliest possible time, and
shall furnish the undersigned such number of
prospectuses as shall reasonably be
requested; provided, however, that the
Company may, at any time, delay the filing or
delay or suspend the effectiveness of such
demand registration or, without suspending
such effectiveness, instruct the undersigned
not to sell any securities included in such
demand registration, (i) if the Company shall
have determined upon the written advice of
counsel (confirmation of which notice shall
be provided to the undersigned in writing by
such counsel) that the Company would be
required to disclose any actions taken or
proposed to be taken by the Company in good
faith and for valid business reasons,
including without limitation, the acquisition
or divestiture of assets, which disclosure
would have a material adverse effect on the
Company or on such actions, or (ii) if
required by law, to update the prospectus
relating to any such registration to include
updated financial statements (a "Suspension
Period") by providing the undersigned with
written notice of such Suspension Period and
the reasons therefor; and provided further
that the Suspension Periods, in the
aggregate, do not exceed sixty (60) days. The
Company shall provide such notice as soon as
practicable and in any event prior to the
commencement of such a Suspension Period. The
obligations of the Company hereunder with
respect to the Common Shares are expressly
conditioned on the undersigned furnishing to
the Company such appropriate information
concerning the undersigned and the Common
Shares as the Company may reasonably request.
b. The Company agrees that it will use its
best efforts to maintain the effectiveness of
any registration statement filed pursuant to
Section VI(b) hereof for a period of 1 year
from the effective date of such registration
statement.
c. The Company will take all necessary action
which may be required in qualifying or
registering the Common Shares included in a
registration statement for offering and sale
under the securities or blue sky laws of such
states as reasonably are requested by the
undersigned, provided that the Company shall
not be obligated to execute or file any
general consent to service of process or to
qualify as a foreign corporation to do
business under the laws of any such
jurisdiction.
(iv) Neither the filing of a registration
statement by the Company pursuant to this Section
VI(b) nor the making of any request for
prospectuses by the undersigned shall impose upon
the undersigned any obligation to sell the Common
Shares.
(v) The undersigned, upon receipt of notice
from the Company that an event has occurred which
requires a post-effective amendment to a
registration statement or a supplement to a
prospectus included therein, shall promptly
discontinue the sale of the Common Shares until
the undersigned receives a copy of a supplemented
or amended prospectus from the Company, which the
Company shall provide as soon as practicable after
such notice.
(VII). Registration Indemnification.
(a) The Company shall indemnity and hold harmless the
undersigned from and against any and all losses,
claims, damages and liabilities caused by any untrue
statement of a material fact contained in any
registration statement covering the Common Shares filed
by the Company under the Securities Act, any post-
effective amendment to such registration statement, or
any prospectus included therein required to be filed or
furnished by reason of Section VI of this Subscription
Agreement or caused by any omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, except, insofar as such losses, claims,
damages or liabilities are caused by any such untrue
statement or omission based upon information furnished
or required to be furnished in writing to the Company
by the undersigned expressly for use therein, which
indemnification shall include each person, if any, who
controls the undersigned within the meaning of the Act;
provided, however, that the indemnification in this
paragraph VII(a) with respect to any prospectus shall
not inure to the benefit of the undersigned (or to the
benefit of any person controlling the undersigned) on
account of any such loss, claim, damage or liability
arising from the sale of the Common Shares by the
undersigned, if a copy of a subsequent prospectus
correcting the untrue statement or omission in such
earlier prospectus was provided to the undersigned by
the Company prior to the subject sale and the
subsequent prospectus was not delivered or sent by the
undersigned to the purchaser prior to such sale; and
provided further, that the Company shall not be
obligated to so indemnity the undersigned or other
person referred to above unless the undersigned or
other person, as the case may be, shall at the same
time indemnity the Company, its directors, each officer
signing such registration statement and each person, if
any, who controls the Company within the meaning of the
Securities Act, from and against any and all losses,
claims, damages and liabilities caused by any untrue
statement of a material fact contained in such
registration statement, any registration statement or
any prospectus required to be filed or furnished by
reason of this Subscription Agreement or caused by any
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims,
damages or liabilities are caused by any untrue
statement or omission based upon information furnished
in writing to the Company by the undersigned expressly
for use therein.
