As filed with the Securities and Exchange Commission on April 27, 1999
REGISTRATION NO. 333-59829
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SWISSRAY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEW YORK [ ]
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Number)
16-0950197
(I.R.S. Employer Identification Number)
SWISSRAY INTERNATIONAL, INC.
200 EAST 32ND STREET, SUITE 34-B
NEW YORK, NEW YORK 10016
UNITED STATES: (212) 545-0095
SWITZERLAND: 011-4141-914-1200
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
RUEDI G. LAUPPER,
CHAIRMAN OF THE BOARD AND PRESIDENT
SWISSRAY INTERNATIONAL, INC.
200 EAST 32ND STREET, SUITE 34-B
NEW YORK, NEW YORK 10016
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
GARY B. WOLFF, ESQ.
GARY B. WOLFF, P.C.
747 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 644-6446
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
discretion of the converting shareholders after the effective date of the
Registration Statement.
* In accordance with Rule 429 of the General Rules and Regulations under
the Securities Act of 1933 this Registration Statement and the Prospectus which
is a part thereof relates, in part, and combines with an earlier
Registration Statement under Registration No. 333-50069 declared effective May
12, 1998.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE (4)
<TABLE>
<CAPTION>
Proposed
Maximum Proposed
Amount to Offering Maximum
Title of Each Class of be Price Aggregate Amount of
Securities to be Registered Per Share Offering Registration
Registered (1) (2)(3) Price(1)(2) Fee
- -------------------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.01 par
value per share) 12,585,480 $2.5935 $32,640,442 $9,628.93 (4)(5)
</TABLE>
(1) Includes (a) 1,967,900 shares which are reserved for issuance pursuant
to currently issued and outstanding Convertible Debentures which
will be offered for resale by certain Selling Holders under
Registration No. 33-50069, (b) 8,541,575 shares which are reserved for
issuance pursuant to currently issued and outstanding Convertible
Debentures which will be offered for resale by certain Selling
Holders under this Registration Statement, (c) 1,890,928 shares which
are reserved for issuance pursuant to three separate promissory note
financings which may be converted into convertible debentures
automatically in the event of non-payment on their respective due dates
and in the event of occurence of such contingency such shares may be
offered for resale by certain then Selling Holders under this
Registration Statement, (d) 85,077 shares being registered pursuant
to certain "piggy-back" registration rights granted to an otherwise
unaffiliated lender pursuant to terms of a promissory note (see
"Description of Capital Stock-Promissory Note") and (e) 100,000 shares
being registered which underlie certain outstanding Warrants. Also
registered hereunder is such indeterminate number of shares of Common
Stock $.01 par value, of the Registrant as may be issuable pursuant to
(i) any shares issuable in exchange for interest earned under
Convertible Debentures and (ii) any anti-dilution provisions as may be
contained in the aforesaid Convertible Debentures and related
Registration Rights Agreements. Such additional shares do not and
will not include any shares as may otherwise be required to be
issued as a result of adjustments to the conversion price, stock
dividends, stock splits or similar transactions as Registrant is not
relying upon Rule 416 with respect thereto.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933. In
accordance with Rule 457(c) of Regulation C, the estimated price for
the Securities was based on the average of the high and low reported
prices on the Electronic Over-the-Counter Bulletin Board on April 20,
1999.
(3) The number of shares referred to throughout this Registration Statement
unless otherwise specifically indicated gives retroactive effect to a 1
for 10 reverse stock split effective as of October 1, 1998.
(4) The number of securities being carried forward and the amount of the
filing fee associated with such securities that was previously paid
under earlier Registration No. 333-50069 was 1,477,008 shares of
Common Stock, $.01 par value, for which the registration fee of
$2,859.40 was paid. This information is provided in accordance with
Rule 429(b) of the 1933 Act and the number of securities being carried
forward and the amount of the filing fee associated with such
securities that was previously paid under earlier Registration No.333-
50069 was an additional 595,048 and under Registration No. 333-59829,
597,333 shares and 85,077 shares pursuant to piggy-back registration
rights for which the registration fee of $1,545.08 was paid.
<PAGE>
(5) Includes (a) 1,967,900 shares which are reserved for issuance pursuant
to currently issued and outstanding convertible debentures which will
be offered for resale by certain Selling Holders under Registration No.
333-50069 and (b) an additional aggregate of 10,617,580 shares as
indicated in footnote 1(b) through (e) inclusive.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K.
<TABLE>
<CAPTION>
Registration Statement Item and Heading Prospectus Caption
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Cover Page of Registration
Front Cover Page of the Prospectus Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside
Prospectus Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk
Earnings to Fixed Charges Factors; The Company
4. Use of Proceeds Prospectus Summary; Use
of Proceeds
5. Determination of Offering Price Outside Front Cover Page
of Prospectus
6. Dilution Risk Factors; Dilution
7. Selling Security Holders Selling Holders and Plan
of Distribution
8. Plan of Distribution Outside Front Cover Page
of Prospectus; Selling
Holders and Plan of
Distribution
9. Description of Securities to be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Matters; Independent
Auditors
11. Information with Respect to Registrant
(a) (1) Description of Business Prospectus Summary;
Management's Discussion and
Analysis of Financial Condition
and Results of Opertions;
Business; The Company
<PAGE>
Registration Statement Item and Heading Prospectus Caption
(2) Description of Property Business -- Description of Property
(3) Legal Proceedings Business -- Legal Proceedings
(4) Control of Registrant Not Applicable
(5) Nature of Trading Market Risk Factors; Selling
Holders and Plan of
Distribution
(6) Exchange Controls and Other Limitations Risk Factors; Description
Affecting Security Holders of Capital Stock
(7) Taxation Risk Factors
(8) Selected Financial Data Prospectus Summary;
Selected Consolidated
Financial Data
(9) Management's Discussion and Analysis of Management's Discussion
Financial Condition and Results of and Analysis of Financial
Operations Condition and Results of
Operations
(10) Directors and Officers of Registrant Management
(11) Compensation of Directors and Officers Management
(12) Options to Purchase Securities from Management
Registrant or Subsidiaries
(13) Interest of Management in Certain Certain Transactions
Transactions
(b) Financial Statements Financial Statements
12. Disclosure of Commission Position on Indemnification Information Not Required
for Securities Act Liabilities In Prospectus
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
DATED APRIL 27, 1999
PROSPECTUS
SWISSRAY INTERNATIONAL, INC.
12,585,480 Shares of Common Stock
This prospectus ("Prospectus") relates to the offer and sale of up to
12,585,480 shares of common stock, $.01 par value per share (the "Common
Stock"), of Swissray International, Inc., a New York corporation ("Swissray
International, Inc." or the "Registrant"), which shares consist of (i) up to
8,541,575 shares of Common Stock which are issuable to certain persons (the
"Selling Holders") upon conversion of convertible debentures, issued in four (4)
separate financings from June 1998 through January 1999, (the "Convertible
Debentures") and which shares are being registered hereby pursuant to
Registration Rights Agreements between the Registrant and the Selling Holders
named in this Prospectus under Registration No. 333-59829, (ii) up to 1,967,900
additional shares of Common Stock which are issuable to certain Selling Holders
upon conversion of convertible debentures issued in March 1998, (the
"Convertible Debentures") and which additional shares are being registered
hereby pursuant to Registration Rights Agreements between the Registrant and the
Selling Holders named in a Prospectus under Registration No. 333-50069, (iii)
1,890,928 shares which are reserved for issuance pursuant to three separate
promissory note financings which may be converted into convertible debentures
automatically in the event of non-payment on their respective due dates and in
the event of occurence of such contingency such shares may be offered for resale
by certain then Selling Holders under this Registration Statement, (iv) 85,077
shares being registered pursuant to certain "piggy-back" registration rights
granted to an otherwise unaffiliated lender pursuant to terms of a promissory
note (see "Description of Capital Stock - Promissory Note") and (v) 100,000
Shares being registered which underlie certain outstanding Warrants. The up to
12,585,480 shares of Common Stock offered hereby are herein referred to as the
"Securities."
The Securities may be offered and sold from time to time by the Selling
Holders named herein (or in Registration No. 333-50069 hereinafter "Selling
Holders" unless otherwise indicated or the Stockholder whose shares are being
registered pursuant to aforesaid piggy-back rights) or by their transferees,
pledgees, donees or their successors pursuant to the Prospectus. The Securities
may be sold by the Selling Holders from time to time directly to purchasers or
through agents, underwriters or dealers who may receive compensation in the form
of discounts, concessions or commissions from the Selling Holders or the
purchasers of the Securities for whom such agents, underwriters or dealers may
act. See "Selling Holders and Plan of Distribution." If required, the names of
any such agents or underwriters involved in the sale of the Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus. The Registrant will not receive any of the proceeds from the sale of
the Securities by the Selling Holders.
The Selling Holders will receive all of the net proceeds from the sale
of the Securities and will pay all underwriting discounts and selling
commissions, if any, applicable to any such sale. The Registrant is responsible
for payment of all other expenses incident to the offer and sale of the
Securities. The Selling Holders and any broker-dealers, agents or underwriters
that participate in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Act"), and any profit on the sale of the Securities by the Selling Holders and
any commissions received by any such underwriters may be deemed to be
underwriting commissions or discounts under the Act. See "Selling Holders and
Plan of Distribution" for a description of indemnification arrangements.
All references herein to the "Company" refer to Swissray International,
Inc. and its subsidiaries. The executive offices of the Company are located at
Swissray International, Inc., 200 East 32nd Street, Suite 34-B, New York, New
York 10016. The telephone number is 212-545-0095 and the fax number is
212-545-7912. The address in Switzerland is Turbistrasse 25-27, CH-6280
Hochdorf, Switzerland and the telephone number in Switzerland is
011-4141-914-1200.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
ADDITIONALLY, THE COMPANY'S COMMON STOCK IS CONSIDERED "PENNY STOCK" AND,
ACCORDINGLY, TRADING THEREIN IS SUBJECT TO CERTAIN LIMITATIONS (AS SUMMARIZED IN
RISK FACTOR ENTITLED "BROKER-DEALER SALES OF COMPANY SECURITIES .. UNDER THE
EXCHANGE ACT OF 1934". SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS
PROSPECTUS.
- 2 -
<PAGE>
The Registrant has not taken any action to register or qualify the
Securities for offer and sale under the securities or "blue sky" laws of any
state of the United States. However, pursuant to the Registration Rights
Agreements among the Registrant and the Selling Holders (the "Registration
Rights Agreements"), the Registrant will use reasonable efforts to (i) register
and qualify the Securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the investors who
hold a majority ^ interest of the Securities being offered reasonably request
and in which significant volumes of shares of Common Stock are traded, (ii)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the earliest (the "Registration Period") of (A) the date that is two
years after the Closing Date, (B) the date when the Selling Holders may sell all
Securities under Rule 144 or (C) the date the Selling Holders no longer own any
of the Securities; (iii) take such other actions as may be necessary to maintain
such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Securities for sale in such jurisdictions; provided,
however, that the Registrant shall not be required in connection therewith or as
a condition thereto to (A) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify, (B) subject itself to general
taxation in any such jurisdiction, (C) file a general consent to service of
process in any such jurisdiction, (D) provide any undertakings that cause more
than nominal expense or burden to the Registrant or (E) make any change in its
articles of incorporation or by-laws or any then existing contracts, which in
each case the Board of Directors of the Registrant determines to be contrary to
the best interests of the Registrant and its stockholders. Unless and until such
times as offers and sales of the Securities by Selling Holders are registered or
qualified under applicable state securities or "blue sky" laws, or are otherwise
entitled to an exemption therefrom, initial resales by Selling Holders will be
materially restricted. Selling Holders are advised to consult with their
respective legal counsel prior to offering or selling any of their Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS April __, 1999.
AVAILABLE INFORMATION
The Registrant is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, NW., Washington, D.C. 20549. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission, such as the Registrant. The address of such
site is http:\\www.sec.gov.
- 3 -
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial information incorporated by reference herein
or appearing elsewhere in this Prospectus.
THE COMPANY
The Registrant was incorporated under the laws of the State of New York
on January 2, 1968 under the name CGS Units Incorporated. On June 15, 1994, the
Registrant merged with Direct Marketing Services, Inc. and changed its name to
DMS Industries, Inc. In May of 1995 the Registrant discontinued the operations
then being conducted by DMS Industries, Inc. and acquired all of the outstanding
securities of SR Medical AG, a Swiss corporation engaged in the business of
manufacturing and selling X-ray equipment, components and accessories. On June
5, 1995 the Registrant changed its name to Swissray International, Inc. The
Registrant's operations are being conducted principally through its wholly owned
subsidiaries, SR Medical Holding AG (known as SR Medical AG until renamed in
February 1998), the latter's wholly owned subsidiaries, SR Medical AG (known as
Teleray AG until renamed in February 1998), a Swiss corporation, Swissray
(Deutschland) Rontgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company and Teleray Research and Development AG, a Swiss
corporation, as well as through the Company's other wholly owned subsidiaries,
SR Management AG (formerly SR Finance AG), a Swiss corporation, Swissray Medical
Systems, Inc. (formerly Swissray Corporation), a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation, and Swissray Information Solutions,
Inc., a Delaware corporation. In September 1998 the Company established an
additional wholly owned subsidiary, Swissray America Inc., a Delaware
corporation. Unless otherwise specifically indicated, all references hereinafter
to the "Company" refer to the Registrant and its subsidiaries.
The Company is active in the markets for diagnostic imaging devices for
the health care industry. The Company's products include a full range of
conventional X-ray equipment for all diagnostic purposes other than mammography
and dentistry, a direct digital multi-functional X-ray system - the ddR-Multi
System (formerly known as the AddOn-Multi-System) and the SwissVision(TM) line
of DICOM 3.0 compatible postprocessing workstations operating on a Windows NT
platform for the processing of digital image data. In addition, the Company is
in the business of selling components and accessories for X-ray equipment
manufactured by third parties and providing services related to imaging systems.
The Company is also offering products, consulting and services related to
viewing, archiving, networking and transmitting of digital X-ray images.
The services offered by the Company include the installation and
after-sales servicing of imaging equipment sold by the Company, consulting
services and application training of radiographers. In the United States, the
Company offers information and informatics solutions consulting services to
hospital imaging departments and imaging centers, maintenance management and
after sales-services of products manufactured by the Company and third parties
(multi-vendor, multi-modality services).
The Company and its predecessors have been in the business of
manufacturing and selling X-ray equipment in Switzerland and Germany since 1988.
Beginning in 1991, the Company's predecessors began to expand into other markets
in Europe, the Middle East and Asia. In 1992, the Company entered into a first
Original Equipment Manufacturing ("OEM") Agreement with Philips Medical Systems
GmbH ("Philips Medical Systems") providing for the manufacturing by the Company
of a Multi-Radiography System ("MRS"). Simultaneously, the Company developed the
first SwissVision(TM) image post-processing system, which was able to convert
analog images obtained in fluoroscopy into digital information. In 1993, the
Company won the innovation award of the Chamber of Commerce of Central
Switzerland for this post-processing system. Beginning in 1993, the Company
began the development of direct digital X-ray technology for medical diagnostic
purposes.
- 4 -
<PAGE>
On April 1, 1997, the Company acquired Empower, Inc., a New York
corporation ("Empower") which since incorporation in 1985, had been engaged in
distributing and servicing diagnostic X-ray equipment and accessories in the New
York/New Jersey/Connecticut area. Certain details with respect to such
acquisition were reported in a Form 8-K and Form 8-K/A1 with date of report of
April 1, 1997. In February 1998 the Company entered into a letter of intent with
E.M. Parker Co., Inc., a Massachusetts corporation ("Parker") with respect to
the sale of Empower's film and x-ray accessories business. Thereafter, the
Company and its wholly owned subsidiary, Empower, Inc. ("Empower")entered into
an Asset Purchase Agreement with Parker pursuant to which the Company and
Empower sold and Parker purchased substantially all of the assets of Empower
(excluding certain excluded assets as defined in the Agreement) in consideration
of: (i) the assumption by Parker of certain liabilities of Empower; (ii) the
cash purchase price of $250,000.00; and (iii) the payment by Parker of
approximately $376,000 to a banking institution in satisfaction of certain
outstanding indebtedness of Empower. Empower remains a wholly owned (but
currently inactive) subsidiary of the Company.
On October 17, 1997, the Company acquired substantially all of the
assets of Service Support Group LLC ("SSG"), located in Gig Harbor, Washington.
SSG has been in the business of selling diagnostic imaging equipment and
providing services related thereto in the markets on the West Coast of the
United States since it was formed on October 16, 1996. SSG's operations are
currently being conducted through the following wholly owned Company
subsidiaries: Swissray Medical Systems, Inc., Swissray Healthcare, Inc.,
Swissray Information Solutions, Inc. and Swissray America Inc.
The following organizational chart graphically indicates the Company,
its wholly owned subsidiaries and certain additional information regarding each
of such firms including principal locations.
<TABLE>
<CAPTION>
Organization Chart
-----------------------------
|SWISSRAY International, Inc.|
| New York |
| USA |
----------------------------
|
--------------------------------------------------------|--------------------------------------------------------
| | | | | | |
| | | | | | |
<S> <C> <C> <C> <C> <C> <C>
------------- ---------------- -------------------- -------------------- ----------- ---------------- -------------
| Empower Inc.| |Swissray Medical| |Swissray Healthcare,| |Swissray Information| |SR Medical | |SR Management AG| | Swissray |
|Glen Cove, NY| | Systems, Inc. | | Inc. | | Solutions Inc. | |Holdings AG| | Hochdorf | |America, Inc.|
| USA | | Gig Harbor, WA | | USA | | Gig Harbor, WA | | Hochdorf | | Switzerland | | USA |
------------- ---------------- -------------------- -------------------- ----------- ---------------- -------------
|
-----------------------------|------------------
| | |
---- |-------- -------- |------------- ------|-----------
|SR Medical AG| |Swissray Rontgentechnik| | Teleray Research |
| Hochdorf | | (Deutschland) GmbH | |and Development AG|
| Switzerland | | Wiesbaden | | Hochdorf |
| | | Germany | | Switzerland |
------------ ----------------------- ------------------
</TABLE>
- 5 -
<PAGE>
THE OFFERING
Common Stock Offered(1) Up to 12,585,480 shares of Common Stock.
Common Stock Outstanding
Before the Offering(2)(3) 11,712,379
Common Stock Outstanding
After the Offering(4)
Use of Proceeds The Registrant will not receive any of the
proceeds from the sale of any of the
Securities.
Risk Factors The Securities offered hereby
involve a high degree of risk. See "Risk
Factors" commencing on page 7 hereof.
Electronic Over-the-Counter
Bulletin Board Symbol SRMI
(1) Includes an aggregate of up to 8,541,575 shares of Common Stock reserved
for issuance upon the conversion of the Convertible Debentures. See
"Selling Holders and Plan of Distribution" and "Description of Capital
Stock." Also includes an aggregate of up to an additional 1,967,900 shares
of Common Stock reserved for issuance upon conversion of Convertible
Debentures issued in March 1998, which latter shares relate to Registration
No. 333-50069 in accordance with Rule 429 (b) of the 1933 Act. Also being
registered hereunder in accordance with certain "piggyback" registration
rights are 85,077 restrictive shares heretofore issued pursuant to terms of
a convertible promissory note, 100,000 shares underlying outstanding
Warrants and 1,890,928 shares which may be issued pursuant to terms of
promissory notes and Contingent Subscription Agreements regarding loan
transactions which occurred in December 1998 and twice in March 1999.
Regarding such promissory notes see Description of Capital Stock
- Contingently Convertible Promissory Notes - December 1998, March 2, 1999
and March 26, 1999.
(2) Does not include (i) those shares referred to in footnote 1 above, (ii)
145,500 shares of Common Stock which may be issued upon the exercise of
outstanding options under the Registrant's 1996 Non-Statutory Stock Option
Plan (the "1996 Plan"), (iii) 15,500 shares of Common Stock reserved for
issuance upon the exercise of options available for future grant under the
1996 Plan and (iv) 200,000 shares of Common Stock reserved for issuance
upon the exercise of options available for future grant under the 1997
Non-Statutory Stock Option Plan (the "1997 Plan").
(3) As of the close of business on March 31, 1999 there were 11,712,379 shares
issued and outstanding held by 683 stockholders of the Registrant's Common
Stock.
(4) Since the Common Stock registered hereunder is being offered on a delayed
or continuous basis pursuant to Rule 415 under the Act, the Registrant
cannot include herein information about the Common Stock outstanding after
the Offering.
- 6 -
<PAGE>
Summary Financial Data
The summary information below represents financial information of the
Registrant for the (i) six month periods ended December 31, 1998 and December
31, 1997, which information was derived from the unaudited consolidated
financial statements of the Registrant and the (ii)fiscal years ended June 30,
1998, June 30, 1997 and June 30, 1996, which information was derived from the
audited consolidated financial statements of the Registrant.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
-------------------- -------------------------------
1998 1997 1998 1997 * 1996 *
--------- --------- --------- --------- ---------
(In Thousands Except Per Share Data)
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Net Sales $ 10,101 $ 11,303 $ 22,893 $ 13,151 $ 10,899
Cost of goods sold 7,969 8,591 18,082 8,445 5,793
--------- --------- --------- --------- ---------
Gross profit 2,132 2,712 4,811 4,706 5,106
Selling, general and administrative expenses 6,613 6,834 18,748 17,450 14,966
--------- --------- --------- --------- ---------
Operating loss (4,481) (4,122) (13,937) (12,744) (9,860)
Other expenses (income) 359 (156) 281 (319) (1,004)
Interest expense 1,413 4,417 8,590 762 194
--------- --------- --------- --------- ---------
Loss from continuing operations, before (6,253) (8,383) (22,808) (13,187) (9,080)
income taxes and extraordinary item
Income tax provision (benefit) -- -- -- 110 (365)
--------- --------- --------- --------- ---------
Loss from continuing operations before
extraordinary item $ (6,253) $ (8,383) $(22,808) $(13,297) $ (8,685)
======== ========= ======== ======== ========
Loss per share from contunuing operations $ (1.35) $ (3.36) $ (8.48) $ (8.41) $ (6.68)
======== ========= ========= ========= ========
</TABLE>
* Restated
Pro-Forma As adjusted
December 31, December 31, December 31,
1998 1998 (1) 1998 (2)
Balance Sheet Data: ________ _________ ________
Total assets 27,802 30,322 30,218
Long term liabilities 12,598 16,768 368
Total liabilities 27,662 30,492 12,712
Common stock subject to put 1,820 1,820 1,820
Total stockholders' equity (1,680) (1,990) 15,686
(1) Includes January and March 1999 financing of $2,830,000.
(2) Adjusted to reflect conversion of cnvertible debentures and accrued
interest thereon.
- 7 -
<PAGE>
RISK FACTORS
Investors should carefully consider the factors set forth below as well
as the other information set forth in this Prospectus before purchasing the
Securities.
History of Losses; Profitability Uncertain
As of June 30, 1995 the Registrant had accumulated losses on a
consolidated basis of approximately $6,000,000. A substantial part of such
losses resulted from activities unrelated to the Company's present operations.
Since June 30, 1995 and for the three fiscal years commencing July 1, 1995 and
concluding June 30, 1998, the Company incurred additional net losses aggregating
$44,454,377 ($22,503,109 of which was attributable to year ended June 30, 1998).
For the six month period ended December 31, 1998, the Company incurred a further
loss of $7,086,046. Such additional losses primarily resulted from the
significant expenses associated with the development of the Company's products,
primarily its direct digital X-ray system, the ddR-Multi-System, the building of
the Company's organization and market position as well as the costs of
amortization of debenture issuance costs and beneficial conversion feature and
the absence of a significant increase in sales as a result of the delay in the
market introduction of certain of the Company's products. The likelihood of the
success of the Company must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the development of new products and the competitive environment in which the
Company operates. Although the Company is deriving operating revenue from its
current operations, such revenue has not been sufficient to make the Company's
operations profitable. There can be no assurance that the Company will be able
to develop significant additional sources of revenue or that it will become
profitable. Results of operations may fluctuate significantly and will depend
upon successful introduction of the ddR-Multi-System, market acceptance of new
product introductions in the future and competition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Products," "-- Research and Development" and "-- Competition."
Need for Market Acceptance of the ddR-Multi-System
The Company's future performance will depend to a substantial degree
upon the continued market introduction and acceptance of the ddR-Multi-System.
The Company's marketing efforts to date have generated considerable awareness
about the ddR-Multi-System among radiologists. Most recently from October 1997
through March 31, 1999, the Company installed thirteen ddR-Multi-Systems in the
United States and Europe and expects to sell an approximate additional twenty
ddR-Multi-Systems prior to conclusion of its fiscal year ended in June 1999
(although no assurance whatsoever can be made that such sales and/or
installations will be made in the numbers indicated or within the anticipated
time frame indicated). The extent of, and rate at which, the market
introduction, acceptance and penetration can be achieved by the ddR-Multi-System
are functions of many variables, including, but not limited to, obtaining the
necessary governmental approvals, price, effectiveness, acceptance by potential
customers and manufacturing, training capacity and marketing and sales efforts.
There can be no assurance that the ddR-Multi-System will achieve or maintain
acceptance in its target markets although management is pleased with the degree
of industry acceptance to date (especially reception and feedback received at
RSNA convention in Chicago in December 1998 and ECR convention in Vienna in
March 1999. Similar risks may confront other products developed by the Company
in the future. See "Business -- Products" and "-- Regulatory Matters."
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<PAGE>
Significant Portion of Company Assets Are Intangible Assets
As of June 30, 1998, and for the year then ended, the Company's
licensing agreement, patents and goodwill (aggregating approximately $5,600,000)
are all intangibles and account for approximately 22% of all Company assets.
Amortization of such intangibles amounts to approximately $652,000 or
approximately 3.5% of total operating expenses
Reliance on a Single Product
The Company has concentrated its efforts primarily on the development
of the ddR-Multi-System and will be dependent to a significant extent upon
acceptance of that product to generate additional revenues. There can be no
assurance that the ddR-Multi-System will be successfully commercialized
notwithstanding its recent successful introduction both within and without the
United States (as heretofore and hereinafter indicated). There can be no
assurance that the Company's competitors will not succeed in developing or
marketing technologies and products that are more commercially attractive than
the ddR-Multi-System. See "Business -- Products" and "-- Competition."
Reliance on Large Customers
In the past, the Company has made a significant amount of sales to a
few large customers. Historically, the identity of the Company's largest
customers and the volumes purchased by them has varied. The loss of one or more
of the Company's current two largest customers (who accounted for 33% and 5% of
Company sales during fiscal year ended June 30, 1998 and further accounted for
55% and 4% of Company sales for the six month period ended December 31, 1998) or
a reduction of the volume purchased by either of them would have an adverse
effect upon the Company's sales until such time, if ever, as significant sales
to other customers can be made. For the six month period ended December 31, 1998
a new customer (who didn't account for any sales during fiscal year ended June
30, 1998) accounted for 5% of Company sales. The Company considers the
relationship with its largest customers to be satisfactory. The Company expects
that as sales of its ddR-Multi-System increase, the Company's revenue will be
less dependent on a few large customers. See Note 21 to the Consolidated
Financial Statements June 30, 1998, 1997 and 1996 and "Business -- Sales and
Marketing."
Risk of Currency Fluctuations
The Company is subject to risks and uncertainties resulting from
changes in currency exchange rates. Future currency fluctuations, to the extent
not adequately hedged, could have an adverse effect on the Company's business,
financial condition and results of operations. On occasion, the Company enters
into currency forward contracts as a hedge against anticipated foreign currency
exposures and not for speculation purposes. Such contracts, which are types of
financial derivatives limit the Company's exposure to both favorable and
unfavorable currency fluctuations. In the past the Company has used forward
contracts exclusively in connection with the purchase of material in currencies
other than Swiss Francs or U.S. dollars. For a discussion of these risks, see
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations - Effect of Currency on Results of Operations."
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<PAGE>
No Registration Under "Blue Sky" Laws
The Registrant has not taken any action to register or qualify the
Securities for offer and sale under the securities or "blue sky" laws of any
state of the United States. However, pursuant to the Registration Rights
Agreements, the Registrant will use reasonable efforts to (i) register and
qualify the Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the investors who hold a
majority interest of the Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times until the earliest
(the "Registration Period") of (A) the date that is two years after the Closing
Date (B) the date when the Selling Holders may sell all Securities under Rule
144 or (C) the date the Selling Holders no longer own any of the Securities;
(iii) take such other actions as may be necessary to maintain such registrations
and qualification in effect at all times during the Registration Period and (iv)
take all other actions reasonably necessary or advisable to qualify the
Securities for sale in such jurisdictions; provided, however, that the
Registrant shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (B) subject itself to general taxation in any
such jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D) provide any undertakings that cause more than nominal expense
or burden to the Registrant or (E) make any change in its articles of
incorporation or by-laws or any then existing contracts, which in each case the
Board of Directors of the Registrant determines to be contrary to the best
interests of the Registrant and its stockholders. Unless and until such times as
offers and sales of the Securities by Selling Holders are registered or
qualified under applicable state securities or "blue sky" laws, or are otherwise
entitled to an exemption therefrom, initial resales by Selling Holders will be
materially restricted. Selling Holders are advised to consult with their
respective legal counsel prior to offering or selling any of their Securities.
Risks Associated With International Operations
The Company does business in numerous countries, including the United
States, Switzerland and Germany. Revenues from international operations outside
the United States amounted to approximately 60% of total sales for the fiscal
year ended June 30, 1998. In addition to the currency risks discussed above, the
Company's international operations are subject to the risk of new and different
legal and regulatory requirements in local jurisdictions, tariffs and trade
barriers, potential difficulties in staffing and managing local operations,
credit risk of local customers and distributors, potential inability to obtain
regulatory approvals, different requirements as to product standards, potential
difficulties in protecting intellectual property, risk of nationalization of
private enterprises, potential imposition of restrictions on investments or
transfer of funds, potentially adverse tax consequences, including imposition or
increase of withholding and other taxes on remittances and other payments by
subsidiaries, and local economic, political and social conditions, including the
possibility of hyper-inflationary conditions, in certain countries. Any adverse
change in any of these conditions could have a material adverse effect on the
Company's business or financial condition. See "-- Risk of Currency
Fluctuations," "-- Government Regulation," "Management's Discussion and Analysis
of Financial Condition and Results of Operations-Taxes," "-- Effect of Currency
on Results of Operations" and "Business -- Regulatory Matters."
The Company previously reported an order backlog for its digital x-ray
equipment as of June 30, 1997 of $30,000,000; $29,000,000 of which relates to a
contract with a purchaser located in South Korea. No portion of this $29,000,000
purchase order has been filled due to economic problems in South Korea and
beyond the Company's control. See also "Business - Backlog".
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<PAGE>
Highly Competitive Market, Rapid and Significant Technological Change
The highly competitive markets in which the Company operates are
characterized by rapid and significant technological change, evolving industry
standards and new product introductions. The Company competes with numerous
competitors, many of which are well-established in the Company's markets. Most
competitors are divisions of larger companies with potentially greater financial
and other resources than the Company.
The Company's competitors can be expected to continue to improve the
design and performance of their products and to introduce new products with
competitive price and performance characteristics. Although the Company believes
that it has certain technological and other advantages over its competitors,
realizing and maintaining these advantages will require continued investment by
the Company in research and development, sales and marketing and customer
service and support. There can be no assurance that the Company will have
sufficient resources to continue to make such investments or that the Company
will be successful in maintaining such advantages. If the Company's products or
technologies become non-competitive or obsolete, it will have a material adverse
effect on the Company. See "Business -- Competition."
Dependence on Patents and Proprietary Technology
The Company has patented certain aspects of its proprietary technology
in certain markets and has filed patent applications for its direct digital
technology in key markets, including the United States. The European patents for
the Add-On Bucky have been granted and expire January 2015. The duration of
other patents range from 2000 to 2016. However, there can be no assurance that
other applications will be granted. There can be no assurance that the Company's
issued patents or other patents issued in the future will afford protection from
material infringement or that such patents will not be challenged. The Company
also relies on trade secrets and proprietary and licensed know-how, which it
protects, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance that these agreements
will not be breached, that the Company would have adequate remedies for any
breach or that the Company's trade secrets will not otherwise become known to,
or independently developed by, competitors.
There also can be no assurance that the Company's technology will not
infringe upon the patents of others. In the event that any such infringement
claim is successful, there can be no assurance that the Company would be able to
negotiate with the patent holder for a license, in which case the Company could
be prevented from practicing the subject matter claimed by such patent. In
addition, there can be no assurance that the Company would be able to redesign
its products to avoid infringement. The inability of the Company to practice the
subject matter of patents claimed by others or to redesign its products to avoid
infringement could have a material adverse effect on the Company.
The Company has obtained a non-exclusive license for a term of two
years ending July 24, 1999 to use certain software for its line of
SwissVision(TM) postprocessing systems. There can be no assurance that this
license will not be granted to a competitor of the Company or that such license
will be renewed on favorable terms with the Company or at all. Negotiations with
respect to potential renewal of such license have not, as yet, commenced. See
"Business -- Intellectual Property."
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<PAGE>
Government Regulation
The Company's services, products and manufacturing activities are
subject to extensive and rigorous government regulation, including the
provisions of the Federal Food, Drug and Cosmetic Act. Commercial distribution
in certain foreign countries is also subject to government regulations. The
process of obtaining required regulatory approvals can be lengthy, expensive and
uncertain. Moreover, regulatory approvals, if granted, may include significant
limitations on the indicated uses for which a product may be marketed. The Food
and Drug Administration (the "FDA") actively enforces regulations prohibiting
marketing without compliance with the pre-market approval provisions of medical
devices. A Section 510(k) application is required in order to market a new or
modified medical device. If specifically required by the FDA, a pre-market
approval may be necessary. The FDA review process typically requires extended
proceedings pertaining to the safety and efficacy of new products, which may
delay or hinder a product's timely entry into the marketplace. On November 21,
1997, the AddOn Bucky(TM), the direct digital detector of the ddR-Multi-System
received FDA approval. The Company also submitted the ddR-Multi -System for
Section 510(k) approval with the FDA and such approval was obtained on December
18, 1997 so that the ddR-Multi-System may be marketed in the United States.
The FDA also regulates the content of advertising and marketing
materials relating to medical devices. There can be no assurance that the
Company's advertising and marketing materials regarding its products are and
will be in compliance with such regulations. The Company is also subject to
other federal, state, local and foreign laws, regulations and recommendations
relating to safe working conditions, laboratory and manufacturing practices.
Failure to comply with applicable regulatory requirements can result in, among
other things, fines, suspensions of approvals, seizures or recalls of products,
operating restrictions and criminal prosecutions. Furthermore, changes in
existing regulations or adoption of new regulations could affect the timing of,
or prevent the Company from obtaining, future regulatory approvals. The effect
of government regulation may be to delay for a considerable period of time or to
prevent the marketing and full commercialization of future products or services
that the Company may develop and/or to impose costly requirements on the
Company. There can also be no assurance that additional regulations will not be
adopted or current regulations amended in such a manner as will materially
adversely affect the Company. See "-- Risks Associated With International
Operations," "Business -- Markets" and "-- Regulatory Matters."
The Company is in compliance with the following regulations:
Section 510(K) notification, 21CFR 892.1680, Reg. K973710 Quality
Assurance QSR 21 CFR Part 820 and Part 820.72 (inspection) General
Labeling Provisions and 21 CFR Part 801.4, 801.5 and 801.6 Swissray
agreement about Data (Patient) protection.
ISO 9001/EN 46001 and Appendix II
Sales to Health Care Industry
The Company's products are used exclusively in the health care
industry, which is highly regulated. The health care industry in certain markets
for the Company's products, including the United States, has experienced
significant pressure to reduce costs, which has led in some jurisdictions to
substantial reorganizations and consolidations of health care providers or
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<PAGE>
payors. Cost reduction efforts by the Company's customers may adversely affect
the potential markets for the Company's products and services. It is also
possible that legislation could be adopted in any of these jurisdictions which
could increase such pressures or which could otherwise result in a modification
of the private or public health care system or both or impose limitations on the
ability of the Company to market its products in any such jurisdiction. Any such
event or condition could have an adverse impact on the Company's business,
financial condition or results of operations. See "Business -- Markets."
Reliance on Key Management
The Company's business is highly dependent on the principal members of
its management, marketing, research and development and technical staffs, and
the loss of their services might impede the achievement of the Company's
business objectives. In addition, the Company's future success will depend in
part upon its ability to retain highly qualified management, scientific,
technical and marketing personnel. There can be no assurance that the Company
will be successful in retaining such qualified personnel or hiring additional
qualified personnel. Losses of key personnel could have a material adverse
effect on the Company's business. The Company has no key man life insurance
policies with respect to any of its senior executives. See "Business -- Research
and Development" and "Management -- Directors and Executive Officers of the
Company."
Limited Manufacturing History with Respect to ddR-Multi-System
The Company has limited experience with the manufacture and assembly of
the ddR-Multi-System in the volumes that will be necessary for the Company to
generate significant revenues from the sale of the ddR-Multi-System. The Company
may encounter difficulties in scaling up its production or in hiring and
training additional personnel to manufacture the ddR-Multi-System. Future
interruptions in supply or other production problems could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business - Products".
Dependence on Sole Source Suppliers
The Company has only single sources for certain essential components of
the ddR-Multi-System. Interruptions in the supply of such components might
result in production delays, each of which could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"-- Reliance on A Single Product".
The percentage of Company revenues derived from products which include
components only currently available from a single source supplier amounts to 14%
as of December 31, 1998. The agreement with the single source supplier of CCD
cameras expires after purchase of 175 Units and thereafter is subject to
renegotiation while the agreement with the single source supplier of optics
expires in July 2002 and is similarly subject to renegotiations.
Future Capital Needs and Uncertainty of Additional Financing
There can be no assurance that the Company will not be required to seek
additional equity or debt capital to finance its operations in the future. In
addition, there can be no assurance that any such financings, if needed, will be
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<PAGE>
available to the Company or that adequate funds for the Company's operations,
whether from the Company's revenues, financial markets, collaborative or other
arrangements with corporate partners or from other sources, will be available
when needed or on terms attractive to the Company. The inability to obtain
sufficient funds may require the Company to delay, scale back or eliminate some
or all of its research and product development programs, sales and marketing
efforts, manufacturing and slide processing operations, clinical studies and/or
regulatory activities or to grant licenses to third parties to commercialize
products or technologies that the Company would otherwise seek to market and
sell itself.
Any additional convertible debenture financings will result in
additional dilution to present Company shareholders by reducing their percentage
of interest in the Company. In the past the Company has issued (and currently
intends to issue when, as and if necessary) debt convertible into common stock
without any limits on the amount that can be converted over any specific period
of time. Since such conversion occurs at a negotiated discount from market
price, such conversion can have a negative impact upon the trading price of the
Company's common stock. Further, since there is no "floor" in the debt
convertibles (i.e., no bid price below which debentures may not be converted)
there is no specific limit on the number of shares that may be issued upon
conversion since such number of shares is dependent upon common share price at
time of conversion.
There can be no assurance that any additional source of financing at
reasonable terms or otherwise (be it debt and/or equity financing) will be
available to the Company in the future or that absent such financing the Company
will have sufficient cash flow to maintain operations in the manner
contemplated. See also risk factor directly below regarding shares issued since
May of 1995 as a result of debt or equity financing.
Significant Number of Shares Issued as a Result of Equity and Debt Financings
Pursuant to Regulation S and Regulation D
From May 1995 through March 26, 1999 the Company has engaged in a
significant number of equity (Regulation S) financings and debt (Regulation D)
financings. Appearing directly below is a chart indicating the number of shares
issued as a result of such finanicngs.
<TABLE>
<CAPTION>
Type of Date of Closing Number Of Proceeds Outstanding
Financing Financing Bid Price Shares Issued(3) Received Balance
<S> <C> <C> <C> <C> <C>
Reg S- Off-Shore May 20, 1995 (4) 2,000,000 $4,000,000 $ -0-
Reg S- Off-Shore Dec. 10, 1995 (4) 1,000,000 $4,500,000 $ -0-
Reg S- Convertible Sept. 11, 1996 $4.125 1,872,707 $3,800,000 $ -0-
Reg S- Convertible Jan. 10, 1997 $3.00 2,395,709 $3,500,000 $ -0-
Reg S- Off-Shore Mar. 5, 1997 $2.6875 1,000,000 $2,000,000 $ -0-
Reg S- Prom. Note Apr. 28, 1997 $1.96875 800,000 $2,000,000 $ -0-
Reg S- Convertible May 15, 1997 $2.40625 -- $2,000,000 $ -0-
Reg S- Convertible June 15, 1997 $3.0625 -- $2,000,000 $ -0-
Reg S- Convertible July 31, 1997 $2.750 4,077,878 $4,262,500 $ -0- (includes May and June1997)
Reg D- Convertible Aug. 19, 1997 $2.6875 3,643,053 $5,000,000 $1,850,000 rolled over
Reg D- Convertible Nov. 26, 1997 $1.84375 4,397,081 $2,158,285 $ -0-
Reg D- Convertible Dec. 11, 1997 $1.375 7,735,099 $3,690,000 $ -0-
Reg D- Convertible Mar. 16, 1998 N/A 2,260,638 $5,500,000 $334,228
Reg D- Convertible June 15, 1998 $.578 (1) $2,000,000 $2,000,000
Reg D- Convertible Aug. 31, 1998 $.281 (1) $6,143,849 $5,784,421
Reg D- Convertible Oct. 6, 1998 $.188 (1) $2,940,000 $2,940,000
Reg D- Prom. Note Dec. 10, 1998 $.500 (1)(2) $1,119,600 $1,119,600
Reg D- Convertible Jan. 29, 1999 $.375 (1) $1,170,000 $1,170,000
Reg D- Prom. Note Mar. 2, 1999 $.437 (1)(2) $1,110,000 $1,150,700
Reg D- Prom. Note Mar. 26, 1999 $.59375 (1)(2) $ 550,000 $ 570,166.66
</TABLE>
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<PAGE>
(1) Utilizing the April 13, 1999 bid price for the Company's common stock
($2.125) and assuming an 18% to 20% discount from market, if all convertible
debentures were converted the number of shares required to be issued (inclusive
of such shares as may be issued for interest earned) would amount to 9,661,459
shares. However, since (as indicated in preceding risk factor) the debenture
agreements do not contain any "floor" provisions, the number of shares as may
actually be issued in the future may significantly increase if there is a
further significant decline in the bid price of the Company's common stock.
(2) These shares may be issued pursuant to terms of three Promissory Notes and
Contingent Subscription Agreements in the event that Promissory Notes are not
paid on or before respective due dates. See also "Description of Capital Stock -
Contingently Convertible Promissory Notes - December 1998, March 2, 1999 and
March 26, 1999".
(3) In accordance with the terms of the debentures and related agreements,
2,738,944 of these shares have been issued with restrictive legends and are
included in the number of shares being registered pursuant to this Registration
Statement. (4) Date precedes initial NASDAQ listing when securities traded in
"pink sheets". Price is not available.
Potential Recalls and Product Liability
Any of the Company's products may be subject to recall for unforeseen
reasons. The medical device industry has been characterized by significant
malpractice litigation. As a result, the Company faces a risk of exposure to
product liability, errors and omissions or other claims in the event that the
use of its X-ray equipment, components, accessories or related services or other
future potential products is alleged to have resulted in a false diagnosis and
there can be no assurance that the Company will avoid significant liability.
There also can be no assurance that the Company will be able to retain its
current insurance coverage or that such coverage will continue to be available
at an acceptable cost, if at all. Consequently, such claims could have a
material adverse effect on the business or financial condition of the Company.
As of the date hereof, the Company continues to maintain what it considers to be
adequate product liability insurance so as to enable it to be compensated for
certain losses incurred as a result of product recalls and product liability
claims (but remains "at risk" if and to the extent that awarded damages exceed
coverage).
Dilution; Effect of Outstanding Convertible Debentures on Certain Shares
The Registrant has outstanding convertible debentures and options to
purchase Common Stock at prices that are below the per share price to purchasers
of the Registrant's Common Stock in the market. The discount from market,
dependent upon the specific convertible debenture, ranges from 18% to 20% except
for one instance where the discount from market was 25% on a $145,969 debenture
(since entirely converted into shares of Company common stock). The exercise of
such convertible debentures or options would have a dilutive effect on the
investment of a holder of the Registrant's Common Stock. As of March 31, 1999 if
all of the principal balance and interest earned on outstanding unconverted
convertible debentures, promissory notes and warrants were converted (based on
calculation contained in this Registration Statement) the Registrant would be
required to issue 9,761,459 shares of its common stock thereby increasing total
outstanding from 11,712,379 to 21,473,838 and reducing percentage of all current
stockholders from 100% to 55%. Historically the Company has met (and intends to
continue to meet) its convertible debenture obligations through issuance of
stock as opposed to cash payments (i.e., interest earned from issuance of
debenture to date of conversion has been paid in stock).
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<PAGE>
The market price of the Registrant's Common Stock may also be adversely
affected by sales of substantial amounts of Common Stock in the public market,
including sales of Common Stock under Rule 144 or after the expiration of any
other applicable holding period (by contract and/or statute). The sale of such
stock could also adversely affect the ability of the Registrant to sell Common
Stock for its own account. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management -- Compensation of
Directors and Executive Officers," "Selling Holders and Plan of Distribution"
and "Description of Capital Stock."
Limited Public Market; Liquidity; Possible Volatility of Stock Price
The Common Stock was quoted on the Nasdaq SmallCap Market System under
the symbol "SRMI" until its delisting on October 26, 1998 and is currently
quoted on the Electronic Over-the-Counter Bulletin Board under the same symbol.
There can be no assurance that an established public market for the Common Stock
can be established and/or sustained. The market price of the Common Stock could
fluctuate significantly as a result of the Company's financial results,
regulatory approval filings, clinical studies, technological innovations or new
commercial products introduced by the Company or its competitors, developments
concerning patents or proprietary rights, trends in the health care industry or
in health care generally, litigation, the adoption of new laws or regulations or
new interpretations of existing laws or regulations and other factors.
Delisting Due To Fact of Non-Compliance With Certain NASDAQ Standards
The Nasdaq Stock Market recently adopted certain changes to the
standards for issuers with securities listed on Nasdaq. One of the changes
included increasing the quantitative maintenance requirements for continued
listing in the Nasdaq SmallCap Market, on which the Company's Common Stock was
then listed and traded under the symbol SRMI until October 26, 1998 delisting.
In order to maintain continued listing on Nasdaq the Company's Common Stock was
required to maintain a closing bid price at least equal to $1.00 per share. On
October 26, 1998 NASDAQ determined to delist Company's securities from The
NASDAQ Stock Market effective with the close of business October 26, 1998. The
advise (accompanying the delisting letter) indicated in pertinent part that (a)
the bid price of Company's common stock had fallen below $1.00 per share on
October 26, 1998 despite the Company having demonstrated ".. a closing bid price
in excess of $1.00 for a period of 17 consecutive trading days" and (b) the
Company's 15 day extension within which to timely file its Form 10-K for fiscal
year ended June 30, 1998 had expired October 15, 1998 and, accordingly, "the
Registrant is now deficient in filing its 10-K for the fiscal year ended June
30, 1998".
The NASDAQ Listing and Hearing and Review Council ("Review Council")
may, on its own motion, determine to review any NASDAQ Listing Qualifications
Panel ("Panel") decision within 45 calendar days after issuance of a written
decision. The Review Council, by letter dated December 9, 1998, and on its own
initiative, called for review of the above referenced Panel's decision. The
Review Council may affirm, modify, reverse, dismiss, or remand the decision to
the Panel. The Registrant may also request the Review Council to review its
decision and such request must be made within 15 days of the date of this
decision. The institution of a review, whether by way of any request, or on the
initiative of the Review Council, does not operate as a stay of NASDAQ's October
26, 1998 delisting decision.
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<PAGE>
The Company formally requested a review of NASDAQ's decision in a
timely manner and such request was confirmed by NASDAQ on November 16, 1998
wherein NASDAQ indicated that the Company had until January 15, 1999 for its
submission of any additional information it may deem pertinent for purposes of
Review Council's consideration. The Company understands that the Review Panel is
prepared to and will consider any and all additional information supplied to it
by the Company that did not exist at the time of delisting and, accordingly, the
Company provided certain new and significant information (in a timely manner)
for NASDAQ's consideration.
On April 1, 1999 The NASDAQ Listing and Hearing Review Council
("Council") issued a Decision whereby it reversed and remanded the decision of
the NASDAQ Panel with instructions, having found that the Company was not
provided with adequate notice and opportunity to respond to all of the basis
upon which the Panel apparently determined to delist the Company's securities.
The Council's instructions directs NASDAQ staff and Panel to determine
whether the Company complies with all continued listing requirements for the
Nasdaq SmallCap Market and demonstrates the ability to maintain compliance with
these requirements in the long term. Such Council's decision directs the staff
to conclude its review and provide its findings to the Panel within 45 days from
April 1, 1999. The decision further states that "If, at the time of the staff's
review, the staff finds that the Company meets all of the requirements for
continued listing on The Nasdaq SmallCap Market, demonstrates the ability to
maintain compliance with these requirements in the long term, and there are no
new adverse developments, the Panel should relist the Company on the SmallCap
Market. If, however, the staff finds that the Company does not meet all of the
continued listing requirements or does not demonstrate the ability to maintain
compliance with these requirements for the long term, the Panel must notify the
Company of which requirement(s) it fails to satisfy." (providing the Company
with 15 days to respond).
Broker-Dealer Sales of Company Securities (Consisting of Shares of Common Stock)
Subject to Sales Practice Requirements (Regarding Certain Low-Priced,
Non-NASDAQ, Over-The-Counter Securities) Under the Exchange Act of 1934
The Company's securities (i.e. its Common Stock) are covered by a
Securities and Exchange Commission rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers to subsequently resell their
securities in the secondary market.
No Dividends and None Anticipated
The Company has not paid any dividends upon its common stock since its
inception and by reason of its present financial condition and contemplated
financing requirements does not anticipate paying any dividends in the
foreseeable future but rather intends to retain earnings, if any, in order to
finance its further growth and development.
- 17 -
<PAGE>
Environmental Matters
The Company is subject to various environmental laws and regulations in
the jurisdiction in which it operates. Although the Company believes that it is
in substantial compliance with applicable environmental requirements and the
Company to date has not incurred material expenditures in connection with
environmental matters, it is possible that the Company could become subject to
additional environmental liabilities in the future that could result in an
adverse effect on the Company's financial condition or results of operations.
See "-- Environmental Matters" and "Business -- Environmental Matters."
Year 2000 Issue
Many currently installed computer systems and software products are
coded to accept only two-digit entries to represent years in the date code
field. Computer systems are products that do not accept four-digit year entries
and will need to be upgraded or replaced to accept four-digit entries to
distinguish years beginning with 2000 from prior years. Management is in the
process of becoming compliant with the Year 2000 requirements and believes that
its management information system will comply with the Year 2000 requirements on
a timely basis at a minimal cost. The Company currently does not anticipate that
it will experience any material disruption to its operations as a result of the
failure of its management information system to be Year 2000 compliant. There
can be no assurance, however, that computer systems operated by third parties,
including customers vendors, credit card transactions processors and financial
institutions, with which the Company's management information system interface
will continue to properly interface with the Company's system and will otherwise
be compliant on a timely basis with year 2000 requirements. The Company
currently is evaluating the Year 2000 compliance status of third parties with
which its system interfaces. Any failure of the Company's management information
system or the systems of third parties to timely achieve Year 2000 compliance
could have a material adverse effect on the Company's business, financial
condition, and operating results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE COMPANY
The Registrant was incorporated under the laws of the State of New York
on January 2, 1968 under the name CGS Units Incorporated. On June 15, 1994, the
Registrant merged with Direct Marketing Services, Inc. and changed its name to
DMS Industries, Inc. In May of 1995 the Registrant discontinued the operations
then being conducted by DMS Industries, Inc. and acquired all of the outstanding
securities of SR Medical AG, a Swiss corporation engaged in the business of
manufacturing and selling X-ray equipment, components and accessories. On June
5, 1995 the Registrant changed its name to Swissray International, Inc. The
Registrant's operations are being conducted principally through its wholly owned
subsidiaries, SR Medical Holding AG (known as SR Medical AG until renamed in
February 1998), the latter's wholly owned subsidiaries, SR Medical AG (known as
Teleray AG until renamed in February 1998), a Swiss corporation, Swissray
(Deutschland) Rontgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company and Teleray Research and Development AG, a Swiss
corporation, as well as through the Company's other wholly owned subsidiaries,
SR Management AG (formerly SR Finance AG), a Swiss corporation, Swissray Medical
Systems, Inc. (formerly Swissray Corporation), a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation, and Swissray Information Solutions,
Inc., a Delaware corporation. In September 1998 the Company established an
additional wholly owned subsidiary, Swissray America Inc., a Delaware
corporation. Unless otherwise specifically indicated, all references hereinafter
to the "Company" refer to the Registrant and its subsidiaries. See Note 1 to the
Consolidated Financial Statements for June 30, 1998, 1997 and 1996.