(b) If for any reason the indemnification provided for
in the preceding subparagraph is held by a court of
competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim,
damage, liability or expense referred to therein, then
the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of
the indemnified party and the indemnifying party, as
well as any other relevant equitable considerations.
VIII. Board Seat. At any time, through the date which
is three years from the date of this Subscription Agreement,
a seat on the Company's Board of Directors (the "Board")
shall become vacant, for whatever reason, and, if the
Company determines, in its sole discretion, to fill such
vacant Board seat, then the Company shall notify the
undersigned and the undersigned shall have thirty (30) days
following such notification to provide the Company with the
name of an individual to fill such Board seat. If the
Company approves such individual, which approval shall not
be unreasonably withheld, then the Company shall elect such
individual to the Board. If such individual is not approved
then the undersigned shall have the right to submit the
names of additional individuals until one is elected to the
Board. Once one individual nominated by the undersigned is
elected to the Board the undersigned shall not have the
right to nominate any additional individuals to the Board.
IX. Series A Preferred Stock. The Company hereby
represents that there are currently no shares of the
Company's Series A Convertible Preferred Stock ("Series A
Stock") issued and/or outstanding and the Company hereby
covenants that it will not issue any shares of Series A
Stock while there are any shares of the Preferred Stock
issued and outstanding.
X. Irrevocability; Binding Effect. The undersigned hereby
acknowledges and agrees that the subscription hereunder is
irrevocable by the undersigned, except as required by
applicable law, and that this Subscription Agreement shall
survive the death or disability of the undersigned and shall
be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal
representatives, and permitted assigns. If the undersigned
is more than one person, the obligations of the undersigned
hereunder shall be joint and several and the agreements,
representations, warranties, and acknowledgments herein
shall be deemed to be made by and be binding upon each such
person and his heirs, executors, administrators, successors,
legal representatives, and permitted assigns.
XI. Modification. This Subscription Agreement shall not be
modified or waived except by an instrument in writing signed
by the party against whom any such modification or waiver is
sought.
XII. Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and
shall be mailed by certified mail, return receipt requested,
or delivered against receipt to the party to whom it is to
be given (a) if to either of the Company, at the address set
forth above, or (b) if to the undersigned, at the address
set forth on the signature page hereof (or, in either case,
to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section
XII). Any notice or other communication given by certified
mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address
which shall be deemed given at the time of receipt thereof.
XIII. Assignability. Following the initial purchase of
the Shares, the rights and obligations hereunder are
assignable by the undersigned; provided, however, that
anyone to whom this Subscription Agreement is assigned must
agree in writing to be bound by all of the terms and
provisions hereof but the rights and obligations of the
undersigned under Section VIII of this Subscription
Agreement are not transferable or assignable.
XIV. Applicable Law. This Subscription Agreement shall be
governed by and construed in accordance with the internal
laws of the State of New Jersey without regard to its
conflicts of laws principles.
XV. Blue Sky Qualification. The Sale of the Shares is
expressly conditioned upon the exemption from qualification
of the offer and sale of the Shares from applicable Federal
and state securities laws. The Company shall not be required
to qualify this transaction under the securities laws of any
jurisdiction and, should qualification be necessary, the
Company shall be released from any and all obligations to
maintain its offer, and may rescind any sale contracted, in
the jurisdiction.
XVI. Counterparts. This Subscription Agreement may be
executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and
any of the parties hereto may execute this subscription by
signing any of such counterparts and delivering the same by
telex, telecopy, telegraph, cable or otherwise in writing
(each delivery by any of such means to be deemed to be in
writing, for purposes of this Subscription Agreement).
XVII. Use of Pronouns. All pronouns and any variations
thereof used herein shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement this 27th day of February, 1997.
Number of Shares Subscribed: 280,000 Shares of Preferred
Stock
Total Subscription Amount: $1,400,000
EP MEDSYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President
Address: 00 Xxxxx 00 Xxxx
Xxxx Xxxx, XX 00000
Taxpayer Identification Number: 22-3212190
ACCEPTED AND AGREED
ECHOCATH, INC.
By: /s/ Xxxxx XxXxxxxxxxx
Name: Xxxxx XxXxxxxxxxx
Title: President
Date: February 27, 1997