- 18 -
<PAGE>
The Company and its predecessors have been in the business of
manufacturing and selling X-ray equipment in Switzerland and Germany since 1988.
Beginning in 1991, the Company's predecessors began to expand into other markets
in Europe, the Middle East and Asia. In 1992, SR Medical AG entered into a first
Original Equipment Manufacturing ("OEM") Agreement with Philips Medical Systems
GmbH ("Philips Medical Systems") providing for the manufacturing of a
multi-radiography system ("MRS"). In 1996, this agreement was replaced with a
new OEM Agreement ("Philips OEM Agreement") which provides for the manufacturing
of the Bucky Diagnost TS bucky table in addition to the MRS System.
Simultaneously, the Company developed the first SwissVision(TM) post-processing
system which was able to convert analog images obtained in fluoroscopy into
digital information. Beginning in 1993, the Company began the development of
direct digital X-ray technology for medical diagnostic purposes.
On November 6, 1996, the Company formed Swissray Corporation (which has
since been renamed Swissray Medical Systems, Inc.), a Delaware corporation
located in Azusa, California, as the Company's principal authorizing division in
the United States.
On April 1, 1997, the Company acquired Empower, Inc., a New York
corporation ("Empower") which since incorporation in 1985, had been engaged in
distributing and servicing diagnostic X-ray equipment and accessories in the New
York/New Jersey/Connecticut area. Certain details with respect to such
acquisition were reported in a Form 8-K and Form 8-K/A1 with date of report of
April 1, 1997. In February 1998 the Company entered into a letter of intent with
E.M. Parker Co., Inc., a Massachusetts corporation ("Parker") with respect to
the sale of Empower's film and x-ray accessories business. Thereafter, the
Company and its wholly owned subsidiary, Empower, Inc. ("Empower") entered into
an Asset Purchase Agreement with Parker pursuant to which the Company and
Empower sold and Parker purchased substantially all of the assets of Empower
(excluding certain excluded assets as defined in the Agreement) in consideration
of: (i) the assumption by Parker of certain liabilities of Empower; (ii) the
cash purchase price of $250,000.00; and (iii) the payment by Parker of
approximately $376,000 to a banking institution in satisfaction of certain
outstanding indebtedness of Empower. Empower remains a wholly owned (but
currently inactive) subsidiary of the Company.
During the fiscal year ended June 30, 1997, the Company created a new
Information Solution Division known as Swissray Information Solutions, Inc.
which is engaged in services related to Picture Archiving and Communications
Systems ("PACS") as well as consulting activities. This division is located in
Gig Harbor, Washington and headed by Michael J. Baker, who has more than 20
years experience in radiology, most recently as head of Lockheed Martin's
Medical Imaging Systems division.
On October 17, 1997, the Company acquired substantially all of the
assets of Service Support Group LLC ("SSG") located in Gig Harbor, Washington,
principally in exchange for the payment of approximately $622,000 in cash and
issuance of 33,333 shares of its Common Stock in equal thirds to each of SSG's
then owners based upon certain warranties and representations made by them.
Pursuant to the terms of the Asset Purchase Agreement and related Registration
Rights Agreement both dated October 17, 1997 (Exhibits 10.9 and 10.10 hereto),
the holders of such Company shares were then given the right, commencing June
30, 1998 and terminating April 16, 1999, to require the Company to purchase any
or all of such shares at $45.00 per share. Since its formation on October 16,
1996, SSG has been in the business of selling diagnostic imaging equipment and
providing services related thereto in the markets on the West Coast of the
United States. Issues involving the aforesaid Company shares and a number of
other related matters became the subject of dispute and litigation. See "Legal
Proceeding". The three former SSG owners relationship with the Company (and
certain Company subsidiaries with whom such persons held positions as officers,
to wit: Swissray Medical Systems, Inc. and Swissray Healthcare, Inc.) was
terminated on July 20, 1998. As a result of such termination Ueli Laupper has
been appointed Chief Executive Officer of both Swissray Medical Systems, Inc.
and Swissray Healthcare, Inc. (with Michael J. Baker being appointed Deputy
Chief Executive Officer of both subsidiaries). See "Prospectus Summary",
"Business -- Research and Development."
- 19 -
<PAGE>
DETERMINATION OF OFFERING PRICE
Since the Common Stock registered hereunder is being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), the Registrant cannot include herein information
about the price to the public of the Common Stock. Additionally, the conversion
price can be determined by the convertible debenture holder by virtue of the
fact that such holder determines date of conversion and price of common stock is
based upon a set discount from market price at or about time of conversion.
USE OF PROCEEDS
The Registrant will not receive any of the proceeds from the sale of
the Securities. All of the proceeds will be received by the Selling Holders. See
"Selling Holders and Plan of Distribution."
MARKET PRICES AND DIVIDEND POLICY
The Registrant's common stock, $.01 par value (the "Common Stock") was
listed on the Nasdaq SmallCap Market and traded under the symbol SRMI until
October 26, 1998 delisting. Since January 1999 the Company's common stock has
been trading on the Electronic Over-the-Counter Bulletin Board under the same
symbol. The following table sets forth, for the periods indicated, the range of
high and low bid prices on the dates indicated for the Registrant's securities
indicated below for each full quarterly period within the two most recent fiscal
years (if applicable) and any subsequent interim period for which financial
statements are included and/or required to be included.
Fiscal Year Ended June 30, 1997 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1996 $50.625 $36.875
2nd December 31, 1996 $40.00 $23.75
3rd March 31, 1997 $35.625 $16.875
4th June 30, 1997 $32.50 $14.063
Fiscal Year Ended June 30, 1998 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1997 $16.375 $15.625
2nd December 31, 1997 $12.50 $11.25
3rd March 31, 1998 $16.875 $7.50
4th June 30, 1998 $10.00 $5.00
Fiscal Year Ended June 30, 1999 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1998 $5.625 $1.88
2nd December 31, 1998 $1.375 $0.875
3rd March 31, 1999 $1.25 $0.375
- 20 -
<PAGE>
(1) The Registrant's Common Stock began trading on the Nasdaq SmallCap
market on March 20, 1996 with an opening bid of $47.50. The
following statement specifically refers to the Common Stock activity,
if any, prior to March 20, 1996 and subsequent to October 26, 1998
NASDAQ delisting. The existence of limited or sporadic quotations
should not of itself be deemed to constitute an "established
public trading market." To the extent that limited trading in the
Registrants's Common Stock took place, such transactions have been
limited to the over-the-counter market. Until March 20, 1996 and since
October 26, 1998, all prices indicated are as reported to the
Registrant by broker-dealer(s) making a market in its common stock in
the National Quotation Data Service ("pink sheets") and in the
Electronic Over-the-Counter Bulletin Board. During such dates the
Registrant's Common Stock was not traded or quoted on any automated
quotation system other than as indicated herein. The over-the-counter
market and other quotes indicated reflect inter-dealer prices without
retail mark-up, mark-down or commission and do not necessarily
represent actual transactions.
(2) All prices indicated hereinabove (and elsewhere throughout this
Registration Statement unless otherwise indicated) take into account
and retroactively reflect a 1 for 10 reverse stock split effective
October 1, 1998).
As of the close of business on March 31, 1999 there were 683
stockholders of the Registrant's Common Stock and 11,712,379 shares issued and
outstanding.
The payment by the Registrant of dividends, if any, in the future rests
within the discretion of its Board of Directors and will depend, among other
things, upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Registrant has not paid or
declared any dividends upon its Common Stock since its inception and, by reason
of its present financial status and its contemplated financial requirements,
does not contemplate or anticipate paying any dividends upon its Common Stock in
the foreseeable future.
- 21 -
<PAGE>
CAPITALIZATION
The following table sets forth (i) the current liabilities and
capitalization of the Company as of December 31, 1998 and (ii) the pro forma
liabilities and capitalization as of December 31, 1998, adjusted to reflect the
conversion of the Convertible Debentures and accrued interest thereon subsequent
to such date.
<TABLE>
<CAPTION>
Proforma as
Actual Proforma (2) Adjusted
----------- ----------- -----------
<S> <C> <C> <C>
Current liabilities 15,064,487 16,724,487 12,344,453
Long-term liabilities, net of current portion 12,597,543 13,767,543 367,725
Total liabilities 27,662,030 30,492,030 12,712,178
Common stock subject to put 1,819,985 1,819,985 1,819,985
Stockholders' equity:
Common stock, $.01 par value, 30,000,000 46,380 84,380 213,739
shares authorized; 4,637,982 issued and
outstanding; 8,437,98224 proforma;
21,373,838 as adjusted (1)
Additional paid-in-capital 59,657,215 60,569,215 78,316,426
Treasury Stock (540,000) (540,000) (540,000)
Accumulated deficit (57,567,759) (57,877,759) (58,078,144)
Accumulated other comprehensive loss (1,455,742) (1,455,742) (1,455,742)
Common stock subject to put (1,819,985) (1,819,985) (1,819,985)
Total stockholders' equity (1,679,891) (1,989,891) 15,686,294
Total capitalization 10,917,652 11,777,652 16,054,019
</TABLE>
(1) Based on a conversion price of 80% to 82% of the average of the high
and low closing price on March 31, 1999.
(2) Includes January and March 1999 financings of $2,830,000.
DILUTION
As of December 31, 1998 the Company's net tangible book value per share of
Common Stock was $(1.50). "Net tangible book value per share" represents total
tangible assets minus total liabilities divided by the number of shares of
Common Stock outstanding. After giving effect to the conversion of the
Convertible Debentures and accrued interest thereon and the net proceeds from
financings occurring in January and March 1999, the net tangible book value per
share would increase to $.49, assuming a conversion price of $1.39. This
represents an immediate increase in net tangible book value of $1.99 and an
immediate dilution of $.90 per share to purchasers of shares purchasing at the
conversion price.
Offering price per share $1.39
-----
Net tangible book value per Share before Offering $ (1.50)
--------
Increase in net tangible book value per share
attributable to conversion $ 1.99
------
Pro forma net tangible book value per Share
after Offering $ .49
------
Dilution from Offering price which will be
absorbed by purchaser $ .90
------
- 22 -
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The selected consolidated financial data presented below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and related
notes thereto included elsewhere in this Prospectus. The selected consolidated
financial data as of and for the fiscal years ended, December 31, 1994, June 30,
1995 (six-month period), June 30, 1996, June 30, 1997 and June 30, 1998 and the
six month periods ended December 31, 1998 and December 31, 1997 are derived from
the consolidated financial statements of the Company.
<TABLE>
<CAPTION>
Six Month Period Ended Year Ended
------------------------ -----------------------------------------------------------
(Unaudited) (Six Months)
12/31/98 12/31/97 6/30/98 6/30/97* 6/30/96* 6/30/95(1) 12/31/94
--------- -------- -------- -------- -------- --------- --------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales 10,101 11,303 22,893 13,151 10,899 3,806 8,618
Cost of goods sold 7,969 8,591 18,082 8,445 5,793 2,484 5,363
----- ------- ------ ------- ------- ------ -------
Gross profit 2,132 2,712 4,811 4,706 5,106 1,322 3,255
Gross profit margin (%) 21% 24% 21% 36% 47% 35% 38%
Selling, general and
administrative expenses 6,613 6,834 18,748 17,450 14,966 2,307 3,175
Operating (loss) income (4,481) (4,122) (13,937) (12,744) (9,860) (985) 80
Other expenses (income), net 359 (156) 281 (319) (1,004) 3,054 15
Interest expense 1,413 4,417 8,590 762 194 122 237
----- ----- ----- ------ ------ ----- -----
Loss from continuing operations,
before income taxes and
extraordinary item (6,253) (8,383) (22,808) (13,187) (9,050) (4,161) (172)
Income tax provision (benefit) -- -- - 110 (365) (339) 24
----- ------- ------ ------- ------- ------ -------
Loss from continuing operations
before extraordinary item (6,253) (8,383) (22,808) (13,297) (8,685) (3,822) (196)
======= ======= ======== ======= ======= ====== ======
Loss per share from continuing
operations - basic (1.35) (3.36) (8.48) (8.41) (6.69) (4.80) (.30)
======== ======== ======== ========= ======== ======= ======
BALANCE SHEET DATA:
Working capital (deficit) 388 6,001 1,085 2,833 3,433 1,185 (1,236)
Total assets 27,802 30,449 25,915 24,788 18,793 13,027 3,899
Short-term debt, including
current portion of
long-term debt 6,186 4,356 3,910 4,211 2,737 2,954 2,843
Long-term debt 12,598 8,118 7,771 5,835 -- 705 420
Common stock subject to put 1,820 320 1,820 320 -- -- --
Stockholders' (deficit)
equity (1,680) 10,095 4,339 7,373 10,655 6,377 (798)
Total shares outstanding
at year end (2) 4,638 2,681 4,143 1,969 1,419 1,204 785
</TABLE>
(1) In 1995, the Registrant changed its fiscal year end from December 31 to
June 30. As a result, the Company had a fiscal year beginning on
January 1, 1995 and ending on June 30, 1995. Accordingly, the Summary
Financial Data for the period ended June 30, 1995 is for a six-month
period.
(2) On October 1, 1998 the Company declared a 1 for 10 reverse stock split.
The financial statements for all periods presented have been
retroactively adjusted for the split.
* Restated
- 23 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All references herein to the "Registrant" refer to Swissray
International Inc. All references herein to the "Company" refer to Swissray
International, Inc. and its subsidiaries.
GENERAL
The focus of the Company for the fiscal year ended June 30, 1998 and
six months ended December 31, 1998, was mainly on the industrialization and
commercialization of the newly developed products AddOn-Multi-System and Bucky
Diagnost TS and the building and strengthening of its organization and
distribution channels in the principal markets USA and Europe. At the recent
annual conference of the Radiological Society of North America (RSNA 98), the
Company announced that its premier product, the AddOn-Multi-System has been
renamed ddR-Multi-System. The recent name change is much more in line with the
overall system concept and strategy of the Company.
In the USA the Company acquired, in October 1997, substantially all of
the assets of Service Support Group LLC (SSG), a company active in the business
of selling diagnostic imaging equipment and providing services related thereto
in the markets on the West Coast of the United States. The Company also started
its activities, in the US and later also in Europe, in the business of
information solutions by providing a comprehensive package of consulting,
services and products to enable the Healthcare providers to perform the
transition into filmless Radiology. Significant amounts of money were invested
in the opening of the market of the Company's direct digital ddR-Multi- Systems,
both in the US and in Europe.
During the start-up of the production of the Company's newly developed
products, the ddR-Multi-System and the Bucky Diagnost TS, gross margins were
affected negatively because of the need of extra time for training the newly
hired production staff and implementation of the production run as well as
efforts made to improve and maintain the highest product quality. The Company
expects to lower costs and time needed for production of these systems in a
later stage of the learning curve due to positive impact of the optimized
production run. The sales of ddR-Multi-System was slowed down by certain
governmental requirements for the sale of Healthcare products, which differ from
one country to the other. On July 26, 1998, SR Medical AG, the Company's Swiss
marketing subsidiary, was ISO 9002 and EN 46002 certified and on March 8, 1999
Swissray Medical AG, the Company's Swiss research and development, production
and marketing subsidiary became ISO 9001 and EN 46001 certified. The Company
filed for CE approval of the ddR-Multi-System in July 1998. Appendix II for
CE-Certification is expected to be completed in April 1999, which allows the
Company to use the CE-Label, including the medical device numbers for all
products manufactured and/or sold through the Company.
The Company started a restructuring process in the fourth quarter of
its fiscal year ended June 30, 1998. With the sale of Empower's Film, Processor
and Chemistry Business to E.M. Parker, the Company continued its focus on
digital Radiography. The process of restructuring is ongoing and includes mainly
internal reorganization to achieve lean structures and cost savings.
- 24 -
<PAGE>
YEAR 2000 POLICY STATEMENT
The Company will help their customers to achieve Year 2000 compliance
on their equipment purchased from the Company through a program of solutions.
The Company has conducted an extensive program to check the status of its
equipment related to the millennium.
For relevant material delivered by third parties the Company has asked
and gotten written assurances when they expect their year 2000 compliance's will
be solved. To date, the Company received written responses of 90% and out of
those 83% confirmed to have no year 2000 problems.
In fact, over 75% of the Company's installed base equipment is already
in compliance and expected to encounter no problems on January 1, 2000.
The Company has organized its products according to A-B-C-D categories
of compliance:
Category A: Already compliant
Category B: Not yet compliant but will be made compliant
Category C: Not listed in A or B categories
Category D: Non- The Company branded products
To all of the Company's customers, specific compliance information also
will be provided to advise them on the status of their equipment purchased from
the Company and to offer solutions for the millennium.
For those customers with non-compliant systems, the Company will
provide solutions in virtually all cases. For a flat fee, these solutions will
cover any applicable site surveys, software licensing, software, installation,
and labor.
The Company does not recommend some solutions offered by other
companies, so-called "workaround" scenarios, such as setting back the clock
because the Company believes that the safest, surest way to maintain the
integrity of data and the viability of information networks is to correct the
problem, not mask it with labor-intensive stop-gaps. Simply put, to protect the
customers the Company will fix their equipment right the first time.
YEAR 2000 COMPLIANT LISTS
The Company reserves the right to modify or update these lists as it
continues to work on the Year 2000 status of its products. The products listed
have been tested on a stand alone basis; therefore an operational environment's
test results may differ. This information does not affect existing warranties,
warranty exclusions, exclusive warranty remedies or limitations of liability.
Class A Systems: Year 2000 Compliant
GEN-X-Generators: Bucky Table Systems:
GEN-X-500 - Eurabil C-Arm Plus
GEN-X-650 - Eurabil C-Arm Top
GEN-X-800
- 25 -
<PAGE>
GEN-X-1000 - Euramove 1
GEN-X-2000 - Euramove 2
GEN-X-3000 - Euramove 3
GEN-X-4000 - Euramove 4
MRS Conv. - Eurastat 2
- Eurastat 4
Atlas Systems: - Bucky-Diagnost TS
Atlas-U / US 2000
Atlas-U / US 3000 Special Systems
Atlas-U / US 4000 - Euralem 1400
Atlas-BV-Tomo - Euralem 1500
MRS Stativ - Euralem 1800
- Euralem Tomo
Urology Systems:
KU-100 Digital Bucky Systems:
KU-100 H - ddR-Multi-System
KU-100 H Tomo
Class B Systems: Not Year 2000 Compliant, Solution will be offered
GEN-X-Generators: Mobile C-Arm Systems:
Turnomat 500 - Eurabil C-Arm Standard
Mobile Systems:
Fluoroscopy Systems: - Eurabil 5
Euroscop 3A - Eurabil 15
Euroscop 6, 6+, 6++ - Eurabil 30
IT-Systems internally used
In its year 2000 project the Company has tested and asked for
statements about the year 2000 compliance. In fact 100% of IT-Systems within the
Company are compliant and expected to encounter no problems on January 1, 2000.
The operating system of the Company's IT-Systems are build on
Microsoft. (Windows 95 and/or Windows NT). SWISSRAY also uses the Microsoft
Office packages for its administration and therefore relies for the operating
system as well as the Microsoft Office package on the year 2000 compliance of
Microsoft for the above mentioned products.
IT-Systems Third Parties
The Company also asked all important partners (e.g. banks, suppliers,
sales channels) for statements about the year 2000 compliance. This survey still
is ongoing and the Company has not received negative responses. Of the partners
being asked approximately 60% have already answered.
- 26 -
<PAGE>
YEAR 2000 PROJECT COSTS
The Company has separated its cost in the following parts:
<TABLE>
<CAPTION>
Until June 30, 1998 Total expected
----------------------- ------------------
<S> <C> <C>
Test & Survey own Products $ 42,000 $ 50,000
Test & Survey Third Parties Products $ 8,000 $ 20,000
Modification own Products $ 12,000 $ 20,000
Administration (Communication with Third Parties) $ 5,000 $ 5,000
Consultant $ - $ 5,000
-------------- ------------
TOTAL YEAR 2000 Project costs $ 67,000 $ 100,000
</TABLE>
SIX-MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED TO SIX-MONTH PERIOD ENDED
DECEMBER 31, 1997
Results of operations
Net sales amounted to $10,101,147 for the six-month period ended
December 31, 1998, compared to $11,302,578, a decrease of $1,201,431, or 10.6%
from the six-month period ended December 31, 1997. Net sales of $11,302,578 for
the six month period ended December 31, 1997 includes sales of the film and
processor business of Empower which was sold on June 30, 1998, of $3,949,854.
Net sales without the film and processor business of Empower increased for the
six-month period ended December 30, 1998 by $2,748,423 or 37.4%.
Gross profit increased by $579,826 or 21.4% to $2,131,805 for the
six-month period ended December 31, 1998, from $2,711,631 for the six-month
period ended December 31, 1997. Gross profit as a percentage of net revenues
decreased to 21.1% for the six-month period ended December 31, 1998 from 24% for
the six-month period ended December 31, 1997.
Operating expenses decreased by $220,281, or 3.2% to $6,613,311, or
65.5% of net revenues, for the six-month period ended December 31, 1998, from
$6,833,592, or 60.5% of net revenues for the six-month period ended December 31,
1997. The principle items were salaries (net of officers and directors
compensation) of $2,064,577 or 20.4% of net sales for the six-month period ended
December 31, 1998 compared to $1,926,769 or 17% of net sales for the six-month
period ended December 31, 1997 and selling expenses of $1,438,281 or 14.2% of
net sales for the six-month period ended December 31, 1998 compared to
$1,674,198 or 14.8% of net sales for the six-month period ended December 31,
1997. Research and development expenses were $843,589 or 8.4% of net sales for
the six-month period ended December 31, 1998 compared to $1,422,482 or 12.6% of
net sales for the six-month period ended December 31, 1997.
Interest expense decreased to $1,412,696 for the six months ended
December 31, 1998 compared to $4,416,914 for the six months ended December 31,
1997. This decrease is primarily due the decrease of interest expense for
amortization of Debenture issuance cost and Conversion Benefit.
- 27 -
<PAGE>
Loss on extinguishment of debt was $832,849 for the six months ended
December 31, 1998 compared to a gain of $304,923 for the six months ended
December 31, 1997. The extinguishment gain or loss resulted from refinancing of
Convertible debentures.
Financial Condition
December 31, 1998 compared to June 30, 1998
Total assets of the Company on December 31, 1998 increased by
$1,887,527 to $27,802,124 from $25,914,597 on June 30, 1998, primarily due to
the increase in current assets. Current assets increased $2,383,089 to
$15,452,346 on December 31, 1998 from $13,069,257 on June 30, 1998. The increase
in current assets is primarily attributable to the increase in accounts
receivable of $1,982,959 and the increase in inventory of $620,696 which was
offset by the decrease in prepaid expenses and sundry receivables of $163,842
and the decrease in cash and cash equivalents of $56,724. Other assets decreased
$489,555 to $6,345,407 on December 31, 1998 from $6,834,962 on June 30, 1998.
The decrease is primarily attributable to the amortization of the licensing
agreement, patents & trademark, software development cost and the goodwill.
On December 31, 1998, the Company had total liabilities of $27,662,029
compared to $19,755,870 on June 30, 1998. On December 31, 1998, current
liabilities were $15,064,487 compared to $11,984,554 on June 30, 1998. Working
capital at December 31, 1998 was $387,859 compared to $1,084,703 at June 30,
1998.
CASH FLOW AND CAPITAL EXPENDITURES SIX MONTH PERIOD ENDED DECEMBER 31, 1998
COMPARED TO SIX MONTH PERIOD ENDED DECEMBER 31, 1997.
Cash used for operating activities for the six months ended December
31, 1998 was $5,972,737 compared to $6,475,460 for the six months ended December
31, 1997. Cash used for investing activities was $198,115 for the six months
ended December 31, 1998 compared to $1,012,969 for the six months ended December
31, 1997. Cash flow from financing activities for the six months ended December
31, 1998 was $6,366,092 compared to $7,548,547 for six months ended December 31,
1997.
The Company anticipates that its use of cash will be substantial for
the foreseeable future. In particular, management of the Company expects
substantial expenditures in connection with the production of the planned
increase of sales, the continuation of the strengthening and expansion of the
Company's marketing organization and, to a lesser degree, ongoing research and
development projects. The Company expects that funding for these expenditures
will be available out of the Company's, future cash flow and/or issuance of
equity and/or debt securities.
However, the availability of a sufficient future cash flow will depend
to a significant extent on the marketability of the Company's ddR-Multi-System.
Accordingly, the Company may be required to issue additional convertible
debentures or equity securities to finance such capital expenditures and working
capital requirements. There can be no assurance whether or not such financing
will be available on terms satisfactory to management.
On August 31, 1998 the Company issued $3,832,849 aggregate principal
amount of 5% convertible debentures (the "Convertible Debentures") including a
25% premium and accrued interest, convertible into Common Stock of the Company.
The Company did not receive any cash proceeds from the offering of the
Convertible Debentures. The full amount was paid by investors to holders of the
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Company's Convertible Debentures issued on March 14, 1998 holding $3,000,000 of
such Convertible Debentures as repayment in full of the Company's obligations
under such Convertible Debentures. During the same period the Company issued
$2,311,000 aggregate principal amount of 5% Convertible Debentures, convertible
into Common Stock of the Company. After deducting fees, commissions and escrow
fees in the aggregate amount of $311,000 the Company received a net amount of
$2,000,000. The face amount of both Convertible Debentures are convertible into
shares of Common Stock of the Company commencing March 1, 1999 at a conversion
price equal to the lesser of 82% of the average closing bid price for the ten
trading days preceding the date of the conversion or $1.00 per share. Any
convertible Debentures not so converted are subject to mandatory conversion by
the Company on the 24th monthly anniversary of the date of issuance of the
Convertible Debentures.
On October 6, 1998 the Company issued $2,940,000 aggregate principal
amount of 5% convertible debentures (the "Convertible Debentures") including
$540,000 repurchase of stock, convertible into Common Stock of the Company.
After deducting fees, commissions and escrow fees in the aggregate amount of
$300,000 the Company received a net amount of $2,100,000. The face amount of the
Convertible Debentures is convertible into shares of Common Stock of the Company
any time after the closing date at a conversion price equal to the lesser of 82%
of the average closing bid price for the ten trading days preceding the date of
the conversion or $1.00. Any Convertible Debentures not so converted are subject
to mandatory conversion by the Company on the 24th monthly anniversary of the
date of issuance of the Convertible Debentures.
The Company received gross proceeds of $1,080,000 on or about December
11, 1998, pursuant to promissory notes bearing interest at the rate of 8% per
annum for the first 90 calendar days (through March 13, 1999) with the Company
having the option to extend the notes for an additional 60 days with interest
increasing 2% per annum during the 60 day period. The Company exercised its
extension option. As further consideration for the loan, the Company issued
Lenders Warrants to purchase up to 50,000 shares of the Company's common stock
exercisable, in whole or in part, for a period of up to 5 years at $.375 (the
bid price for Company shares on the date of closing). The notes are secured by a
second mortgage on land and building as well as certain Company inventory. In
the event that the promissory notes are not paid by their due date then the
terms of a Contingent Subscription Agreement, Debenture and Registration Rights
Agreement shall apply. In that respect the convertible debentures are to bear
interest at the rate of 5% per annum (payable in stock or cash at the Company's
option) and are convertible, at any time at the lesser of (a) 82% of the 10 day
average bid price for the 10 consecutive trading days immediately preceding the
conversion date or (b) $1.00 per share. The documents also provide for certain
Company redemption rights at percentages ranging from 115% of the face amount of
the Debenture to 125% of the face amount of the debenture dependent upon
redemption date, if any.
On January 29, 1999 the Company issued a principal aggregate amount of
$1,170,000 of convertible debentures ("Convertible Debenture"), convertible into
Common Stock of the Company at a conversion price of 82% of the average closing
bid price for the ten trading days preceding the date of conversion together
with accrued interest of 3% for the first 90 days, 3.5% for 91-120 days and 4%
for 120 days and thereafter. After deducing fees directly attributable to such
offering the Company received a net amount of $1,020,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") and the Company received
written representations from each investor to that effect. Any Convertible
Debenture not so converted are subject to mandatory conversion by the Company on
the 24th anniversary date of issuance of the Convertible Debentures. None of
these Convertible Debentures have been converted as of March 31, 1999.
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The Company entered into a second promissory note on March 2, 1999
(contingent convertible debenture financing) with the same lenders as the
December 1998 transaction described directly above with terms and conditions
identical to those set forth above excepting (a) gross proceeds amounted to
$1,110,000, (b) the initial due date of such notes are May 31, 1999, (c) the
potential 60 day extension date on such promissory notes is July 30, 1999, (d)
the conversion price is 80% of the 10 day average closing bid price for the 10
consecutive trading days preceding conversion date and (e) Warrants were issued
(similarly exercisable over 5 years) to purchase up to 50,000 shares of common
stock at 125% of the average 5 day closing bid price of the Company's common
stock immediately preceding the date of closing but in no event at less than
$1.00 per share. In all other respects the terms and conditions of each of the
documents executed with respect to this transaction are identical to those
described above for the December 11, 1998 notes in all material respects.
The Company entered into a third promissory note on March 26, 1999
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above (a) the lender is different (b) gross proceeds amounted to
$550,000, (c) the initial due date of such note is June 25, 1999, (d) the
potential 60 day extension date on such promissory note is August 24, 1999, (e)
Warrants were issued (similarly exercisable over 5 years) to purchase up to
27,000 shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock immediately preceding the date of closing but in no
event at less than $1.00 per share. In all other respects the terms and
conditions of each of the documents executed with respect to this transaction
are identical to those described in the above referenced March 2, 1999
transaction.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The result of operations and the financial position of the Company's
subsidiaries outside of the United States is reported in the relevant foreign
currency (primarily in Swiss Francs) and then translated into US dollars at the
applicable foreign exchange rate for inclusion in the Company's consolidated
financial statements. Accordingly, the results of operations of such
subsidiaries as reported in US dollars can vary significantly as a result of
changes in currency exchange rates (in particular the exchange rate between the
Swiss Franc and the US dollar).
YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997
Net sales for the fiscal year ended June 30, 1998 were $22,892,978
compared to $13,151,701 for the fiscal year ended June 30, 1997.
The 74% increase in net sales was partially due to the acquisition of
Empower on April 1, 1997 (Sales of Empower were $7,134,928 for the fiscal year
ended June 30, 1998 compared to $2,000,603 for the fiscal year ended June 30,
1997), the Asset purchase of Service Support Group LLC on October 17, 1997
(Sales of Swissray Medical Inc. which started its selling activities after the
asset purchase of Service Support Group was $1,577,298 for the fiscal year ended
June 30, 1998 compared to $0 for the fiscal year ended June 30, 1997) and the
increase in sales made under the Philips OEM Agreement of $6,500,529. Also sales
to third parties in Switzerland almost doubled in the fiscal year ended June 30,
1998 compared with the previous fiscal year. These increases have been partially
offset by the decrease of $1,519,159 in Sale of Elscint products and decreased
sales for Eastern Europe. The Company sold four of the ddR-Multi-System during
the fiscal year ended June 30, 1998.
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Gross profits amounted to $4,811,192 or 21% of net sales for the fiscal
year ended June 30, 1998, compared to $4,706,287 or 35.8% of net sales for the
fiscal year ended June 30, 1997. The decrease in gross profits as a percentage
of net revenues is primarily attributable to the fact that sales of lower-margin
products increased substantially compared to the fiscal years ended June 30,
1997. This is mainly attributable to increased sales of accessories, which are
generally low-margin products, as a result of the acquisition of Empower (net
sales of Empower contributed approximately 31% to the Company's net sales). The
Company also sold a significant number of units of newly developed products,
where the Company is at the beginning of the learning curve in the production
process, which results in higher production costs than in a later stage of the
learning curve. These products are the Bucky Diagnost TS produced under the OEM
Agreement with Philips (which contributed approximately 22% to the Company's net
sales) and the ddR-Multi-System (which contributed approximately 6% to the
Company's net sales). The Company expects sales of accessories to be of a
smaller percentage of total sales for the fiscal year ending June 30, 1999
because of the sale of Empower's accessory business to E.M. Parker.
Operating expenses for the fiscal year ended June 30, 1998 were
$18,747,729 or 81.9% of net sales compared to $17,450,333 or 132.7% of net sales
for the fiscal year ended June 30, 1997. The principal items were selling
expenses of $3,740,391 or 16.3% of net sales compared to $1,873,389 or 14.2% of
net sales for the fiscal year ended June 30, 1997 and salaries (net of directors
and officers compensation) of $4,168,540 or 18.2% of net sales compared to
$2,059,396 or 15.6% of net sales for the fiscal year ended June 30, 1997.
Research and Development was $3,542,149 or 15.5% of net sales compared to
$5,786,158 or 44% of net sales for the fiscal year ended June 30, 1997.
General and administrative expenses for the year ended June 30, 1997
include the value of stock options granted in the amount of $1,161,462, whereas
no stock options were granted during the fiscal year ended June 30, 1998. The
Company made an accrual of $500,000 for planned restructuring of its
organization. No such costs were accrued in the fiscal year ended June 30, 1997.
The increase of 102% in Salaries was mainly due to the acquisition of
Empower Inc. on April 1, 1997 (with salaries included in the consolidated
statement of operation only for one quarter of the fiscal year ended June 30,
1997) and the takeover of all of the employees of Service Support Group on
October 17, 1997. Both acquisitions were within the Company's marketing strategy
to build a strong market position with its own organization in one of its
principle markets. The number of employees in Switzerland was increased by 21
mainly to handle the significant rise in production volume.
The increase of 100% in selling expenses is the result of additional
significant efforts on the part of the Company to build a strong market position
in the United States and in Germany, the biggest European market as well as the
costs incurred for successful market introduction of the Company's direct
digital ddR-Multi-System. The Company also made efforts to lay the groundwork
for the market introduction of Swissray Information Solutions comprehensive
package of consulting, services and products.
Research and development expenses decreased by 39%. Management
considered the relative size of the research and development expenses for the
fiscal year ended June 30, 1997 as high. The main focus of the R&D was the
industrialization phase of the ddR-Multi-System and the development of
communication interfaces (DICOM 3.0, HL 7, Dicom Worklist etc.) to extend the
connectivity of the ddR-Multi-System to communication networks such as HIS, RIS,
and PACS. Another important task was to finalize the Tahoma TMSSM software and
go into beta-tests. The Tahoma TMSSM, technology management systems are based on
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the premise that technology is a resource that can be managed to achieve
organizational objectives, like reducing operating expense and improving
clinical performance. Additional research and development expenses have also
been incurred to maintain the technological advantages of the Company's
conventional X-ray equipment. Significant research and development expenses will
continue to be incurred for the development of new technologically advanced
products and the continuing improvement of existing products.
The Company's operating loss increased to $13,936,537 for the fiscal
year ended June 30, 1998 from $12,744,046 for the fiscal year ended June 30,
1997. The increase in the Company's operating loss is due to the significant
expenses associated with the building of the Company's organization and market
position primarily in one of its principle markets, the USA. After taking into
account interest expense, other income, income tax benefits and extraordinary
items of income (loss) the resulting net loss of the Company for the fiscal year
ended June 30, 1998 increased to $22,503,109 from $13,685,188 for the fiscal
year ended June 30, 1997. The increase of net loss is mainly due to the
significant amount of interest expenses which resulted from the amortization of
issuance cost and beneficial Conversion features of Convertible debentures
issued for financing purposes, which amounted to $8,590,268 for the fiscal year
ended June 30, 1998 compared to $759,853 for the fiscal year ended June 30,
1997. Extraordinary income includes the gain on early extinguishment of Debt
which resulted from refinancing of Convertible debentures.
CASH FLOW AND CAPITAL EXPENDITURES
Cash used by operating activities for the fiscal year ended June 30,
1998 increased to $11,759,371 from $10,684,988 for the fiscal year ended June
30,1997 and cash used by investing activities increased to $4,517,140 for the
fiscal year ended June 30, 1998 from $3,668,196 for the fiscal year ended June
30, 1997. Cash flow from financing activities for the fiscal year ended June 30,
1998 was $14,799,200 compared to $14,752,928 for the fiscal year ended June 30,
1997.
The Company's capital expenditures totaled $2,849,205 for the fiscal
year ended June 30, 1998 compared to $3,431,375 for the fiscal year ended June
30, 1997. Capital expenditures were primarily for the improvements of the
Hochdorf facility and the purchase of equipment. The increased financing needs
resulted primarily from the building and strengthening of the Company's
organization and distribution channels in the US and Europe and the improvements
of the Hochdorf facility.
INFLATION
Inflation can affect the costs of goods and services used by the
Company. The competitive environment in which the Company operates limits
somewhat the Company's ability to recover higher costs through increasing
selling prices. Moreover, there may be differences in inflation rates between
countries in which the Company incurs the major portion of its costs and other
countries in which the Company sells its products, which may limit the Company's
ability to recover increased costs, if not offset by future increase of selling
prices. To date, the Company's sales to high-inflation countries have either
been made in Swiss Francs or US dollars. Accordingly, inflationary conditions
have not had a material effect on the Company's operating results.
SEASONALITY
The Company's business has historically experienced a slight amount of
seasonal variation with sales in the first fiscal quarter slightly lower than
sales in the other fiscal quarters due to the fact that the Company's first
quarter coincides with the summer vacations in certain of the Company's markets.
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BACKLOG
Management estimates that as of the end of the fiscal year ended June
30, 1998, the Company had an order backlog of $13,000,000.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 103"), and No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 130 established standards for reporting
and displaying comprehensive income, its components and accumulated balances.
SFAS 131 establishes standards for the way that public companies report
information about operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim financial
statements issued to the public. Both SFAS 130 and SFAS 131 are effective for
periods beginning after December 15, 1997. The Company adopted these new
accounting standards in 1998, and their adoption had no effect on the Company's
financial statements and disclosures.
Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.
Bederson & Company LLP ("Bederson") audited the books, records and
accounts of the Registrant for the fiscal year ended June 30, 1997. Bederson was
dismissed on November 7, 1997.
On November 7, 1997 the Board of Directors selected STG-Coopers &
Lybrand AG ("STG") as the Registrant's auditors for the fiscal year ending June
30, 1998 and this action was ratified by the stockholders at the Annual Meeting
held on December 23, 1997.
On November 2, 1998 (after having failed to complete the audit for
fiscal year ended June 30, 1998 in a timely manner or otherwise) STG advised the
Company that it had determined to cease to represent the Company. On November 6,
1998 the Company engaged Feldman Sherb Ehrlich & Co., P.C. ("FSE") as its new
independent accountants and such firm commenced and concluded its audit so that
the Company was able to file its Form 10-K on December 3, 1998. STG acknowledged
in its required letter to the SEC that there were no disagreements, as defined
by Rule 304 of Regulation S-K during the period that STG served as the Company's
auditors through the date of STG's resignation.
For further information with respect to change of auditors as indicated
in the preceding paragraph, reference is herewith made to the Company's Form 8-K
and 8-K/A with date of report of November 3, 1998 as filed with the Commission
on November 6, 1998 and November 27, 1998 respectively.
BUSINESS
Overview
The Company is active in the markets for diagnostic imaging devices for
the health care industry. Diagnostic imaging devices include X-ray equipment,
computer tomography ("CT") systems and magnetic resonance imaging ("MRI")
systems for three dimensional projections, nuclear medicine ("NM") imaging
devices and ultrasound devices.
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The Company is primarily engaged in the business of manufacturing and
selling diagnostic X-ray equipment for all radiological applications other than
mammography and dentistry. In addition, the Company is in the business of
selling imaging systems and components and accessories for X-ray equipment
manufactured by third parties and providing services related to diagnostic
imaging.
X-rays were discovered in 1895 by Wilhelm Konrad Rontgen. Shortly
thereafter, X-ray imaging found numerous applications for medical diagnostic and
non-medical purposes. Today, medical X-ray imaging is a fundamental tool in bone
and soft tissue diagnosis. X-ray diagnosis is primarily used in orthopedics,
traumatology, gastro-enterology, angiography, urology, pulmology, mammography
and dentistry. The principal elements of a diagnostic X-ray system are the X-ray
generator, the X-ray tube and the bucky device. The generator generates high
tension, which is converted into X-rays in the X-ray tube. The X-rays so created
then penetrate a patient's body and subsequently expose a film contained in the
bucky device. Following exposure, the film is chemically processed and dried in
a dark room. A typical room used for general X-ray examinations (bucky room)
contains an X-ray system which includes a table with a bucky device for
examinations of recumbent patients (bucky table) and a wall stand with a second
bucky device for examinations of sitting and standing patients (bucky wall
stand).
The film used in conventional X-ray systems has certain inherent
disadvantages, including the significant amount of time and operating expenses
associated with the handling, processing and storage thereof, the need for
chemicals to develop films and the environmental concerns related to their
disposal. Additional expenses and inconveniences arise in connection with the
storage, duplication and transportation of conventional films. The following
X-ray systems have been developed to overcome these disadvantages: scanning
devices, phosphor plate or Computed Radiography(TM) ("CR") systems and direct
digital radiography ("ddR") systems. Scanning devices are used to convert
existing X-ray images into a digital form. While the use of scanning devices
permits the electronic storage, retrieval and transmission of X-ray images, they
do not eliminate the other inconveniences of conventional films and add time and
expenses associated with the scanning process. In a CR system the film cassette
is replaced with a phosophor plate which is electrically charged by X-rays. The
electrical charges on this phosphor plate are then converted into digital
information by a laser scanner. Although this system has the advantage that the
phosphor plates are reusable and the inconveniences related to the development
of X-ray films are eliminated, it does not achieve instant images and a
significant amount of time and operating expenses are required in connection
with the handling and scanning of the phosphor plates. Additional expenses arise
due to the fact that phosphor plates have a limited lifespan.
ddR technology is designed to eliminate the disadvantages and
significant operating costs associated with conventional X-ray systems and CR
systems. With ddR technology digital information can be made available for
diagnostic purposes within a few seconds after an X-ray image is taken without
any additional steps, thereby reducing processing time and related operating
expenses. Direct digital X-ray technology uses either charge coupled devices
("CCD") arrays, amorphous silicon/selenium panels or selenium drums to convert
X-rays into digital information. To the Company's knowledge, no silicon or
selenium-based technology is currently available for purposes of general X-ray
diagnosis. To the Company's knowledge, the only CCD based direct digital
technology available for general diagnostic purposes is the Company's AddOn
Bucky(TM). While other CCD based direct digital X-ray systems are used for
dental X- ray imaging and chest examinations, the Company believes that neither
such technologies nor the silicium based technology used in a chest examination
system offered by one of the Company's competitors can easily be adapted for
general diagnostic purposes because none is capable of providing the resolution
necessary to obtain digital information with sufficient diagnostic value on a
standard 14" by 17" X-ray image.
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Products
The Company's marketing strategy is to offer its customers a complete
package of products and services in the field of radiology, including equipment,
accessories and related services such as consulting and after-sales services.
The Company's products include a full range of conventional X-ray equipment for
all diagnostic purposes other than mammography and dentistry, the direct digital
ddR-Multi-System and the SwissVision(TM) line of DICOM 3.0 compatible
postprocessing work stations operating on a Windows NT platform. Currently, most
of the Company's X-ray equipment is manufactured and developed in Switzerland.
On July 26, 1996, SR Medical AG, the Company's Swiss marketing subsidiary, was
ISO 9002 and EN 46002 certified and on March 8, 1999 Swissray Medical AG, the
Company's Swiss research and development, production and marketing subsidiary
became ISO 9001 and EN 46001 certified. Appendix II for CE - Certification is
expected to be completed in April 1999, which allows the Company to use the
CE-Label, including the medical device numbers for all products manufactured
and/or sold through the Company. See also "Products Distribution of Agfa
Products".
Digital ddR-Multi-System/SwissVision
The ddR-Multi-System, which includes a SwissVision(TM) workstation for
the postprocessing of digital image data and the transfer of such data through
central networks or via telecommunications systems, is a complete multi-
functional direct digital X-ray system which combines the functions of a
conventional bucky table and a bucky wall stand. The Company's own estimates and
research into this area indicate that the ddR-Multi-System is the first direct
digital radiography system available which allows for substantially all plane
X-ray examinations on the recumbent, upright and sitting patient necessary in
orthopedics, emergency rooms and chest examination rooms. The ddR-Multi-System
uses the Company's AddOn Bucky(TM) as the digital detector. The AddOn Bucky(TM)
is able to make available an X-ray image in a direct digital way for diagnostic
study within 16 to 20 seconds. As a consequence, the efficiency and the
throughput of the bucky room can be increased. The Company believes that a
significant advantage of the Company's ddR-Multi-System is the fact that a
variety of X-ray examinations can be made with the use of only one digital
detector, the most expensive part of an X-ray system using direct digital
technology.
During the 100 years in which X-ray imaging has been used for medical
purposes, there has been a continuous trend to improve image quality, to reduce
the radiation dose and to improve the ergonomic features of X-ray equipment.
Management believes that the ddR technology developed by the Company will take
this development to the next level because the ergonomically advanced
ddR-Multi-System provides excellent image quality with minimal radiation doses
and at the same time reduces operating expenses through the elimination of
films, phosphor plates or cassettes and the handling, development and storage
thereof.
The Company's line of SwissVision(TM) postprocessing workstations
permit the postprocessing of digital X-ray images, including section, zooming,
enlargement, soft tissue and bone structure imaging, accentuation of the
limitation of the joints, noise suppression, presentation of different fields of
interest within an area and archiving and transferring the data through central
networks and telecommunication systems. In addition, the SwissVision(TM)
post-processing workstations are able to analyze data stored with respect to a
particular patient. As a result, consistent image quality of different images of
the same patient can be achieved. The workstations operate on a Windows NT
platform and are DICOM 3.0 compatible. The Company is also offering products and
services related to networking, archiving and electronic distribution of digital
X-ray images, including PACS.
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Conventional X-Ray Equipment, Imaging Systems, Components and
Accessories
The Company manufactures and sells conventional diagnostic X-ray
equipment for all radiological applications other than mammography and
dentistry. The conventional X-ray equipment manufactured by the Company includes
X- ray generators, basic X-ray equipment, bucky table systems, mobile X-ray
systems, mobile C-arm systems, fluoroscopy systems, urology systems and remote
controlled examination systems. In addition, the Company sells components and
accessories for X-ray systems. In general, the components and accessories for
X-ray equipment sold by the Company are manufactured by third parties. In
Switzerland, the Company was the exclusive distributor of CT systems, MRI
systems and NM systems manufactured by Elscint. No sales were made under such
distributorship arrangement for the fiscal year ended June 30, 1998 while for
the fiscal year ended June 30, 1997 revenues under such agreement approximated
12% of total sales. The Company does not currently have any business
arrangements with Elscint in that such firm sold all or part of its company to
Picker International Inc. and GE Medical Systems in the later part of 1998.
Original Equipment Manufacturing (OEM)
On June 11, 1996, the Company entered into a new OEM Agreement (the
"Philips OEM Agreement") with Philips Medical Systems which replaced the
previous OEM Agreement with Philips Medical Systems, dated July 29, 1992. The
Philips OEM Agreement provides for the production of two conventional X-ray
systems, the Bucky Diagnost TS bucky table and a Multi Radiography System
("MRS"), which is approved by the World Health Organization ("WHO") as a World
Health Imaging System for Radiology ("WHIS-RAD"). As a result, the Company's MRS
system may be tendered in projects financed by the World Bank. Under the Philips
OEM Agreement these two products are marketed worldwide by Philips Medical
Systems through its existing distribution network. The initial term of the
Philips OEM Agreement expires on December 31, 2000.
Services
The services offered by the Company include the installation and
after-sales servicing of imaging equipment sold by the Company, consulting
services and application training of radiographers. In the United States, the
Company offers consulting services to hospital imaging departments and imaging
centers, including maintenance management, and after-sales services of products
manufactured by the Company and third parties. Maintenance management services
for imaging equipment include the management of after-sales services with
respect to different kinds and brands of imaging equipment (multi-vendor and
multi-modality services).
Distribution of Agfa Products
In April of 1998 the Company entered into a OEM Agreement with Agfa for
the distribution of the latter's laser imagers, dry printers and computed
radiography systems. By virtue of having entered into such distribution
agreement, the Company is able to offer a complete solution for a total digital
radiology department. Both Company products and Agfa products are DICOM 3.0
compatible and can be used on a network or for ponit-to-point connections. Agfa,
a leading worldwide manufacturer of imaging products and systems, is part of the
Agfa-Gevaert Group, with Agfa-Gevaert being a wholly owned subsidiary of Bayer
AG.
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Markets
Product Markets
The Company estimates that the global market for X-ray equipment and
accessories is approximately $5 billion, 45% of which is in the United States,
26% in Western Europe, 19% in Japan and 10% in the rest of the world (Sources:
National Electrical Manufacturers Association; Market Line). The Company's
principal markets for its X-ray equipment, components and accessories by country
are Switzerland, the United States and Germany constituting 56%, 40% and 4% of
the Company's sales during the fiscal year ended June 30, 1998 respectively. The
Company believes that because of the need to bring medical services to Western
standards, Eastern Europe continues to offer interesting opportunities as a
market for the Company's conventional X-ray equipment and accessories. The
Company has also been able to gain access to markets in Asia, the Middle East
and Africa. See "-- Sales and Marketing."
The Company believes that the principal markets for its direct digital
X-ray equipment are located in North America and Western Europe, where the first
sales of the ddR-Multi-System have been made. The Company submitted both its
AddOn Bucky(TM) and the ddR-Multi-System to the FDA for Section 510(k)
clearance. On November 21, 1997, the Company's AddOn Bucky(TM), the direct
digital detector of the ddR-Multi-System, received FDA approval and on December
18, 1997 the Company's ddR-Multi-System received FDA approval; the Company thus
receiving authorization to market the ddR-Multi-System in the United States.
Having obtained the required approval from the FDA, the Company intends to sell
the ddR-Multi-System in the United States through its subsidiaries and other
channels. See "Risk Factors -- Government Regulation" and "Business --
Regulatory Matters."
Service Markets
The Company estimates that the worldwide market for services related to
X-ray equipment, including maintenance management is approximately $44 billion,
of which approximately $40.5 billion (or 92%) relate to after-sales services.
The markets for maintenance management and capital planning amount to $3.4
billion or 8% of the total market for services related to X-ray equipment. The
principal markets for after-sales services are the United States (45%), Western
Europe (26%) and Japan (19%). The Company expects that as the installed base of
X-ray equipment grows, the market for after-sales services will also expand.
Additional growth may result from a general increase in the demand for such
services. To date, a significant market for maintenance management and capital
planning has only developed in the United States as a result of the impact of
managed care plans and health maintenance organizations ("HMOs") on the health
care industry. The Company expects that in the future there will be a similar
trend in Europe, which may lead to the development of a market for such services
in Europe. See "-- Products" and "-- Sales and Marketing."
Sales and Marketing
The Company's customers are universities, hospitals, clinics, imaging
centers and physicians. The Company markets its products and services primarily
through its own sales force in the United States, Switzerland, Germany and
Eastern Europe and through resellers in these and other markets in Europe,
Middle East, Africa, Asia, and Latin America. The Company also offers products
and services related to networking, electronic archiving and distribution,
including PACS, through the Swissray Information Solution division.
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Two of the Company's products, the MRS system and the Bucky Diagnost TS
system, are distributed worldwide through Philips Medical Systems.
The Company believes that in the foreseeable future there will be a
continuous world-wide growth in the markets for complete X-ray systems,
components, accessories and related services because of the improvement of
health care services in developing countries and Eastern Europe and the
necessity to meet increasingly stricter regulations with respect to radiation
dosage and other safety features and environmental hazards in many
jurisdictions. With the transition from conventional to digital X-ray systems,
the demand for products and services related to networking, archiving and
electronic distribution of digital X-ray images will grow in industrialized
countries. In these markets the demand for conventional X-ray equipment,
accessories and related services will decrease over time. See "-- Markets."
In the past, the Company has made a significant amount of sales of
conventional X-ray equipment to a few large customers. For the fiscal year ended
June 30, 1998 sales to the Company's two largest customers accounted for
approximately 38% of all revenues while sales to the Company's single largest
customer during such period accounted for approximately 33% of all revenues.
The Company considers the relationship with its largest customers to be
satisfactory. Historically, the identity of the Company's largest customers and
the volumes purchased by them has varied. The loss of one or more of the
Company's current two largest customers or a reduction of the volume purchased
by either of them would have an adverse effect upon the Company's sales until
such time, if ever, as significant sales to other customers can be made. The
Company expects that as sales of its ddR-Multi-System increase, the Company's
revenue will be less dependent on a few large customers. See "Risk Factors --
Reliance on Large Customers" and Note 21 to the Company's Consolidated Financial
Statements.
In August 1998 the Company entered into a global distributorship
agreement for its ddR-Multi-System with Elscint Ltd. of Haifa to sell and
service such product in 14 countries in Europe, Canada, South America and
Africa. Soon thereafter almost all of the assets of Elscint Ltd. were sold to
Picker International and GE Medical Systems respectively. Neither Picker
International nor GE Medical Systems have executed the distributorship agreement
as of March 31, 1999 and therefore the Company is unable to sell 75
ddr-Multi-Systems (partially anticipated to be sold through Elscint Ltd.) within
the fiscal year 98/99 as originally planned.
Research and Development
During the fiscal year ended June 30, 1998, the Company incurred
expenses related to research and development of $3,542,149 (accounting for 19%
of the Company's operating expenses) compared to $5,786,158 (accounting for 33%
of the Company's operating expenses) for fiscal year ended June 30, 1997 and
compared to $1,731,502 (accounting for 12% of the Company's operating expenses)
during the previous fiscal year and $233,084 (or 10.1% of the Company's
operating expenses) during the 6-month period ended June 30, 1995. The increase
of the Company's research and development expenses by 643% from the fiscal year
ended June 30, 1995 to the fiscal year ended June 30, 1996 resulted primarily
from the Company's decision not to market the AddOn Bucky(TM) as a retrofit
product for existing conventional bucky table X-ray systems, but rather to offer
a complete multi-functional direct digital X-ray system which combines a
conventional bucky table and a bucky wall stand and includes a postprocessing
system. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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The Company will continue to have significant research and development
expenses associated with the development of new products (including diagnostic
hardware and software products and new digital X-ray products) and improvements
to existing products manufactured by the Company. New products currently being
developed by or on behalf of the Company include a new digital C-arm system, a
digital remote controlled fluoroscopy system, a conventional bucky-table system
and a multi-functional floating table.
As of June 30, 1998, the Company employed nine people in research and
development. The number of people employed in research and development has
increased by 50% since June 30, 1997. The Company is outsourcing certain
research and development activities (such as the development of the Company's
mobile units, C-arm systems and fluoroscopy tables) and intends to continue this
policy in the future.
The Company has established a scientific board to support its research
and development projects and to enable the Company to develop technologically
advanced products. The Company believes that the integration of academic
institutions and hospitals will allow the Company to save research and
development expenses and will provide it with access to clinical and scientific
experience and know-how.
Raw Materials and Suppliers
The Company has a policy of outsourcing the manufacturing of components
for its X-ray equipment whenever such outsourcing is more efficient and cost
effective than in-house production. In particular, components for which serial
production is available are produced by third-party manufacturers according to
Company specifications. Generally, the X-ray accessories sold by the Company are
manufactured by third parties.
There is virtually no stock of finished X-ray equipment on the
Company's premises for any extended period of time since X-ray equipment is
generally manufactured at a customer's request. At June 30, 1998 finished
products accounted for approximately 6% of inventory while raw material, parts
and supplies accounted for approximately 92% of inventory and work in process
for approximately 2%.
In general, key components for the Company's X-ray equipment can be
obtained from several sources and the Company has entered into supply agreements
with certain of its suppliers. The CCD camera, a key component of the AddOn
Bucky(TM), has been developed on the Company's behalf by the Philips Components
division of Philips GmbH, Hamburg. Philips Components has entered into an
exclusive supply agreement with the Company (which is currently being restated
but has not, as yet, been finalized) and the Company considers its relationship
with Philips Components to be satisfactory. While other suppliers of CCD cameras
are available, a significant amount of time would be required to integrate a CCD
camera of another supplier into the Company's ddR-Multi-System and there can be
no assurance that such integration could be achieved in a timely manner. The
Company believes that there is no anticipated shortage in the supply of key
components for its X-ray equipment. See "Risk Factors -- Limited Manufacturing
History with Respect to ddR-Multi-System; Dependence on Sole Source Suppliers."
Backlog
Management estimates that as of the end of the fiscal year ended June
30, 1998, the Company had an order backlog of $11,500,000 for conventional X-ray
equipment as compared to $10,500,000 as of June 30, 1997. The Company had
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previously reported an order backlog for its digital x-ray equipment as of June
30, 1997 of $30,000,000; $29,000,000 of which related to a contract with a
purchaser located in South Korea. As a result of certain recent economic
problems in South Korea, management currently does not expect that such order
will be filled (to any significant degree) in the current calendar year (if at
all) absent a dramatic positive change in such economic conditions which
currently is not expected to occur. Accordingly, the Company no longer, for
practicable purposes, considers such South Korea contract to be part of its
backlog. The Company believes that substantially the entire order backlog for
conventional X-ray equipment (which consists primarily of orders under the
Philips OEM Agreement) will be filled during the current fiscal year. While the
Company expects to continue to have a certain order backlog for conventional
X-ray equipment (exclusive of that indicated above) in the future because of the
Philips OEM Agreement, the order backlog for digital X-ray equipment is likely
to be substantially reduced in the future as the Company estimates that orders
for such equipment will typically be filled within three months.
Competition
X-Ray Equipment Market
The markets in which the Company operates are highly competitive. Most
of the Company's competitors are significantly larger than the Company and have
access to greater financial and other resources than the Company. The principal
competitors for the Company's X-ray equipment are General Electric, Siemens,
Toshiba, Trex Medical, Shimatsu, Picker and Philips. In general, it is the
Company's strategy to compete primarily based on the quality of its products. In
the market for conventional X-ray equipment, the Company's strategy is to focus
on niche products and standard equipment.
To the Company's knowledge the only direct digital X-ray systems for
medical diagnostic purposes other than the ddR-Multi-System currently available
are chest examination systems offered by Philips, IMIX and Odelft. In addition,
there are several direct digital X-ray systems available for dental purposes.
None of these systems is able to perform bone examinations on extremities. To
the best of management's knowledge the Company's ddR-Multi-System is the only
multi-functional direct digital X-ray system currently available which allows
all plane X-ray examinations on the recumbent, upright and sitting patient
without the use of cassettes, films, chemicals or phosphor plates. A number of
companies, including certain of the Company's competitors in the markets for
conventional X-ray equipment, are currently developing direct digital X-ray
detectors or direct digital X-ray systems for specific applications (including
mammography). See "-- Products," "-- Markets," "Risk Factors -- Competition."
Service Market
In the markets for services related to imaging equipment the Company's
competitors are equipment manufacturers (including certain of the Company's
competitors in the X-ray equipment market) and independent service
organizations. In the service markets, it is the Company's strategy to build a
market position based on the confidence of its customers in the quality of its
products and service personnel. See "-- Products," "-- Markets," "Risk Factors
- -- Competition."
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Intellectual Property
The Company has obtained patent protection for certain aspects of its
conventional X-ray technology. The Company has filed patent applications
covering certain aspects of its direct digital technology in key markets in
Europe, North America and Asia, including the United States, Canada, Switzerland
and Germany. There can be no assurance, however, as to the breadth or degree of
protection which such patents may afford the Company, that any patent
applications will result in issued patents or that patents will not be
circumvented or invalidated. Although the Company believes that its products do
not infringe patents or violate proprietary rights of others, it is possible
that infringement of proprietary rights of others has occurred or may occur. In
the event the Company's products infringe patents or proprietary rights of
others, the Company may be required to modify the design of its products or
obtain a license. There can be no assurance that the Company will be able to do
so in a timely manner, upon acceptable terms and conditions or at all. The
failure to do any of the foregoing could have a material adverse effect upon the
Company. In addition, there can be no assurance that the Company will have the
financial or other resources necessary to enforce or defend a patent
infringement action and the Company could, under certain circumstances, become
liable for damages, which also could have a material adverse effect on the
Company.
The Company also relies on proprietary know-how and employs various
methods to protect its concepts, ideas and technology. However, such methods may
not afford complete protection and there can be no assurance that others will
not independently develop such technology or obtain access to the Company's
proprietary know-how or ideas. Furthermore, although the Company has generally
entered into confidentiality agreements with its employees, consultants and
other parties, there can be no assurance that such arrangements will adequately
protect the Company. The Company has obtained licenses to use certain technology
which is essential for certain of the Company's products, including certain
software used for its line of SwissVision(TM) postprocessing systems. The
software license is a worldwide, non-exclusive, non-transferable license for a
term of two years to use and distribute the Agfa software in combination with
the Add-On Bucky.
The Company considers the Swissray name as material to its business and
has obtained, or is in the process of obtaining, trademark protection in key
markets. The Company is not aware of any claims or infringement or other
challenges to the Company's rights to use this or any other trademarks used by
the Company. See "Risk Factors -- Dependence on Patents and Proprietary
Technology."
Regulatory Matters
The Company's X-ray equipment, components and related accessories are
subject to regulation by national or regional authorities in the markets in
which the Company operates. Pursuant to the Federal Food, Drug and Cosmetic Act,
X-ray equipment is a class II medical device which may not be marketed in the
United States without prior approval from the FDA.
The FDA review process typically requires extended proceedings
pertaining to the safety and efficacy of new products. A 510(k) application is
required in order to market a new or modified medical device. If specifically
required by the FDA, a pre-market approval ("PMA")may be necessary. Such
proceedings, which must be completed prior to marketing a new medical device,
are potentially expensive and time consuming. They may delay or hinder a
product's timely entry into the marketplace. Moreover, there can be no assurance
that the review or approval process for these products by the FDA or any other
applicable governmental authorities will occur in a timely fashion, if at all,
or that additional regulations will not be adopted or current regulations
amended in such a manner as will adversely affect the Company. Moreover, such
pre-marketing clearance, if obtained, may be subject to conditions on the
marketing or manufacturing of the ddR-Multi-System which could impede the
Company's ability to manufacture and/or market the product. The Company
submitted both its AddOn-Bucky(TM) and the ddR-Multi-System for Section 510(k)
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clearance with the FDA. On November 21, 1997, the Company's AddOn Bucky(TM), the
direct digital detector of the ddR-Multi-System, received FDA approval and on
December 18, 1997 the Company's ddR-Multi-System received FDA approval; the
Company thus receiving authorization to market the ddR-Multi-System in the U.S.
The FDA also regulates the content of advertising and marketing materials
relating to medical devices. There can be no assurance that the Company's
advertising and marketing materials regarding its products are and will be in
compliance with such regulations.
The Company is also subject to other federal, state, local and foreign
laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing practices. The electrical components of the
Company's products are subject to electrical safety standards in many
jurisdictions, including Switzerland, EU, Germany and the United States. The
Company believes that it is in compliance in all material respects with
applicable regulations. Failure to comply with applicable regulatory
requirements can result in, among other things, fines, suspensions of approvals,
seizures or recalls of products, operating restrictions and criminal
prosecutions. The effect of government regulation may be to delay for a
considerable period of time or to prevent the marketing and full
commercialization of future products or services that the Company may develop
and/or to impose costly requirements on the Company. There can also be no
assurance that additional regulations will not be adopted or current regulations
amended in such a manner as will materially adversely affect the Company. See
"Risk Factors -- Risks Associated With International Operations," "-- Government
Regulations," "Business -- Markets" and "-- Regulatory Matters." Company product
certifications may be briefly summarized as follows: On July 26, 1996, SR
Medical AG, the Company's Swiss marketing subsidiary, was ISO 9002 and EN 46002
certified and on March 8, 1999 Swissray Medical AG, the Company's Swiss research
and development, production and marketing subsidiary became ISO 9001 and EN
46001 certified. Appendix II for CE - Certification is expected to be completed
in April 1999, which allows the Company to use the CE-Label, including the
medical device numbers for all products manufactured and/or sold through the
Company.
Environmental Matters
The Company is subject to various environmental laws and regulations in
the jurisdictions in which it operates, including those relating to air
emissions, wastewater discharges, the handling and disposal of solid and
hazardous wastes and the remediation of contamination associated with the use
and disposal of hazardous substances. The Company owns or leases properties and
manufacturing facilities in Switzerland, the United States and Germany. The
Company, like its competitors, has incurred, and will continue to incur, capital
and operating expenditures and other costs in complying with such laws and
regulations in both the United States and abroad. As a result of the operation
of the Company's business, the Company may have potential liability with respect
to the remediation of past contamination in certain of its presently and
formerly owned or leased facilities in both the United States and abroad. In
addition, certain of the Company's facilities may have used substances or
generated and disposed of wastes which are or may be considered hazardous. It is
possible that such sites, as well as disposal sites owned by third parties to
which the Company has sent wastes, may in the future be identified and become
the subject of remediation. Accordingly, although the Company believes that it
is in substantial compliance with applicable environmental requirements and the
Company to date has not incurred material expenditures in connection with
environmental matters, it is possible that the Company could become subject to
additional environmental liabilities in the future that could result in an
adverse effect on the Company's financial condition or results of operations.
See "Risk Factors -- Environmental Matters."
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Employees
After giving effect to the Empower, Inc. transaction heretofore
initially referred to on page 5 of this Registration Statement, the Company had
105 employees worldwide, of which 27 were employed by subsidiaries in the United
States, 70 in Switzerland, and 8 in European countries other than Switzerland.
The Company believes that its relationship with employees is satisfactory. The
Company has not suffered any significant labor problems during the last five
years.
Description of Property
On April 12, 1997, the production facility rented by the Company in
Hochdorf, Switzerland was affected by a fire in an adjacent facility. On May 15,
1997, the Company purchased a new office and production facility of
approximately 43,000 square feet and moved its entire production to this
facility and has since moved the offices and other facilities formerly located
in its Hitzkirch facility to the new Hochdorf facility. The Company believes
that its new Hochdorf facility provides it with sufficient production and office
space to meet its demand in Switzerland in the foreseeable future.
The Company also leases office space in New York City, Azusa,
California, Gig Harbor, Washington and Wiesbaden, Germany.
Legal Proceedings
A. On or about October 3, 1997, the Registrant and Swissray Healthcare, Inc.
were served with a complaint by a company engaged in the business of providing
services related to imaging equipment alleging that defendant received benefits
from breach of fiduciary duties and contract obligations and misappropriation of
trade secrets by certain former employees of such competitor Such company also
obtained a temporary restraining order against the Registrant and Swissray
Healthcare, Inc. On November 10, 1997, the Court denied a Motion for a
preliminary injunction and the temporary restraining order was vacated. On
December 1, 1997 and January 30, 1998 the Registrant answered the Complaint and
Amended Complaint respectively by denying the allegations contained therein. The
Plaintiff in such action (on December 2, 1997) filed a Motion to reargue and
renew its prior denied Motion for a Preliminary Injunction and such Motion was
(by Order and Decision dated June 17, 1998) denied. The Company denied the
allegations, vigorously defended the litigation and thereafter settled such
litigation and all outstanding matters with respect thereto in July 1998 for
$60,000.
B. Dispute with Gary J. Durday ("Durday"), Kenneth R. Montler ("Montler") and
Michael E. Harle ("Harle"). On July 17, 1998, two legal proceedings were
commenced by Swissray, and two of its subsidiaries against Durday, Montler and
Harle. Harle and Montler are former Chief Executive Officers of Swissray Medical
Systems Inc. and Swissray Healthcare Inc., respectively, and Durday is the
former Chief Financial Officer of both of those companies. Each of them was
employed pursuant to an Employment Agreement dated October 17, 1997. In
addition, these three individuals were owners of a company by the name of
Service Support Group LLC ("SSG"), the assets of which were sold to Swissray
Medical Systems Inc. pursuant to an Asset Purchase Agreement dated as of October
17, 1997. whereby Messrs. Durday, Montler and Harle received, among other
consideration, 33,333 shares of Swissray's common stock, together with a put
option entitling these individuals to require Swissray to purchase any or all of
such shares at a purchase price equal to $45.00 per share (on or after June 30,
1998 and until April 16, 1999, subject to certain adjustments set forth in the
Asset Purchase Agreement).
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On July 17, 1998, Swissray and its subsidiaries, Swissray Medical
Systems Inc. and Swissray Healthcare Inc. commenced an arbitration proceeding
before the American Arbitration Association in Seattle, Washington (Case No. 75
489 00196 98) alleging that Messrs. Durday, Montler and Harle fraudulently
induced Swissray and its subsidiaries to enter into the above referenced Asset
Purchase Agreement and otherwise breached that Agreement. The relief sought in
the arbitration proceeding was the recovery of damages suffered as a result of
this alleged wrongful conduct and a rescission of the put option provided for in
the Asset Purchase Agreement. Messrs. Durday, Montler and Harle responded to the
allegations made in the arbitration proceeding and asserted counterclaims
against Swissray and its subsidiaries claiming a breach by them of their
obligations under the Asset Purchase Agreement and other relief. The arbitration
took place in Seattle on January 8-10, 1999; the proceeding concluded on January
27, 1999 after the submission of post-hearing briefs. On February 23, 1999, the
Arbitrator issued his ruling, awarding Messrs. Durday, Montler and Harle
$1,500,000 and ordering them to surrender all rights to 33,333 shares of
Swissray common stock. On February 26, 1999, Swissray and Swissray Medical
Systems Inc. filed a petition in Supreme Court, New York County (Index No.
99/104017) to vacate the above referenced arbitration award.
In addition to the above referenced arbitration proceeding, Swissray
and its subsidiaries commenced an action against Messrs. Durday, Montler and
Harle which is currently pending in the Supreme Court of the State of New York,
County of New York, alleging that these individuals breached the obligations
undertaken by them in their respective Employment Agreements. Further, Messrs.
Durday, Montler and Harle commenced an action in state court in Pierce County,
Washington, and asked that Court to adjudicate the issues raised in the above
referenced New York State Court action. Swissray filed applications in both the
Washington and New York litigations urging that, because the action was first
filed in New York, the New York court, rather than the Washington court, should
decide where the litigation should proceed. Messrs. Durday, Montler and Harle
initially opposed that position and urged the Washington State court to
adjudicate all issues, but subsequently withdrew their opposition to Swissray's
application and consented to a stay of all further proceedings in the Washington
State court action until after the New York court had reached a decision as to
whether it or the Washington court is the proper forum for litigation of the
parties' dispute. The New York court has not yet rendered a decision on this
issue.
It is Swissray's management's intention to contest these matters
vigorously since Swissray believes that its claims are meritorious, and that it
has meritorious defenses to the claims asserted against them, notwithstanding
the above referenced arbitration ruling.
Recent Developments
In May 1998 Swissray Medical Systems, Inc., a wholly owned subsidiary
of the Company, was awarded a contract from the Department of Veterans Affairs
("VA") estimated at $400,000 for the base year for its Diagnostic X-ray systems,
the ddR-Multi-System, with the VA reserving its option to extend the term of the
contract up to March 31, 2001; the ddR-Multi-System being the first ever FDA
approved multifunctional direct digital radiography (ddR) system to be offered
worldwide. With the official contract award in hand, management intends to
actively pursue sales to various VA hospitals, medical centers and outpatient,
community and outreach clinics throughout the United States.
In July of 1998 the Company sold its multifunctional direct digital
radiography (ddR) system, the ddR-Multi- System, to the largest Diagnostic Out
Patient Center in Warsaw, Poland, the Diagnostic Center Luxmed. This order
represents Swissray's first sale within the Eastern European Market,
complementing sales previously made in both Western Europe and the United
States.
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In October 1998 the Company entered into a distribution agreement with
X-ray Inc. ("XRI"), Warwick, RI. XRI will distribute the Company's
ddR-Multi-System in the territories of Connecticut, Rhode Island, Vermont, New
Hampshire, Massachusetts and Maine.
In November 1998 the Company reached an agreement with Data General
Corporation of Westborough, MA, which grants authority to Data General to act as
a reseller for the Company's family of products. Data General will sell the
Company's ddr-Multi-System and Information Solutions as a package with their
PACS system.
In February of 1999 the Company announced the sale of three of its
ddR-Multi-System, to Houston, Texas based Kelsey-Seybold Clinic and to the
Federal Maximum Security Facility in Florence, Colorado. The two Kelsey- Seybold
systems are scheduled to be viewed in clinical use by attendees of the annual
Society for Computer Applications (SCAR) meeting in Houston in May 1999 while
the Colorado sale was made through the above indicated contract with the
Department of Veterans Affairs.
In February 1999 the Company announced entry into distribution
agreements with three medical equipment suppliers for distribution in both
domestic and international markets. These firms - Medika International Inc., of
San Juan, Puerto Rico, Radiographic Equipment Services (RES) of San Diego,
California, and H & H X-Ray Corporation of Lancaster, New York, have agreed to
distribute Swissray's direct digital radiography system, the ddr-Multi- System.
Medika, one of the largest medical equipment suppliers in the Southern
Hemisphere, will cover ddR-Multi-Systems sales in Puerto Rico, the Caribbean,
Mexico and selected South American markets. RES will represent Swissray in San
Diego and Orange Counties (California), and H&H X-Ray - with 28 years of
experience in medical imaging - will oversee sales in New York, Pennsylvania and
Ohio.
On March 29, 1999 the Company entered into a one year Consulting
Agreement (with option to extend for an additional period of one year) with
Liviakis Financial Communications, Inc. In accordance with the terms and
conditions of the Consulting Agreement, the Consultant agreed to provide certain
specified consulting services in a diligent and thorough manner in return for
which and as full and complete compensation thereunder, the Company is required
to compensate the Consultant through its issuance and delivery of 3,000,000
shares of the Company's restrictive common stock. As regards such shares of
common stock, Consultant has agreed that throughout the period of time that it
retains beneficial ownership of all or any portion of such shares that it shall
(a) vote such shares in favor of Ruedi G. Laupper continuing to maintain his
current position(s) with the Company and (b) give Ruedi G. Laupper and/or his
designee the right to vote Consultant's shares at all Company shareholder
meetings. In the event that the Company, in its sole discretion, exercises its
option to extend the Agreement for an additional period of one year,
remuneration for such second year has been set at $630,000 to be paid in
restrictive shares of Company common stock (with the number of shares to be
determined based upon the ten day average closing bid price for the ten
consecutive trading days preceding March 29, 2000). The foregoing does not
purport to set forth each of the terms and conditions of the aforesaid
Consulting Agreement but rather is designed to summarize what management
considers to be pertinent portions thereof.
Additionally, on March 29, 1999 the Company entered into a five year
Consulting Agreement with Rolcan Finance Ltd. ("Rolcan"), pursuant to which
Rolcan agreed to provide certain business and consulting services outside the
United States and in return for which the Company became obligated to issue as
full and complete compensation thereunder, 800,000 restrictive shares of its
common stock.
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MANAGEMENT
Directors and Executive Officers of the Company
Set forth below is certain information concerning each current director
and executive officer of the Registrant, including age, position(s) with the
Registrant, present principal occupation and business experience during the past
five years.
Name Age Position(s) Held
Ruedi G. Laupper 49 Chairman of the Board of Directors,
President and Chief Executive Officer,
Josef Laupper 53 Secretary, Treasurer and Director
Ueli Laupper 29 Vice President and Director
Dr. Erwin Zimmerli 51 Director and Member of the Independent
Audit Committee
Erich A. Kalbermatter 42 Chief Operating Officer *
Dr. Sc. Dov Maor 51 Director and Member of the Independent
Audit Committee
Michael Laupper 26 Interim Chief Financial Officer
* Until his resignation in February 1999.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
Ruedi G. Laupper has been President, Chief Executive Officer and a
director of the Registrant since May 1995 and Chairman of the Board of Directors
since March 1997. In addition, he is Chairman of the Board of Directors and
President of the Company's principal operating subsidiaries. Ruedi G. Laupper is
the founder of the predecessors of the Company and was Chief Executive Officer
of SR Medical AG until May 1995. He has approximately 23 years of experience in
the field of radiology. Ruedi G. Laupper is the brother of Josef Laupper and the
father of Ueli and Michael Laupper.
Josef Laupper has been Secretary, Treasurer (until January 1998 and
recommencing January 1999) and a director of the Registrant since May 1995 (with
the exception of not having served as Secretary from December 23, 1997 to
February 23, 1998). He has held comparable positions with SR Medical Holding AG,
SR-Medical AG, and their respective predecessors since 1990. He is principally
in charge of the Company's administration. Josef Laupper has approximately 19
years of experience within the medical device business.
Ueli Laupper has overall Company responsibilities in the area of
international marketing and sales with approximately eight years of experience
within the international X-ray market. He has been a Vice President of the
Company since March 1997 and a director of the Registrant since March 1997. He
was Chief Executive Officer of SR Medical AG from July 1995 until June 30, 1997.
Since the beginning of July 1998 he has been in charge of the Company's U.S.
operations and currently serves as CEO of both Swissray Medical Systems, Inc.
and Swissray Healthcare, Inc. as well as President of Swissray America Inc.
since the latter's formation in September 1998.
- 46 -
<PAGE>
Dr. Erwin Zimmerli has been a director of the Registrant since May 1995
and, since March 1998, a member of the Registrant's Independent Audit Committee.
Since receiving his Ph.D. degree in law and economics from the University of St.
Gall, Switzerland in 1979, Dr. Zimmerli has served as head of the White Collar
Crime Department of the Zurich State Police (1980-86), as an expert of a Swiss
Parliamentary Commission for penal law and Lecturer at the Universities of St.
Gall and Zurich (1980-87), Vice President of an accounting firm (1987-1990) and
Executive Vice President of a multinational aviation company (1990-92). Since
1992 he has been actively engaged in various independent consulting capacities
primarily within the Swiss legal community.
Erich A. Kalbermatter, commenced serving the Company in the position of
Chief Operating Officer in April 1998 and held such position until February
1999. Mr. Kalbermatter whose background is principally as an internationally
experienced manager with expertise in the areas of electronics and
telecommunications, has also served as managing director of Private & Business
Communications of ASCOM Ltd., Berne, Switzerland being responsible for the
turn-over of more than 1 billion Swiss Francs, with approximately 4,800
employees worldwide. In addition, he was a member of ASCOM's Group Management,
an international communications corporation.
Dr. Sc. Dov Maor, was appointed as a member of the Registrant's Board
of Directors and a member of its Independent Audit Committee effective March 26,
1998. Dr. Sc. Dov Maor currently holds the position of Vice President for
Technology with ELBIT Medical Imaging, Haifa. Dr. Sc. Dov Maor is well
experienced in the field of Nuclear Medicine and medical imaging and has been
employed for over 10 years in a leading position in Research & Development.
Additionally, he was working in conjunction with the Max Planck Institute for
Nuclear Physics in Heidelberg within his field of experience. In addition to his
technical knowledge, Dr. Sc. Dov Maor is experienced in the commercial sector of
the industry.
Michael Laupper assumed the position of Interim Chief Financial Officer
of the Company effective January 1, 1999, having previously served as Controller
working in conjunction with the Company's former CFO. Michael Laupper completed
his commercial education in the chemical industry in 1991 in Switzerland and has
additionally completed studies in finance and accounting (in the United States
during 1996-97). He has served the Company in various management positions at SR
Management AG and SR Medical AG, Company subsidiaries, prior to assuming his
current position.
The Board of Directors
The Board of Directors has responsibility for establishing broad
corporate policies and for overseeing the performance of the Registrant. Members
of the Board of Directors are kept informed of the Registrant's business by
various reports and documents sent to them in anticipation of Board meetings as
well as by operating and financial reports presented at Board meetings. The
Registrant pays its directors fees or compensation for services rendered in
their capacity as directors. The current Board of Directors was elected and
assumed office as of December 23, 1997 with the exception that Dr. Sc. Dov Maor
assumed his position on March 26, 1998.
The Board does not currently have a standing audit, nominating or
compensation committee or any committee or committees performing similar
functions, but acts, as a whole, in performing the functions of such committees
(except as may be indicated directly hereinafter). At a meeting of the Board of
Directors held on March 26, 1998, an Independent Audit Committee was
established.
- 47 -
<PAGE>
Employment Agreements
Ruedi G. Laupper has entered into a five-year employment agreement with
Swissray Management AG, a wholly owned subsidiary of the Registrant, on December
18, 1997, which agreement will be automatically renewed for another five years
unless terminated by either party no later than December 31, 2001. Such
agreement provides for (i) an annual salary of 299,000 Swiss francs (or
$208,740, based on an exchange rate of 1.4324), (ii) an annual bonus of 12,000
Swiss francs (or $8,377), and (iii) a performance based bonus, based on the
audited consolidated financial statements of the Company as of the end of the
fiscal year. The bonus shall be 25% of EBIT (earnings before interest and taxes)
payable in stock of Swissray International, Inc. valued at the average of the
closing prices during the five business days following the filing of the 10-K.
In addition, the agreement entitles Mr. Laupper to a car allowance, five weeks
of vacation, $698 per month for expenses and a "Bel Etage" insurance which
provides certain pension benefits not mandated by Swiss law. If such employment
agreement is terminated for reasons beyond the employee's control, Ruedi Laupper
will receive 2 million Swiss francs (or $1,396,258) including any bonus. The
Registrant guarantees the obligation of Swissray Management AG in the event of a
default.
Ueli Laupper and Josef Laupper have entered into three-year employment
agreements with Swissray Management AG on December 18, 1997, which agreements
will be automatically renewed for another three years unless notice is given six
months prior to the expiration date. Such agreements provide for salaries of
$84,924 and 119,700 Swiss francs (or $83,566) respectively with annual bonuses
of $7,077 and 9975 Swiss francs (or $6,964) respectively, $1,500 and 1000 Swiss
francs (or $698) per month for expenses respectively and 20 days and 25 days of
vacation respectively. The employment agreements of each of Ueli Laupper and
Josef Laupper also provide for a car allowance. If either of such employees is
terminated for reasons beyond the employees control he will receive 500,000
Swiss francs (or $349,065).
Mr. Kalbermatter in accordance with his Agreement with Swissray
Management AG assumed the position of Chief Operating Officer of the Company
effective April 14, 1998 at an annual salary equivalent to $153,333. Mr.
Kalbermatter shall also receive (a) an expense allowance equivalent to $12,000,
(b) an automobile allowance equivalent to $11,333, (c) 25 days of vacation and
(d) a "Bel Etage" inusrance which provides certain pension benefits. U.S. dollar
equivalents indicated above are based upon a Swiss Francs (CHF) exchange rate of
$1.50. This Agreement expires May 31, 1999.
All of these employment agreements are covered by Swiss law.
Compensation of Directors and Executive Officers
Summary Compensation Table
(A) The following Summary Compensation Table sets forth certain
information for the years ended June 30, 1996, 1997 and 1998 concerning the cash
and non-cash compensation earned by or awarded to the Chief Executive Oficer of
the Registrant, the three other most highly compensated executive officers of
the Registrant as of June 30, 1998 and the former Chairman of the Board of
Directors (the "Named Executive Officers").
- 48 -
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Fiscal Other Annual Stock All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- ------------------------------------ ----- ----------- ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ruedi G. Laupper 1998 $189,644 --- $15,000 (1) -- ---
President and Chief Executive 1998 $1,122,973 (7)
Officer, Chairman of the 1997 $146,983 --- $15,000 (1) 12,000(5) ---
Board of Directors 1996 $161,085 --- $15,000 (1) --- ---
Josef Laupper 1998 $ 94,669 --- $12,000 (1) --- ---
Secretary, Treasurer 1997 $ 96,861 --- $12,000 (1) --- ---
1996 $106,229 --- $12,000 (1) --- ---
Ueli Laupper 1998 $ 95,685 --- $10,000 (1) --- ---
Vice President International 1997 $ --- --- $ --- --- ---
Sales (2) 1996 $ --- --- $ --- --- ---
Herbert Laubscher 1998 $ 79,244 --- $ --- --- ---
Chief Financial Officer (2)(3) 1997 $ --- --- $ --- --- ---
1996 $ --- --- $ --- --- ---
Ulrich R. Ernst (4) 1997 $ 96,979 --- $10,000 (1) --- ---
1996 $ 98,197 --- $15,000 (1) --- ---
Erich A. Kalbermatter 1998 $ 33,652 --- $ --- --- ---
Chief Operating Officer (2)(6)
- --------------------
</TABLE>
(1) Fees for service on the Board of Directors of the Company.
(2) Compensation did not exceed $100,000 in any fiscal year.
(3) Herbert Laubscher joined the Company in August of 1996 and served as
Treasurer from January 1998 until his resignation effective December
31, 1998.
(4) Ulrich R. Ernst was Chairman of the Board of Directors from May 1995
until March 18, 1997.
(5) The options, which were fully vested on date of grant (6/13/97), were
issued in exchange for services to the Company as Chairman of the Board
of Directors.
(6) Erich A. Kalbermatter joined the Company on April 14, 1998 and resigned
in February 1999.
(7) Compensation paid in equivalent of 48,259 post reverse split shares of
Common Stock for cancellation of Common Stock held by officer.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables set forth certain information concerning the grant
of options to purchase shares of the Common Stock to each of the executive
officers of the Registrant, as well as certain information concerning the
exercise and value of such stock options for each of such individuals. Options
generally become exercisable upon issuance and expire no later than ten years
from the date of grant.
- 49 -
<PAGE>
STOCK OPTIONS GRANTED IN FISCAL YEAR ENDED JUNE 30, 1997(1)
<TABLE>
<CAPTION>
Percent of
Total Potential
Options Realization Value at
Granted Assumed Annual Rates
Number of to Exercise of Stock Appreciation
Securities Employees or Market For Option Term
Underlying in Base Price on
Options Fiscal Price Date of Expiration
Name Granted Year Per Share Grant Date 0% 5% 10%
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ruedi G. Laupper 120,000(2) 30.4% $0.73(3) $2.94(4) 6/13/02 265,200 282,840 300,480
Josef Laupper(5) -- -- -- -- -- -- -- --
Ueli Laupper(5) -- -- -- -- -- -- -- --
Herbert Laubscher(5) -- -- -- -- -- -- -- --
Ulrich Ernst(5)(6) -- -- -- -- -- -- -- --
</TABLE>
(1) The options to purchase the Registrant's Common Stock were granted
under the Swissray International, Inc. 1996 Non-Statutory Stock Option
Plan.
(2) These options were owned indirectly through SR Medical Equipment Ltd.,
a corporation wholly owned by Mr. Laupper. They were immediately
exercisable on the date of grant but do not give effect to subsequent
October 1998 1 for 10 reverse stock split.
(3) The exercise price per share is contingent on purchase of the entire
amount of securities.
(4) The market price on date of grant was based on the average of the high
and low reported prices on the Nasdaq SmallCap Market on June 13, 1997.
On October 26, 1998 the Company's securities were delisted by NASDAQ.
(5) These individuals own no stock options of the Registrant.
(6) Mr. Ernst was Chairman of the Board of Directors from May 1995 until
March 18, 1997.
- 50 -
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 1998
With respect to the Named Executive Officers there were no granting of
stock options under either the Company's 1996 or 1997 Stock Option Plans (the
"Plans") during the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options Options
Name At Fiscal Year-End(#) At Fiscal Year-End($)
(A) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
Ruedi G. Laupper 12,000/0(3) $1.79/0
Josef Laupper(4) 0/0 0/0
Ueli Laupper(4) 0/0 0/0
Herbert Laubscher(4) 0/0 0/0
Ulrich R. Ernst(4)(5) 0/0 0/0
</TABLE>
(1) No options were exercised by a Named Executive Officer during the
fiscal year ended June 30, 1997 and 1998.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
(3) Includes 12,000 options which are owned indirectly by Mr. Laupper
through SR Medical Equipment Ltd., a corporation which is wholly owned
by Mr. Laupper.
(4) These individuals own no stock options of the Registrant.
(5) Mr. Ernst was Chairman of the Board of Directors from May 1995 until
March 18, 1997.
Stock Option Plans
On January 30, 1996, the Board of Directors adopted the Company's 1996
Non-Statutory Stock Option Plan (the "1996 Plan"). Substantially all of the
options under such 1996 Plan have been granted. Consequently, the Board of
Directors and the Registrant's stockholders approved the Swissray International,
Inc. 1997 Stock Option Plan (the "Stock Option Plans").
The purpose of the Stock Option Plans is to provide directors, officers
and employees of, and consultants to the Company and its subsidiaries with
additional incentives by increasing their ownership interests in the Company.
Directors, officers and other employees of the Company and its subsidiaries are
eligible to participate in the Stock Option Plans. Options may also be granted
to directors who are not employed by the Company and consultants providing
valuable services to the Company and its subsidiaries. In addition, individuals
who have agreed to become an employee of, director of or a consultant to the
Company and its subsidiaries are eligible for option grants, conditional in each
case on actual employment, directorship or consultant status. Awards of options
to purchase Common Stock may
- 51 -
<PAGE>
include incentive stock options under Section 422 of the Internal Revenue Code
("ISOs") and/or non-qualified stock options ("NQSOs"). Grantees who are not
employees of the Company or a subsidiary shall only receive NQSOs.
The maximum number of options that may be granted under this Plan shall
be options to purchase 200,000 shares of Common Stock. As of March 31, 1999,
none of such options have been granted.
The Compensation Committee will administer the Stock Option Plans. The
Compensation Committee generally will have discretion to determine the terms of
any option grant, including the number of option shares, exercise price, term,
vesting schedule, the post-termination exercise period, and whether the grant
will be an ISO or NQSO. Notwithstanding this discretion: (i) the number of
shares subject to options granted to any individual in any calendar year may not
exceed 200,000; (ii) the term of any option may not exceed 10 years (unless
granted as an ISO to an individual or entity who possesses more than 10% of the
voting power of the Company, which term may not exceed five years); (iii) an
option will terminate as follows: (a) if such termination is on account of
permanent and total disability (as determined by the Compensation Committee),
such options shall terminate one year thereafter; (b) if such termination is on
account of death, such options shall terminate six months thereafter; (c) if
such termination is for cause (as determined by the Compensation Committee),
such options shall terminate immediately; (d) if such termination is for any
other reason, such options shall terminate three months thereafter; and (iv) the
exercise price of each share subject to an ISO shall be not less than 100%, or,
in the case of an ISO granted to an individual described in Section 422(b)(6) of
the Code, 110% of the fair market value (determined in accordance with Section
422 of the Code) of a share of the Stock on the date such option is granted.
Unless otherwise determined by the Compensation Committee, (i) the exercise
price per share of Common Stock subject to an option shall be equal to the fair
market value of the Common Stock on the date such option is granted; (ii) all
outstanding options become exercisable immediately prior to a "change in
control" of the Company (as defined in the Stock Option Plans) and (iii) each
option shall become exercisable in three equal installments on each of the
first, second and third anniversary of the date such option is granted.
The Stock Option Plans may be amended, altered, suspended, discontinued
or terminated by the Board of Directors without further stockholder approval,
unless such approval is required by law or regulation or under the rules of the
stock exchange or automated quotation system on which the Common Stock is then
listed or quoted. Thus, stockholder approval will not necessarily be required
for amendments which might increase the cost of the Stock Option Plans or
broaden eligibility. The Stock Option Plans will remain in effect until
terminated by the Board of Directors. No ISO may be granted more than ten years
after such date.
The Registrant currently has outstanding non-statutory stock options to
purchase an aggregate of 145,500 shares of Common Stock. See "Management --
Compensation of Directors and Executive Officers" and Note 16 to the
Consolidated Financial Statements June 30, 1998, 1997 and 1996.
Retirement and Long-Term Incentive Plans
The Swiss and German Subsidiaries, mandated by government regulations,
are required to contribute approximately five (5%) percent of eligible, as
defined, employees' salaries into a government pension plan. The subsidiaries
also contribute approximately five (5%) percent of eligible employee salaries
into a private pension plan. Total contributions charged to operations for the
years ended June 30, 1998 and 1997, were $347,854 and $274,009, respectively.
- 52 -
<PAGE>
Director Compensation
Directors of the Registrant receive $10,000 annually for serving as
directors except for Josef Laupper, who receives $12,000 and Ruedi Laupper, the
Chairman of the Board of Directors, who receives $15,000. Ruedi Laupper also
received options to acquire 12,000 shares of the Registrant's Common Stock on
June 13, 1997 in accordance with applicable provisions of the Company's 1996
Non-Statutory Stock Option Plan. The exercise price for such options is $7.30
per share. The options were fully vested on the date of grant.
Compensation Committee Interlocks and Insider Participation
The Registrant had no Compensation Committee during the last completed
fiscal year. The Registrant's executive compensation was supervised by all
members of the Registrant's Board of Directors and the following directors were
concurrently officers of the Registrant in the following capacities: Ruedi G.
Laupper (Chairman of the Board of Directors, President and Chief Executive
Officer); Josef Laupper (Secretary and Treasurer), Ueli Laupper (Vice President
International Sales) and Ulrich R. Ernst (Chairman of the Board of Directors
from May 1995 until March 18, 1997). No executive officer of the Registrant
served as a member of the board of directors or compensation committee of any
entity which has one or more executive officers who serve on the Registrant's
Board of Directors.
While the Company did not issue any shares of its Common Stock to any
of its officers during fiscal year ended June 30, 1998 it did issue 48,259
shares of Common Stock to a company controlled by Ruedi G. Laupper pursuant to
an agreement between Ruedi G. Laupper and the Company, dated as of June 30,
1997, in consideration of Mr. Laupper's agreement to the temporary cancellation
of 160,863 shares of Common Stock held by Ruedi G. Laupper or companies
controlled by him to enable the Company to maintain a sufficient number of
shares of Common stock to meet certain obligations of the Company to issue
Common Stock and to permit certain financings prior to the increase of the
number of authorized shares of Common Stock from 15,000,000 to 30,000,000.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 31, 1999 (except where otherwise
noted) with respect to (a) each person known by the Registrant to be the
beneficial owner of more than five percent of the outstanding shares of Common
Stock, (b) each director of the Registrant, (c) the Registrant's executive
officers and (d) all officers and directors of the Registrant as a group (except
as indicated in the footnotes to the table, all of such shares of Common Stock
are owned with sole voting and investment power):
No. Of Shares Percentage of
Beneficially Shs. Benficially
Name and Address of Beneficial Owner (1) Owned (2) Owned (2)
- ---------------------------------------- -------------- -------------
Ruedi G. Laupper (3) 410,259 3.50%
Josef Laupper (4) 50,000 0.43%
- 53 -
<PAGE>
Erwin Zimmerli (5) 5,000 *
Ueli Laupper --- *
Dov Maor --- *
Michael Laupper --- *
Thomson Kernaghan & Co. Ltd. 463,854 3.96%
Atlantis Capital Fund, Ltd. 571,712 4.88%
Dominion Capital Fund, Ltd. 394,587(6) 3.37%
Sovereign Partners LP 538,195(7) 4.60%
Canadian Advantage Limited Partnership 530,321(8) 4.53%
Liviakis Financial Communications, Inc. 3,000,000 25.61%
Rolcan Finance Ltd. 800,000 6.83%
All directors and officers as
a group (six persons) 465,259 3.97%
- ---------------
o Represents less than 1% of the 11,712,379 shares outstanding as of
March 31, 1999.
(1) Unless otherwise indicated, the address for each named individual is in
care of SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B,
New York, New York 10016.
(2) Unless otherwise indicated, the Company believes that all persons named
in the table have sole voting and investment power with respect to all
shares of the Common Stock beneficially owned by them. A person is
deemed to be the beneficial owner of securities which may be acquired
by such person within 60 days from the date indicated above upon the
exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
options, warrants or convertible securities that are held by such
person (but not those held by any other person) and which are
exercisable within 60 days of the date indicated above, have been
exercised.
(3) Includes (i) 30,000 shares owned indirectly by Ruedi G. Laupper
through SR Medical Equipment Ltd., a corporation which is wholly owned
by him; (ii) 368,259 shares owned indirectly by Ruedi G. Laupper
through Tomlinson Holding Inc., a corporation which is wholly owned
by him and (iii) 12,000 shares which may be acquired upon exercise of
immediately exercisable options, which options are owned indirectly
by Ruedi G. Laupper through SR Medical Equipment Ltd., a corporation
which is wholly owned by him.
(4) Includes 50,000 shares owned indirectly by Josef Laupper through Lairy
Investment Inc., a corporation in which he is a majority shareholder.
(5) Includes 5,000 shares which may be acquired upon exercise of
immediately exercisable options.
As of the March 31, 1999, an aggregate principal outstanding balance
(exclusive of interest) for those Convertible Debentures referred to below
amounts to $11,976,149. None of these convertible debentures are owned by
officers and/or directors of the Company.
(6) Does not include up to 3,067,151 shares which normally could be issued,
at any time, upon conversion of previously issued convertible
debentures (the "Convertible Debentures") assuming conversion based on
80% of the last reported sales price on March 31, 1999.
- 54 -
<PAGE>
This number of shares, if issued, would require disclosure of
beneficial ownership of in excess of 5%. However, pursuant to terms of
Convertible Debentures, the holders thereof may not beneficially own
more than 4.9% of outstanding Company shares (other than as a result of
mandatory conversion provisions).
(7) Does not include up to 3,356,431 shares which normally could be issued,
at any time, upon conversion of previously issued convertible
debentures (the "Convertible Debentures") assuming conversion based on
80% of the last reported sales price on March 31, 1999. This number of
shares, if issued, would require disclosure of beneficial ownership of
in excess of 5%. However, pursuant to terms of Convertible Debentures,
the holders thereof may not beneficially own more than 4.9% of
outstanding Company shares (other than as a result of mandatory
conversion provisions).
(8) Does not include up to 359,606 shares which normally could be issued,
at any time, upon conversion of previously issued convertible
debentures (the "Convertible Debentures") assuming conversion based on
80% of the last reported sales price on March 31, 1999. This number of
shares, if issued, would require disclosure of beneficial ownership
of in excess of 5%. However, pursuant to terms of Convertible
Debentures, the holders thereof may not beneficially own more than 4.9%
of outstanding Company shares (other than as a result of
mandatory conversion provisions).
In addition, the only record holder known by the Company to hold more
than five percent of the Company's Common Stock is Cede & Co., P.O. Box 20,
Bowling Green Station New York, New York 10004. As of March 31, 1999 Cede & Co.
held a total of 4,407,633 shares of the Company's Common Stock, which
represented approximately 38% of the total number of shares outstanding. Cede &
Co. is a nominee of the Depository Trust Company, which holds such shares of
record on behalf of various of its customers. The names of all of the beneficial
owners of the shares held by those stockholders are unknown to Management.
CERTAIN TRANSACTIONS
Reference is herewith made to Compensation Committee Interlock, second
paragraph regarding 48,259 shares of Company common stock issued to its
President.
The Company made unsecured advances to its former Chairman of the Board
of Directors (a principal stockholder) during the fiscal year ended June 30,
1997 requiring interest at 6% per annum. The balance at June 30, 1997 was
$69,587. Interest charged to the stockholder for the fiscal year ended June 30,
1997 was $3,460. Such indebtedness was repaid in full in July 1997. See Note 12
to the Consolidated Financial Statements June 30, 1998, 1997 and 1996.
SELLING HOLDERS AND PLAN OF DISTRIBUTION
The Securities offered hereby may be sold from time to time to
purchasers directly by the Selling Holders (which term includes their
transferees, pledgees, donees or their successors). Any such transferee,
pledgee, donee or their successors may not offer the Securities pursuant to this
Prospectus until such holder is included as a Selling Holder in a supplement to
this Prospectus. The Securities consist of shares of Common Stock which are
issuable to Selling Holders upon conversion of the Convertible Debentures.
- 55 -
<PAGE>
The Registrant has agreed to register the public offering of the Securities by
the Selling Holders under the Securities Act. The Registrant will not receive
any of the proceeds from the sale of the shares by the Selling Holders.
The following table sets forth as of March 31, 1999, certain
information with respect to the Selling Holders, (who participated in financings
from June 1998 to March 26, 1999) including the number of shares that may be
offered by them. The number of shares which may actually be sold by the Selling
Holders will be determined from time to time by them and will depend upon a
number of factors, including, with respect to the shares underlying the
Convertible Debentures, the price of the Registrant's Common Stock from time to
time. Because the Selling Holders may offer all or none of the Securities that
they hold and because the offering contemplated by the Prospectus is not being
underwritten, no estimate can be given as to the number of Securities that will
be held by the Selling Holders upon termination of such offering. None of the
Selling Holders have had any material relationship with the Registrant other
than as purchasers of Convertible Debentures.
Name of Selling Holder(3) Shares(1) % of Class(2)
Dominion Capital Fund Ltd. 3,757,293(4) 16.97%
Sovereign Partners Ltd. Partnership 4,448,101(4) 20.09%
Canadian Advantage Ltd. Partnership 761,886 3.44%
Atlantis Capital Fund, Ltd. 521,350 2.35%
Dominion Investment Fund LLC 564,307(4) 2.55%
Aberdeen Avenue, LLC 379,566(4) 1.71%
(1) Assumes conversion of the Convertible Debentures held by such Selling
Holders based on the reported closing prices on the Electronic Over-
the-Counter Bulletin Board on April 13, 1999 at an 18% to 20% discount
(as required) and including additional shares which may be issued for
interest earned through mandatory conversion datee.
(2) Based upon an aggregate of 22,144,882 shares arrived at by adding the
aggregate of those shares indicated in column designated "Shares" to
those shares issued and outstanding as of March 31, 1999.
(3) The names of those person(s) who have voting control over each of these
entities is as follows: (i) Dominion Capital Fund, Ltd. and Dominion
Investment Fund, LLC - Livingstone Asset Management Ltd., Navigator
Management Ltd. (President) and D. Sims (director of Navigator)-British
Virgin Islands, (ii) Sovereign Partners Limited Partnership-Southridge
Capital Management LLC, G. P., S. Hicks (President) - Connecticut (iii)
Atlantis Capital Fund, Ltd.-Harbourcrest Asset Management Ltd., B.
Herman (President and director) - Bahamas, (iv) Canadian Advantage
Limited Partnership - Ian McKinnon, General Partner and (v) Aberdeen
Avenue, LLC-Minglewood Capital LLC., CTC Corporation Ltd., M. Francombe
(director of CTC).
(4) Number of shares indicated includes those shares as may be issued to
Selling Holder assuming Company does not pay promissory notes by their
respective due dates thereby causing contingent convertible debentures
and underlying documents to go into effect. Such included shares are as
follows: Dominion Capital Fund, Ltd. - 372,665 shares, Sovereign
Partners LP - 755,681 shares, Dominion Investment Fund, LLC - 383,016
shares and Aberdeen Avenue, LLC - 379,566 shares.
- 56 -
<PAGE>
Reference is herewith made to prior Registration Statement on Form S-1
as declared effective May 12, 1998 (Registration No. 333-50069) and in
particular the section therein entitled "Selling Holders and Plan of
Distribution". In that regard, and as heretofore indicated, and in accordance
with Rule 429 under the Securities Act of 1933, an aggregate of an additional
1,967,900 shares of Common Stock are being registered hereunder for issuance
against unconverted balance of aggregate principal amount of $5,500,000 in
Convertible Debentures issued in March 1998.
The Selling Holders of the Securities identified above may have sold,
transferred or otherwise disposed of, in transactions exempt from the
registration requirements of the Securities Act, all or a portion of the
Convertible Debentures or Securities since the date on which the information in
the preceding table is presented. Information concerning the Selling Holders may
change from time to time and any such changed information will be set forth in
supplements to this Prospectus if and when necessary.
The sale of the Securities by the Selling Holders may be affected from
time to time in transactions on the Electronic Over-the-Counter Bulletin Board
in negotiated transactions, or through a combination of such methods of sale (a)
at fixed prices, which may be changed, (b) at market prices prevailing at the
time of sale, (c) at prices related to such prevailing market prices or (d) at
negotiated prices. The Selling Holders may effect such transactions by selling
the Securities directly to purchasers or to or through broker-dealers. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Holders and/or the purchasers of the Securities for
whom such broker-dealers may act as agents or to whom they sell as principals,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The Selling Holders and any broker-dealers who act in
connection with the sale of the Securities hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and profit on any resale of the Securities as
principals might be deemed to be underwriting discounts and commissions under
the Securities Act.
At the time a particular offering of the Securities is made, a
Prospectus Supplement, if required, will be distributed, which will set forth
the aggregate amount and type of Securities being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Securities may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or any exemption from
registration or qualification is available and is complied with. The Registrant
has not taken any action to register or qualify the Securities for offer and
sale under the securities or "blue sky" laws of any state of the United States.
However, pursuant to the Registration Rights Agreements among the Registrant and
the Selling Holders (the "Registration Rights Agreements"), the Registrant will
use reasonable efforts to (i) register and qualify the Securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Selling Holders who hold a majority in interest of the
Securities being offered reasonably request and in which significant volumes of
shares of Common Stock are traded, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times until the earliest (the "Registration
Period") of (A) the date that is two years after the Closing Date, (B) the date
when the Selling Holders may sell all Securities under Rule 144 or (C) the date
the Selling Holders no longer own any of the Securities, (iii) take such other
actions as may be necessary to maintain such registrations and qualification in
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<PAGE>
effect at all times during the Registration Period and (iv) take all other
actions reasonably necessary or advisable to qualify the Securities for sale in
such jurisdictions; provided, however, that the Registrant shall not be required
in connection therewith or as a condition thereto to (A) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify, (B)
subject itself to general taxation in any such jurisdiction, (C) file a general
consent to service of process in any such jurisdiction, (D) provide any
undertakings that cause more than nominal expense or burden to the Company or
(E) make any change in its articles of incorporation or by-laws or any then
existing contracts, which in each case the Board of Directors of the Registrant
determines to be contrary to the best interests of the Company and its
stockholders. Unless and until such times as offers and sales of the Securities
by Selling Holders are registered or qualified under applicable state securities
or "blue sky" laws, or are otherwise entitled to an exemption therefrom, initial
resales by Selling Holders will be materially restricted. Selling Holders are
advised to consult with their respective legal counsel prior to offering or
selling any of their Securities.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Securities by the Selling
Holders. The foregoing may affect the marketability of the Securities.
Pursuant to the Registration Rights Agreements between the Registrant
and each of the Selling Holders all expenses of the registration of the
Securities will be paid by the Registrant, including, without limitation,
Commission filing fees and expenses of compliance with state securities or "blue
sky" laws; provided, however, that the Selling Holders will pay all underwriting
discounts and selling commissions, if any. The Selling Holders will be
indemnified by the Registrant against certain civil liabilities, including
certain liabilities under the Securities Act or will be entitled to contribution
in connection therewith.
DESCRIPTION OF CAPITAL STOCK
The following statements do not purport to be complete and are
qualified in their entirety by reference to the detailed provisions of the
Registrant's Certificate of Incorporation, as amended and By-Laws, copies of
which are incorporated by reference as exhibits to this Registration Statement.
Common Stock
On December 26, 1997 an amendment to the Certificate of Incorporation
with respect to an increase of the number of shares of Common Stock the
Registrant is authorized to issue from 30,000,000 to 50,000,000 was filed with
the Department of State of the State of New York. Accordingly, the Registrant is
authorized to issue up to 50,000,000 shares of Common Stock, par value $.01 per
share. The amount of shares of Common Stock of the Registrant issued and
outstanding at the close of business on March 31, 1999 was 11,712,379 . In
addition, the Registrant currently has reserved 1,967,900 shares for issuance
pursuant to outstanding convertible debentures referred to under Registration
No. 333-50069 and an additional aggregate of 10,617,580 shares which are part of
this Registration Statement and are referred to in footnote 1 to the
"Calculation of Registration Fee". The Company has also reserved (i) 145,500
shares of Common Stock which may be issued upon the exercise of outstanding
options under the Registrant's 1996 Non-Statutory Stock Option Plan (the "1996
Plan"), (ii) 15,500 shares of Common Stock reserved for issuance upon the
exercise of options available for future grant under the 1996 Plan and (iii)
200,000 shares of Common Stock reserved for issuance upon the exercise of
options available for future grant under the 1997 Non-Statutory Stock Option
Plan (the "1997 Plan").
- 58 -
<PAGE>
All of the issued and outstanding shares of Common Stock are fully paid
and non-assessable. The holders of Common Stock are entitled to one vote per
share for the election of directors and with respect to all other matters
submitted to a vote of stockholders. Shares of Common Stock do not have
cumulative voting rights, which means that the holders of more than 50% of such
shares voting for the election of directors can elect 100% of the directors if
they choose to do so and, in such event, the holders of the remaining shares so
voting will not be able to elect any directors. There is no classification of
the Board of Directors. The payment by the Registrant of dividends, if any, in
the future rests within the discretion of its Board of Directors and will
depend, among other things, upon the Registrant's earnings, its capital
requirements and its financial condition, as well as other relevant factors. The
Registrant has not paid or declared any dividends upon its Common Stock since
its inception and, by reason of its present financial status and its
contemplated financial requirements, does not contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future. The holders of
the Common Stock have no preemptive or conversion rights, and there are no
redemption or sinking fund rights with respect to the Common Stock. See "Market
Prices and Dividend Policy."
Promissory Note
On or about April 28, 1997 an otherwise unaffiliated lender, Trianon
Opus One Inc. ("Trianon"), loaned the Company the sum of $2,000,000 bearing
interest at the rate of 6% per annum in accordance with the terms and conditions
of a certain convertible promissory note due April 28, 1998. In accordance with
the terms of such note both principal and interest were convertible into shares
of Company Common Stock one year from the date of the note at the higher of 80%
of bid price or $2.50 per share on the date of conversion. The note also
provided for certain "piggy-back" registration rights and, accordingly, the
85,077 restrictive shares of Company Common Stock issued upon conversion in
accordance with the terms of the note are herewith being registered hereunder.
Contingently Convertible Promissory Notes - December 1998
The Registrant received gross proceeds of $1,080,000 in December 1998
pursuant to promissory notes bearing interest at the rate of 8% per annum for
the first 90 calendar days (through March 13, 1999) with the Company having the
option to extend the notes for an additional 60 days with interest increasing 2%
per annum during the 60 day period. The Company exercised its extension option.
As further consideration for the loan, the Company issued Lenders Warrants to
purchase up to 50,000 shares of the Company's common stock exercisable, in whole
or in part, for a period of up to 5 years at $.375 (the bid price for Company
shares on the date of closing). The notes are secured by a second mortgage on
land and building as well as certain Company inventory. In the event that the
promissory notes are not paid by their due date then the terms of a Contingent
Subscription Agreement, Debenture and Registration Rights Agreement shall apply.
In that respect the convertible debentures are to bear interest at the rate of
5% per annum (payable in stock or cash at the Company's option) and are
convertible, at any time at the lesser of (a) 82% of the 10 day average bid
price for the 10 consecutive trading days immediately preceding the conversion
date or (b) $1.00 per share. The documents also provide for certain Company
redemption rights at percentages ranging from 115% of the face amount of the
Debenture to 125% of the face amount of the debenture dependent upon redemption
date, if any.
The Company is also required to register those shares of common stock
underlying the convertible debentures. Accordingly, 745,330 shares are being
registered pursuant to the terms of such agreements, notwithstanding the fact
that the current due date on the promissory note is May 13, 1999 and the
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<PAGE>
contingent convertible debenture terms are not in effect (but will be in effect
as of May 13, 1999). In the event that the promissory notes are paid off prior
to its due date those shares registered hereunder regarding the contingent
convertible debenture shall be deregistered by post effective amendment or
otherwise.
Contingently Convertible Promissory Notes- March 1999
On March 2, 1999, the Company entered into a second promissory note
(contingent convertible debenture financing) with the same lenders as the
December 1998 transaction described directly above with terms and conditions
identical to those set forth above excepting (a) gross proceeds amounted to
$1,110,000, (b) the initial due date of such notes are May 31, 1999, (c) the
potential 60 day extension date on such promissory notes is July 30, 1999, (d)
the conversion price is 80% of the 10 day average closing bid price for the 10
consecutive trading days preceding conversion date and (e) Warrants were issued
(similarly exercisable over 5 years) to purchase up to 50,000 shares of common
stock at 125% of the average 5 day closing bid price of the Company's common
stock immediately preceding the date of closing but in no event at less than
$1.00 per share. In all other respects the terms and conditions of each of the
documents executed with respect to this transaction are identical to those
described above (under "Contingently Convertible Promissory Notes - December
1998") in all material respects. The number of shares being registered for this
transaction amounts to 766,032 shares and to the extent not issued will be
properly deregistered.
On March 26, 1999 the Company entered into a third promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, (b) gross proceeds
amounted to $550,000, (c) the initial due date of such note is June 25, 1999,
(d) the potential 60 day extension date on such promissory note is August 24,
1999, (e) Warrants were issued (similarly exercisable over 5 years) to purchase
up to 27,500 shares of common stock at 125% of the average 5 day closing bid
price of the Company's common stock immediately preceding the date of closing
but in no event at less than $1.00 per share. In all other respects the terms
and conditions of each of the documents executed with respect to this
transaction are identical to those described in the above referenced March 2,
1999 transaction. The number of shares being registered for this transaction
amounts to 379,566 shares and to the extent not issued will be properly
deregistered.
Registration Rights
The Convertible Debentures
The Registrant issued $12,253,849 aggregate principal amount of
Convertible Debentures from June of 1998 to March 1999 (as well as becoming
obligated under the three contingent convertible promissory notes referred to
above). One Hundred percent of the face amount of such Convertible Debentures is
convertible into shares of Common Stock of the Registrant at the earlier of the
effective date of a Registration Statement covering the underlying shares of
Common Stock or within 90 to 120 days from closing dependent upon the specific
convertible debenture at a conversion price equal to 18% to 20% except for one
instance where the discount from market was 25% on a $145,969 debenture (since
entirely converted into shares of Company common stock) of the average closing
bid price for the five to ten trading days preceding the date of conversion
(dependent upon the particular debenture). Any Convertible Debentures not so
converted are subject to mandatory conversion by the Registrant on the 24th
monthly anniversary of the date of issuance of the Convertible Debentures.
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<PAGE>
Other than on the date of such mandatory conversion provision, the Selling
Holder shall not be entitled to convert any amount of Convertible Debentures in
excess of that amount upon conversion of which the sum of (i) the number of
shares of Common Stock beneficially owned by the Selling Holder and its
affiliates (other than the unconverted Convertible Debentures) and (ii) the
number of shares of Common Stock issuable upon conversion of the Convertible
Debentures would result in beneficial ownership by the Selling Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock of the
Registrant.
Reference is herewith made to chart appearing on page 56 regarding
specific percentages as same relate to debenture conversion price and percent of
beneficial ownership that Selling Shareholders may have at any one time.
If at any time the number of shares of Common Stock into which the
Convertible Debentures may be converted exceeds the aggregate number of shares
of Common Stock then registered, the Registrant shall, within ten (10) business
days after receipt of written notice from any investor, either (i) amend the
registration statement filed by the Registrant, if such registration statement
has not been declared effective by the SEC at that time, to register all shares
of Common Stock into which the Debenture may be converted, or (ii) if such
registration statement has been declared effective by the Securities and
Exchange Commission (the "SEC") at that time, file with the SEC an additional
registration statement on Form S-1 to register the shares of Common Stock into
which the Convertible Debentures may be converted that exceed the aggregate
number of shares of Common Stock already registered.
Pursuant to the Registration Rights Agreements between the Registrant
and the Selling Holders, the Registrant is required to file with the SEC, within
a set time frame, a Registration Statement(s) covering a sufficient number of
shares of Common Stock for the Selling Holders into which the Convertible
Debentures would be convertible. Consequently, the Registrant is filing with the
Commission this Registration Statement on Form S-1 (the "Registration
Statement"), of which this prospectus is a part, to cover the sale of the Common
Stock issuable to the Selling Holders upon conversion of the Convertible
Debentures. The Registration Rights Agreements provide that the Registrant shall
keep the Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two years after the Closing Date,
(ii) the date when the Investors may sell all Securities under Rule 144 or (iii)
the date the Investors no longer own any of the Securities.
If the Registration Statement covering the Securities required to be
filed by the Registrant pursuant to the Registration Rights Agreements is not
filed by the agreed to date or if such Registration Statement is not declared
effective within 90 to 120 days of the closing date (dependent upon applicable
Registration Rights Agreement) (the "Initial Date"), the Registrant shall make
payments to the Selling Holders in such amounts and at such times as shall be
determined pursuant to the Registration Rights Agreements. In the event a timely
filing is not made, the Registrant shall pay the Selling Holder 2% of the face
amount of the Convertible Debenture for each 30 day period, or portion thereof
after 30 days following the Closing Date that the Registration Statement is not
filed. The amount to be paid by the Registrant to the Selling Holders in the
event the Registration Statement is not declared effective within the agreed to
number of days subsequent to closing date shall be determined as of each
Computation Date, and such amount shall be equal to two percent (2%) of the
purchase price paid by the Selling Holders for the Convertible Debentures
pursuant to the Registration Rights Agreements for the period from the Initial
Date to the first Computation Date, and two percent (2%) of the purchase price
for each Computation Date thereafter, to the date the Registration Statement is
declared effective by the SEC (the "Periodic Amount"). The full Periodic Amount
shall be paid by the Registrant in immediately available funds within five
business days after each Computation Date.
- 61 -
<PAGE>
Notwithstanding the foregoing, the amounts payable by the Registrant pursuant to
the Registration Rights Agreements shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Selling Holders or their respective
counsel.
"Computation Date" means the date which is the earlier of (i) 35 days
after the Registrant is notified by the SEC that the Registration Statement may
be declared effective or (ii) one hundred twenty (120) days after the Closing
Date and, if the Registration Statement required to be filed by the Registrant
pursuant to the Registration Rights Agreements has not therefore been declared
effective by the SEC, each date which is thirty (30) days after the previous
Computation Date until such Registration Statement is so declared effective.
The number of shares of Common Stock issuable upon conversion of the
Convertible Debentures depends on several factors, including the conversion
ratio and the date on which such shares are converted. As of April 13, 1999 if
all of the Convertible Debentures (issued from March 1998 to March 1999, as
indicated in aforesaid chart) were converted based on a 18% to 20% discount to
the reported closing price on the Electronic Over-the-Counter Bulletin Board on
April 13, 1999, the Registrant would be required to issue 12,585,480 shares of
Common Stock (exclusive of shares which may be issued in exchange for interest
earned from the date of closing through date of conversion).
Except for the total number of shares to which this Prospectus relates
as set forth above, references in this Prospectus to the "number of Shares
covered by this Prospectus," or similar statements, and information in this
Prospectus regarding the number of Securities issuable to or held by the Selling
Holders and percentage information relating to the Securities of the outstanding
capital stock of the Registrant, are based, with respect to the Convertible
Debentures. See "Selling Holders and Plan of Distribution" and "Description of
Capital Stock."
The Securities are being offered on a continuous basis pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"). No
underwriting discounts, commissions or expenses are payable or applicable in
connection with the sale of the Securities by the Selling Holders. The Common
Stock of the Registrant is quoted on the NASDAQ SmallCap Market ("NASDAQ") under
the symbol "SRMI". The Securities offered hereby will be sold from time to time
at the then prevailing market prices, at prices relating to prevailing market
prices or at negotiated prices. On April 13, 1999, the last reported sale price
of the Common Stock on Electronic Over-the-Counter Bulletin Board was $2.125 per
share. This Prospectus may be used by the Selling Holders or any broker-dealer
who may participate in sales of the Securities covered hereby.
Common Stock Reserved
The Registrant is required to reserve and keep available out of its
authorized but unissued Common Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect conversion of all of the then
outstanding Convertible Debentures and exercise of options. While the Registrant
currently has a sufficient number of authorized but unissued shares for such
purposes in the event of any further significant decrease in the bid price of
the Company's common stock additional authorized shares may be necessary in
order to meet its contractual commitments regarding conversion especially in
view of the fact that none of the Subscription Agreements or convertible
debentures contain any "floor", i.e., a bid price beneath which Debenture Holder
may not convert. In the event that additional authorized shares are necessary
but not readily available, the Company intends to take such steps as are
necessary in order to hold a Special Meeting of Stockholders for the purpose of
amending its Certificate of Incorporation so as to increase its authorized
shares.
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<PAGE>
Registrar and Transfer Agent
The registrar and transfer agent for the Registrant's Common Stock is
Continental Stock Transfer & Trust Company, New York, New York.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Registrant by Gary B.
Wolff, P.C., counsel to the Company.
INDEPENDENT AUDITORS
The consolidated financial statements of the Registrant and its
subsidiaires for the year ended June 30, 1998 included herein have been included
in reliance upon the report of Feldman Sherb Ehrlich & Co., P.C., independent
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of the Registrant and its
subsidiaries for the two years ended June 30, 1997 and 1996 included herein have
been included in reliance upon the report of Bederson & Company LLP, independent
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
As set forth in the report of Bederson & Company LLP, the financial
statements of one of the Registrant's subsidiaries for the year ended June 30,
1997 were audited by other auditors whose report was furnished to Bederson &
Company LLP. The opinion of Bederson & Company LLP set forth in such report,
insofar as it relates to amounts included for that subsidiary, is based solely
on the report of the other auditors.
- 63 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Audited Financial Statements for Fiscal Years Ended
June 30, 1998, 1997 and 1996:
Independent Auditor's Report F-1-3
Consolidated Balance Sheets at June 30, 1998 and 1997 F-4-5
Consolidated Statements of Operations for the years ended
June 30, 1998, 1997 and 1996 F-6
Consolidated Statements of Cash flows for the years ended
June 30, 1998, 1997 and 1996 F-7-8
Consolidated Statements of Stockholders Equity for the years F-11-12
ended June 30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements F-13-34
Unaudited Financial Statements for the Six Months Ended
December 31, 1998 and 1997:
Consolidated Balance Sheets at December 31, 1998
and June 30, 1998 F-35
Consolidated Statements of Operations for the six months
ended December 31, 1998 and 1997 F-36
Consolidated Statements of Cash Flows for the six months
ended December 31, 1998 and 1997 F-37
Notes to Consolidated Financial Statements at December 31, 1998 F-38
- 64 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Swissray International, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Swissray
International, Inc. and subsidiaries as of June 30, 1998 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Swissray International, Inc.
and subsidiaries as of June 30, 1998, and the results of its operations, changes
in stockholders' equity and cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ Feldman Sherb Ehrlich & Co., P.C.
Feldman Sherb Ehrlich & Co., P.C.
Certified Public Accountants
New York, New York
November 20, 1998
F-1
<PAGE>
[LETTERHEAD OF BEDERSON & COMPANY LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Swissray International, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Swissray
International, Inc., and its subsidiaries, as of June 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of Swissray (Deutschland) Rontgentechnik
GmbH, a wholly-owned subsidiary, which statements reflect total assets of
$437,021 as of June 30, 1997 and total revenues of $1,255,140 for the year then
ended. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it related to the amounts included
for Swissray (Deutschland) Rontgentechnick GmbH, is based solely on the report
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Swissray International, Inc., and
its subsidiaries, at June 30, 1997 and 1996 and the results of their operations
and their cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/ BEDERSON & COMPANY LLP
---------------------------
Bederson & Company LLP
West Orange, New Jersey
September 16, 1997
Except for Notes 17, 20 and 22, as of March 6, 1998, and Note 1, 16, 23, 25, 26,
27, 29 30, 31 and 32, as of November 16, 1998
Member of TAG International with offices in principal cities worldwide
Affiliated with the American Institute of CPAs Division for Firms
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Swissray (Duetschland) Rontegentechnik Gmbh
Wiesbaden, Germany
We have audited the balance sheet of Swissray (Duetschland) Rontegentechnik
Gmbh as of June 30, 1997 and the related statements of income and stockholder's
equity for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audit.
We conducted our audit in accordance to all laws governed by German
regulations and with generally accepted auditing standards promulgated by the
American Institute of Certified public accountants. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Swissray (Duetschland)
Rontegentechnik Gmbh as of June 30, 1997 and the results of its operations for
the year then ended.
/s/ Theo Lepper
Theo Lepper
Certified Public Accountant
Wiesbaden, Germany
August 8, 1997
F-3
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
------------------------------
1998 1997
------------------------------
(Restated)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,281,552 $ 3,091,307
Accounts receivable, net of allowance for doubtful
accounts of $ 32,356 and $ 148,390 2,584,651 5,154,794
Inventories 7,701,145 3,911,107
Prepaid expenses and sundry receivables 1,501,909 1,936,138
------------------------------
TOTAL CURRENT ASSETS 13,069,257 14,093,346
------------------------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation
of $ 581,077 and $ 320,110 6,010,378 4,336,617
------------------------------
OTHER ASSETS
Due from stockholders -- 69,587
Loan receivable 20,005 17,396
Accounts receivable - long-term, net of allowance of $ 891,409
and $ 814,178 for doubtful account -- 240,912
Licensing agreement, net of accumulated amortization of 3,600,766 4,097,424
$ 1,365,809 and $ 869,151
Patents and trademarks, net of accumulated amortization of 230,614 206,003
$ 82,716 and $ 54,941
Software development costs, net of accumulated amortization of 455,318 317,524
$ 121,892 and $ 34,512
Organization cost, net of accumulated amortization of -- 5,921
$ 8,385 and $ 2,464
Security deposits 38,280 43,728
Note receivable - long-term, net of allowance of $ 30,733 and $ -0- 513,643 513,643
Goodwill, net of accumulated amortization of $ 136,939 and $ 9,023 1,796,336
410,814
Debt issance costs on convertible debentures, net of accumulated
amortization of $ 60,000 and $ 200,566 180,000 435,319
------------------------------
TOTAL OTHER ASSETS 6,834,962 6,358,271
------------------------------
TOTAL ASSETS $25,914,597 $24,788,234
==============================
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL
CONSOLIDATED BALANCE SHEET (Continued)
JUNE 30, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 233,746 $ 243,135
Notes payable - banks 3,551,091 3,834,706
Loan payable 125,029 133,008
Accounts payable 5,030,449 5,336,749
Accrued expenses 2,365,450 1,401,938
Restructuring 500,000 --
Customer deposits 176,583 170,436
Due to stockholders and officers 2,206 139,826
---------------------------------
TOTAL CURRENT LIABILITIES 11,984,554 11,259,798
---------------------------------
CONVERTIBLE DEBENTURES 7,645,969 6,000,000
Conversion Benefit (315,327) (689,441)
---------------------------------
Net Convertible Debentures 7,330,642 5,310,559
---------------------------------
LONG-TERM DEBT, less current maturities 440,674 524,689
COMMON STOCK SUBJECT TO PUT 1,819,985 320,000
STOCKHOLDERS' EQUITY
Common stock 41,426 19,694
Additional paid-in capital 58,074,793 35,957,659
Common stock to be issued to officer
(48,259 shares in 1997) -- 1,122,973
Accumulated deficit (50,481,713) (27,978,604)
Accumulated other comprehensive loss (1,475,779) (1,428,534)
Common stock subject to put (1,819,985) (320,000)
---------------------------------
TOTAL STOCKHOLDERS' EQUITY 4,338,742 7,373,188
---------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,914,597 $ 24,788,234
=================================
</TABLE>
F-5
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED JUNE 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
----------------------------------------------------
1998 1997 1996
(Restated) (Restated)
----------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 22,892,978 $ 13,151,701 $ 10,899,222
COST OF SALES 18,081,786 8,445,414 5,793,306
----------------------------------------------------
GROSS PROFIT 4,811,192 4,706,287 5,105,916
----------------------------------------------------
OPERATING EXPENSES
Officers and directors compensation 569,816 1,816,879 612,776
Salaries 4,168,540 2,059,396 1,829,535
Selling 3,740,391 1,873,389 1,140,604
Research and development 3,542,149 5,786,158 1,731,502
General and administrative 2,612,262 2,879,257 7,535,759
Restructuring cost 500,000 -- --
Other operating expenses 1,735,877 1,645,800 1,098,346
Bad debts 133,196 619,160 491,487
Depreciation and amortization 1,745,498 770,294 526,138
----------------------------------------------------
TOTAL OPERATING EXPENSES 18,747,729 17,450,333 14,966,147
----------------------------------------------------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND INCOME TAXES (13,936,537) (12,744,046) (9,860,231)
Other income (expenses) (281,227) 318,763 1,003,933
Interest expense (8,590,268) (762,168) (193,930)
----------------------------------------------------
OTHER INCOME (EXPENSES) (8,871,495) (443,405) 810,003
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS (22,808,032) (13,187,451) (9,050,228)
INCOME TAX PROVISION (BENEFIT) -- 110,223 (364,648)
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS (22,808,032) (13,297,674) (8,685,580)
Extraordinary income (expenses) net of
taxes 304,923 (387,514) 419,500
----------------------------------------------------
NET LOSS $(22,503,109) $(13,685,188) $ (8,266,080)
====================================================
LOSS PER COMMON SHARE BASIC
Loss from continuing operations (8.48) (8.41) (6.69)
Extraordinary items 0.11 (0.24) 0.32
----------------------------------------------------
NET LOSS (8.37) (8.65) (6.37)
====================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,690,695 1,581,757 1,297,475
============ ========= =========
</TABLE>
F-6
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
----------------------------------------------------
1998 1997 1996
----------------------------------------------------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $(22,503,109) $(13,685,188) $ (8,266,080)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization 1,874,206 770,294 526,138
Provision for bad debts (38,803) 552,725 336,706
Write-off of affiliate receivable -- 166,384 --
Interest expense on Debt issuance cost and
conversion benefit 7,905,225 511,125 --
Operating expenses through issuance of stock
options and common stock to be issued 449,376 2,442,385 6,374,468
Early extinguishment of Debt (gain) (304,923) -- --
Gain on Sale of marketable securities -- -- (762,500)
(Increase) decrease in operating assets:
Accounts receivable 2,887,427 (1,857,662) (1,870,866)
Accounts receivable - affiliates -- 31,533 (31,533)
Accounts receivable - long-term 163,680 283,603 22,138
Inventories (3,790,038) (998,271) (1,420,393)
Prepaid expenses and sundry receivables 434,229 (860,457) (976,664)
Increase (decrease) in operating liabilities:
Accounts payable (306,300) 1,601,074 1,514,465
Accounts payable-affiliates -- (1,541) 1,541
Accrued expenses 1,463,512 266,245 855,041
Customers deposits 6,147 92,763 38,874
----------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (11,759,371) (10,684,988) (3,658,665)
----------------------------------------------------
<PAGE>
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment (2,849,205) (3,431,375) (932,066)
Capitalized Computer Software (225,174) (352,036) --
Purchase of marketable securities -- -- (200,000)
Patents and trademarks (52,386) (12,925) (45,309)
Goodwill (802,107) (299,837) --
Organization costs -- -- (8,385)
Asset Purchase net of cash received (591,108) -- --
Collection of note receivable -- 448,857 --
Security deposits 5,448 (23,776) (19,952)
(Repayment of) loan receivable (2,608) 2,896 --
Repayments from (advances to) affiliates -- -- 34,592
----------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (4,517,140) (3,668,196) (1,171,120)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 10,342,060 9,198,821 2,069,828
Proceeds from long-term borrowings -- 248,987 --
Principal payment of short-term borrowings (3,852,075) (2,093,074) (2,711,086)
Principal payment of long-term borrowings (21,748) (442,681) (281,004)
Principal payment of long-term borrowings with stock (62,267) -- --
Issuance of common stock for cash 8,461,262 7,753,222 7,250,000
Repayment from (payment to) stockholders and officers (68,032) 87,653 141,054
Public offering expenses -- -- (680,098)
----------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 14,799,200 14,752,928 5,788,694
----------------------------------------------------
EFFECT OF EXCHANGE RATE ON CASH (332,444) (561,122) (383,050)
----------------------------------------------------
NET INCREASE (DECREASE) IN CASH (1,809,755) (161,378) 575,859
CASH AND CASH EQUIVALENT - beginning of period 3,091,307 3,252,685 2,676,826
----------------------------------------------------
CASH AND CASH EQUIVALENTS - end of period $ 1,281,552 $ 3,091,307 $ 3,252,685
====================================================
</TABLE>
F-7
The accompanying notes are an integral part of these financial statements
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the years ended June 30, 1998, 1997 and 1996,
include interest of $161,093, $122,427 and $193,930, respectively. Cash payments
for the years ended June 30, 1997 and June 30, 1996 included income taxes of
$56,562 and $-0-, respectively. No income taxes had to be paid in the fiscal
year ended June 30, 1998
NON-CASH OPERATING ACTIVITIES
In April of 1997, the Company issued options to an officer under
the 1996 non-statutory stock option plan. The excess of the then quoted market
price over the option price has been recorded as additional compensation
amounting to $25,000.
For the years ended June 30, 1997 and 1996, the Company issued
options to various individuals and companies for services rendered under the
1996 non-qualified stock option plan. The excess of the fair value over the
option price has been charged to operations in the amounts of $1,161,462 and
$6,374,468, for the years ended June 30, 1997 and 1996, respectively. No options
have been issued during the fiscal year ended June 30, 1998
For the years ended June 30, 1998 and June 30, 1997, the Company
issued 60,999 shares of common stock in the amount of $449,376 in lieu of
interest payments due on convertible debentures and 7,061 shares of common stock
in the amount of $132,950 in lieu of interest payments due on convertible
debentures respectively.
NON-CASH INVESTING AND FINANCING ACTIVITIES
For the year ended June 30, 1996 the Company received a note
receivable for $962,500 from the sale of marketable securities. No cash was
received.
On April 1, 1997, the Company acquired a subsidiary through the
issuance of 8,000 shares of common stock at the then quoted market price of
$120,000 ($15 per share). This transaction was accounted for as a purchase.
On May 15, 1997 and June 13, 1997, the Company issued convertible
debentures which were convertible into common shares at a price equal to eighty
(80%) of the average closing bid price for the five (5) trading days preceding
the date of the conversion. A beneficial conversion feature of $1,000,000 was
charged to additional paid-in capital and is being amortized over the period
from the date of issuance to the first available conversion date of the
respective debenture.
During 1997, pursuant to agreements with an officer of the Comany, dated
December 1996 and June 1997 (as described in Note 16), the Company was required
to issue 48,259 shares of common stock with a fair value of $1,122,973 in lieu
of cash compensation.
On July 31, 1997, the Company issued convertible debentures in
exchange for $4,262,500 (including interest of $262,500) of 6% convertible
debentures dated May 15, 1997 and June 13, 1997. The Company did not receive any
cash proceeds from this transaction. The debentures, due July 31, 2000, are
convertible into common shares at a price equal to eighty (80%) of the average
closing bid price for the five (5) trading days preceding the date of
conversion.
On August 19, 1997, the Company issued $5,000,000 of 6% convertible
Debentures which were convertible into common shares at a price equal to eighty
(80%) of the average closing bid price for the five (5) trading days preceding
the date of conversion. A beneficial conversion feature of $1,250,000 was
charged to additional paid-in capital and is being amortized over the period
from the date of issuance to the first available conversion date of the
respective debenture.
On October 17, 1997, the Company acquired substantially all of the
assets of Service Support Group LLC ("SSG") located in Gig Harbor, Washington,
in exchange for the payment of approximately $621,892 in cash and issuance of
33,333 shares of its Common.
F-8
<PAGE>
Between November 26, 1997 and December 11, 1997, the Company issued
$2,158,285 of convertible debentures including a 15% premium and accrued
interest, convertible into Common shares at a price equal to 75% of the average
closing bid price for the five (5) trading days preceding the date of
conversion. The registrant did not receive any cash proceeds from the offering
of the Convertible Debentures. An amount of $2,158,285 was paid by investors to
holders of the Company's Convertible Debentures issued on August 19,1997 holding
$1,850,000 of such Convertible Debentures as repayment in full of the Company's
obligations under such Convertible Debentures. During the same period the
Company issued $3,690,000 aggregate principal amount of convertible debentures,
convertible into Common shares at a price equal to 75% of the average closing
bid price for the five (5) trading days preceding the date of conversion A
beneficial conversion feature of $1,949,426 was charged to additional paid-in
capital and is being amortized over the period from the date of issuance to the
first available conversion date of the respective debenture.
On March 16, 1998, the Company issued $5,500,000 convertible
debentures convertible into Common shares at a price equal to 80% of the average
closing bid price for the ten (10) trading days preceding the date of
conversion. A beneficial conversion feature of $875,500 was charged to
additional paid-in capital and is being amortized over the period from the date
of issuance to the first available conversion date of the respective debenture.
On June 15, 1998, the Company issued $2,000,000 convertible
debentures convertible into Common shares at a price equal to 80% of the average
closing bid price for the ten (10) trading days preceding the date of
conversion. A beneficial conversion feature of $420,436 was charged to
additional paid-in capital and is being amortized over the period from the date
of issuance to the first available conversion date of the respective debenture.
F-9
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CONSOLITATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common
Additional Stock
Paid-in to be
Common Stock Capital issued
Shares Amount (Restated) (Restated) )
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - July, 1, 1995 1,203,506 $ 12,035 $ 12,828,314 $ --
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- --
Issuance of common stock for cash 110,000 1,100 5,198,900 --
Stock options exercised for cash 105,000 1,050 2,048,950 --
Stock options granted for services 6,374,468 --
Public offering expenses (680,098) --
-----------------------------------------------------------
BALANCE - June 30, 1996 1,418,506 14,185 25,770,534 --
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- --
Issuance of common stock for cash 519,776 5,197 7,630,495 --
Stock options exercised for cash 16,100 161 117,369 --
Issuance of common stock in lieu of interest payment 7,061 71 132,879 --
Beneficial conversion feature of convertible debentures -- -- 1,000,000 --
Stock options granted as compensation -- -- 25,000 --
Stock options granted for services -- -- 1,161,462 --
Shares to be issued to officers for services -- -- -- 1,122,973
Purchase of subsidiary for stock 8,000 80 119,920 --
Common stock subject to put -- -- -- --
-----------------------------------------------------------
BALANCE - JUNE 30, 1997 1,969,443 19,694 35,957,659 1,122,973
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- --
Issuance of common stock for cash 2,013,688 20,137 13,581,739 --
Stock options exercised for cash 16,900 169 123,201 --
Shares issued to officers for services 48,259 483 1,122,490 (1,122,973)
Issuance of common stock in lieu of interest payment 60,999 610 448,766 --
Beneficial conversion feature of convertible debentures -- -- 5,738,149 --
Early extinguishment of Debt -- -- (396,875) --
Issuance of common stock for asset purchase 33,333 333 1,499,664 --
Common Stock subject to put -- -- -- --
-----------------------------------------------------------
BALANCE - JUNE 30, 1998 4,142,622 $ 41,426 $ 58,074,793 $ --
===========================================================
F-10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated Other
Deficit Comprehensive Common Stock Total
(Restated) Loss Subject to Put s (Restated)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - July, 1, 1995 $ (6,027,336) $ (436,180) $ -- $ 6,376,833
COMPREHENSIVE LOSS:
Net loss of the year (8,266,080) -- -- (8,266,080)
Foreign currency transaction losses net of taxes $ -0- (399,867) -- (399,867)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- (8,665,947)
--------------
Issuance of common stock for cash -- -- -- 5,200,000
Stock options exercised for cash -- -- -- 2,050,000
Stock options granted for services -- -- -- 6,374,468
Public offering expenses -- -- -- (680,098)
------------------------------------------------------------
BALANCE - June 30, 1996 (14,293,416) (836,047) 0 10,655,256
COMPREHENSIVE LOSS:
Net loss of the year (13,685,188) -- -- (13,685,188)
Foreign currency transaction losses net of taxes $ -0- -- (592,487) -- (592,487)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- (14,277,675)
--------------
Issuance of common stock for cash -- -- -- 7,635,692
Stock options exercised for cash -- -- -- 117,530
Issuance of common stock in lieu of interest payment -- -- -- 132,950
Beneficial conversion feature of convertible debentures -- -- -- 1,000,000
Stock options granted as compensation -- -- -- 25,000
Stock options granted for services -- -- -- 1,161,462
Shares to be issued to officers for services -- -- -- 1,122,973
Purchase of subsidiary for stock -- -- -- 120,000
Common Stock subject to put -- -- (320,000) (320,000)
------------------------------------------------------------
BALANCE - JUNE 30, 1997 (27,978,604) (1,428,534) (320,000) 7,373,188
COMPREHENSIVE LOSS:
Net loss of the year (22,503,109) -- -- (22,503,109)
Foreign currency transaction losses net of taxes $ -0- (47,245) -- (47,245)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- (22,550,354)
Issuance of common stock for cash -- -- -- 13,601,876
Stock options exercised for cash -- -- -- 123,370
Shares issued to officers for services -- -- -- --
Issuance of common stock in lieu of interest payment -- -- -- 449,376
Beneficial conversion feature of convertible debentures -- -- -- 5,738,149
Early extinguishment of Debt -- -- -- (396,875)
Issuance of common stock for asset purchase -- -- -- 1,499,997
Common Stock subject to put -- -- (1,499,983) (1,819,985)
------------------------------------------------------------
BALANCE - JUNE 30, 1998 $(50,481,713) $ (1,475,779) $(1,819,985) $ 4,338,742
============================================================
</TABLE>
F-11
The accompanying notes are an integral part of these financial statements
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company was incorporated under the laws of the State of New York on January
2, 1968 under the name CGS Units Incorporated. On June 6, 1994, the Company
merged with Direct Marketing Services, Inc. and changed its name to DMS
Industries, Inc. In May of 1995 the Company discontinued the operations then
being conducted by DMS Industries, Inc. and acquired all of the outstanding
securities of SR Medical AG, a Swiss corporation engaged in the business of
manufacturing and selling X-ray equipment, components and accessories. On June
5, 1995 the Company changed its name to Swissray International, Inc. The
Company's operations are being conducted principally through its wholly owned
subsidiaries, SR Medical Holding AG (known as SR Medical AG until renamed in
February 1998), the latter's wholly owned subsidiaries, SR Medical AG (known as
Teleray AG until renamed in February 1998), a Swiss corporation, Swissray
(Deutschland) Roentgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company and Teleray Research and Development AG (a Swiss
corporation), as well as through the Company's other wholly owned subsidiaries,
SR Management AG (formerly SR Finance AG), a Swiss corporation, Swissray Medical
Systems, Inc. (formerly Swissray Corporation), a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation, and Swissray Information Solutions,
Inc., a Delaware corporation and Empower, Inc. (whose assets were substantially
sold in June 1998), a New York corporation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. Investments which are recorded on a equity
method and have operated at a Loss in excess of equity are carried at a zero
value. See Note 9 Investments
BUSINESS ACQUISITION
On April 1, 1997, Swissray International, Inc. exchanged 8,000 shares of common
stock at the then quoted market price of $120,000 ($15 per share) for all the
outstanding shares of Empower, Inc.The consolidated financial statements
presented include the accounts of Empower, Inc.(whose assets were substantially
sold in June 1998), from April 1, 1997 (date of acquisition) to June 30, 1998.
The acquisition has been accounted under the purchase accounting method. The
contract requires the Company to repurchase the 8,000 shares of common stock at
$40 per share for a period of one year commencing two years from the date of the
contract at the option of the former owner of Empower, Inc. On October 17, 1997,
the Company acquired substantially all of the assets and assumed certain
liabilities of Service Support Group, LLC (SSG) located in Gig Harbor,
Washington pursuant to an asset purchase agreement. The acquisition has been
accounted under the purchase accounting method. SSG is in the business of
selling diagnostic imaging equipment and related services in markets on the West
Coast of the United States. The purchase price consisted of (1) cash in the
amount of $621,892, (2) 33,333 shares of the Company's common stock, (3) an
amount equal to fifty percent of certain accounts receivable net of certain
accounts payable and (4) the assumptions of certain other liabilities. As a
result of these transactions, the Company recorded goodwill of $1,933,275. The
contract requires the Company to repurchase the 33,333 common shares at $45 per
share during the period June 30, 1998 to April 17, 1999 at the option of the
former owners of SSG.
REVENUE AND INCOME RECOGNITION POLICIES
The Company maintains its records on the accrual basis of accounting.
Revenues from the sale of products is recorded when the products are shipped,
collection of the purchase price is probable and the Company has no significant
further obligations to the customer. Cost of remaining insignificant company
obligations, if any, are accrued as costs of revenue at the time of revenue
recognition.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during this period. Actual results
could differ from those estimates
F-12
<PAGE>
WARRANTY
The company accrues a warranty allowance at the time of sale. The warranty
allowance is based upon the companies experience and varies between 0.5 and 2%
of the net sales amount.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107 "Disclosures about Fair Value
of Financial Instruments" (SFAS 107) requires the disclosure of fair value
information about financial instruments whether or not recognized on the balance
sheet, for which it is practicable to estimate the value. Where quoted market
prices are not readily available, fair values are based on quoted market prices
of comparable instruments. The carrying amount of cash and equivalents, accounts
receivable and accounts payable approximates fair value because of the short
maturity of those instruments.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method. Inventory costs include
material, labor, and overhead.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which are three years for Computers and Telecommunication Equipment, five to ten
years for Equipment, Office furniture and Equipment and Office and leasehold
improvements and thirty years for Buildings. Leasehold improvements are
amortized over the shorter of the estimated useful lives of the improvements, or
the term of the facility lease.
Expenditures for repairs and maintenance are charged to expense as incurred. The
cost of major renewals and betterment's are capitalized and depreciated over
their useful lives. Upon disposition, the cost and related accumulated
depreciation of property and equipment are removed from the accounts and any
resulting gain or loss is reflected in operations.
The Company is required to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, in accordance with the provisions of Statement of
Financial Accounting Standards No.121, "Accounting for Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121"). Accordingly, when
indicators of impairment are present, the Company evaluates the carrying value
of property, plant, and equipment and intangibles using projected undiscounted
future cash flows and operating income for each subsidiary to determined whether
material impairment of these assets exists.
INTANGIBLE ASSETS
Excess of cost over fair value of net assets acquired ("goodwill") resulted from
the acquisition of Empower and SSG and is being amortized over ten years from
the date of acquisition using the straight-line method. Patents and Trademarks
are capitalized and are amortized using the straight-line method over their
estimated useful lives (10 year).Debt issuance costs are amortized using the
straight-line method over the term of the related debts, which range from two to
six months. Periods of amortization are evaluated periodically to determine
whether later events and circumstances warrant revised estimates of useful
lives. At each balance sheet date, the Company evaluates the recoverability of
unamortized goodwill based upon expectations of nondiscounted cash flows and
operating income. Impairments, if any, would be recognized in operating results
if a permanent diminution in value were to occur.
F-13
<PAGE>
Capitalization of software development costs begins upon the establishment of
technological feasibility of new or enhanced software products. Technological
feasibility of a computer software product is established when the Company has
completed all planning, designing, coding and testing that is necessary to
establish that the software product can be produced to meet design
specifications including functions, features and technical performance
requirements. All costs incurred prior to establishing technological feasibility
of a software product are charged to research and development as incurred. The
Company amortizes capitalized software development costs over the related sales
on a product-by-product basis at the greater of the amount computed using (a)
the ratio of current gross revenues for a product to the total of current and
anticipated future gross revenues or (b) the straight-line method over the
estimated remaining economic life of the software products, generally five to
eight years.
All cost incurred by the Company in connection with incorporation of
subsidiaries have been capitalized and are being amortized over a period up to
60 months.
ADVERTISING AND PROMOTION
Advertising and promotion cost are expensed as incurred and included in "Selling
Expenses". Advertising and promotion expense for the years ended June 30, 1998,
1997 and 1996 were $ 1,737,935, $ 781,189 and $ 740,044, respectively
RESEARCH AND DEVELOPMENT
Costs associated with research, new product development, and product cost
improvements are treated as expenses when incurred.
CONVERTIBLE DEBT
Convertible debt is recorded as a liability until converted into common stock,
at which time it is recorded as equity
INCOME TAXES
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
EXPENSES RELATED TO SALES AND ISSUANCE OF SECURITIES
All costs incurred in connection with the sale of the Company's common stock
have been capitalized and charged to additional paid-in capital.
NET LOSS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per Share",
which established new standards for computation of earnings per share. SFAS No.
128 requires the presentation on the face of the income statement of "basic"
earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing the net income (loss) available
to common shareholders by the weighted average number of outstanding common
shares. The calculation of diluted earnings per share is similar to basic
earnings per share except the denominator includes dilutive common stock
equivalents such as stock options and convertible debentures. Common stock
options and the common shares underlying the convertible debentures are not
included for the years ended June 30, 1998 ("Fiscal 1998"), June 30, 1997
("Fiscal 1997") and June 30, 1996 (`Fiscal 1996') as their effect would be
anti-dilutive.
F-14
<PAGE>
ACCOUNTING FOR STOCK OPTIONS
As permitted by Statement of Financial Accounting Standards No. 123 ("SFAS No.
123"), "Accounting for Stock Based Compensation", the Company applies Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations in accounting for the Swissray International, Inc. 1996
Non-Statutory Stock Option Plan and the 1997 Stock Option Plan (the "Stock
Option Plans"). Accordingly, no compensation cost has been recognized for
options granted under the Stock Option Plans except for $1,186,462 for Fiscal
1997, and $6,374,468 for Fiscal 1996 related to the fair value of services
rendered in exchange for options granted to consultants. However, the Company
has disclosed in Note 16, Shareholders' Equity the pro forma effects had
compensation cost been determined based on the fair value of the options, not
including the options for which expense has been previously recognized, at the
grant date.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial statements to
conform to the June 30, 1998 presentation.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of subsidiaries operating in foreign countries are
translated into U.S. dollars using both the exchange rate in effect at the
balance sheet date or historical rate, as applicable. Results of operations are
translated using the average exchange rates prevailing throughout the year. The
effects of exchange rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are included in stockholders equity (Accumulated
other comprehensive loss), while gains and losses resulting from foreign
currency transactions are included in operations.
NEW ACCOUNTING PRONOUNCMENTS
The Company will adopt Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131") for the year ended June 30, 1999. SFAS No. 131 requires the Company to
report selected information about operating segments in its financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The application of the new
pronouncement is not expected to have a material impact on the Company's
disclosures.
The Company will adopt Statement of Financial Accounting Standards No. 132
("SFAS No. 132"), "Employers' Disclosures about Pensions and Other
Postretirement Benefits" for the year ended June 30, 1999. SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit plans. The
application of the new pronouncement is not expected to have a material impact
on the Company's financial statements.
The Company will adopt Statement of Financial Accounting Standard No. 133 ("SFAS
No. 133"), "Accounting for Derivative Instruments and Hedging Activities" for
the year ended June 30, 2000. SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supersedes and amends a
number of existing standards. The application of the new pronouncement is not
expected to have a material impact on the Company's financial statements.
F-15
<PAGE>
STOCK SPLIT
On October 1, 1998 the Company declared a 1 for 10 reverse stock split. The
financial statements for all periods presented have been retroactively adjusted
for the stock split.
NOTE 2 - NOTE RECEIVABLE
On June 20, 1996 the Company sold marketable securities for a 5% promissory note
in the amount of $962,500 originally due on October 20, 1996 of which $100,000
was paid on December 10, 1996. On January 15, 1997, the Company renegotiated the
terms of the unpaid balance. A new note in the amount of $862,500 was
renegotiated, with interest at 6% cumulative and payable when the note matures
on January 1, 2000. At June 30, 1997, principal payments of $348,857 were
received leaving a balance due of $513,643. Interest payments were also paid to
June 30, 1997. At June 30, 1998 no payments were received.
NOTE 3 - INVENTORIES
Inventories are summarized by major classification as follows:
<TABLE>
<CAPTION>
June 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Raw materials, parts and supplies $7,047,001 $2,632,256
Work in process 160,064 468,204
Finished goods 494,080 810,647
-----------------------
$7,701,145 $3,911,107
========== ==========
</TABLE>
NOTE 4 - PREPAID EXPENSES AND SUNDRY RECEIVABLES
Prepaid expenses and sundry receivables consist of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Prepaid expenses, deposits and advance payments $ 616,183 $ 681,742
Insurance claim for fire damage 165,655 352,996
Prepaid and refundable taxes 708,246 888,169
Employee loans 11,825 13,231
-----------------------
$1,501,909 $1,936,138
========== ==========
</TABLE>
F-16
<PAGE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Land and building $4,956,328 $3,022,772
Equipment 1,305,092 1,223,572
Office furniture and equipment 328,258 161,223
Office and leasehold improvements 1,777 249,160
-----------------------
6,591,455 4,656,727
Less: Accumulated depreciation and amortization 581,077 320,110
-----------------------
$6,010,378 $4,336,617
=======================
</TABLE>
Depreciation and amortization expense, for property and equipment, for the years
ended June 30, 1998, 1997 and 1996 were $1,077,074, $233,040 and $ 103,176,
respectively.
NOTE 6 INTANGIBLE ASSETS
Intangible Assets at June 30, 1998 and 1997 consisted of the following
<TABLE>
<CAPTION>
June 30,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Excess of cost over fair value of net assets
acquired $1,933,275 $ 419,837
Licensing 4,966,575 4,966.575
Software development cost 577,210 352,036
Patents and Trademarks 313,330 260,944
Other 8,385 8,385
-----------------------
7,798,775 6,007,777
Less: Accumulated amortization 1,715,741 970,091
-----------------------
$6,083,034 $5,037,686
=======================
</TABLE>
Amortization expense, for Intangible Assets, for the years ended June 30, 1998,
1997 and 1996 were $1,227,719, $ 537,254, and $ 401,472, respectively.
NOTE 7 - ACCOUNTS RECEIVABLE - LONG-TERM
The Company sold merchandise to a customer in 1995. In June 1996,the Company
renegotiated payment terms with the customer and agreed that the customer would
pay the Company approximately $5,000 to $30,000 per month based on usage of the
merchandise for a period of 5 years. The amount due the Company at June 30, 1997
was $240,912 after a provision for doubtful collection in the total amount of
$814,178. The balance of the account receivable, totaling $ 124,697 was written
during Fiscal 1998.
NOTE 8 - LICENSING AGREEMENT
The Company entered into a licensing agreement in June of 1995 with an
unaffiliated individual. The agreement is for an exclusive field-of-use license
within the United States and Canada to use the proprietary information,
including the patent rights, for certain technology regarding the integration of
computer technology with diagnostic x-ray and radiology medical equipment
through digital imaging systems. The agreement required a fee of $5,000,000
consisting of $1,200,000 in cash and 66,000 shares of the Company's common
stock. The cash payment requirement consisted of $900,000 upon the signing of
the agreement and the $300,000 balance due on December 31, 1996. The fee has
been discounted at 7.5% for imputed interest of $33,425 resulting in a net
capitalized cost of $4,966,575.
F-17
<PAGE>
This agreement is for an indefinite term or until all of the proprietary
information becomes public knowledge and the patent
rights expire.
The Licensing Agreement is amortized over the related sales on a
product-by-product basis at the greater of the amount computed using (a) the
ratio of current gross revenues for a product to the total of current and
anticipated future gross revenues or (b) the straight-line method over the
estimated remaining economic life, generally ten years. At each balance sheet
date, the Company evaluates the recoverability of the unamortized License Fee
based upon expectations of nondiscounted cash flows and operating income of its
US-Operation. Impairments, if any, would be recognized in operating results if a
permanent diminution in value were to occur.
NOTE 9 - INVESTMENTS
The Company has made various investments which are recorded on the equity
method. These entities have operated at a loss in excess of equity, and
therefore, the Company is carrying these investments as follows:
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------- -------------
Ownership Carrying Carrying
% Cost Value Cost Value
--------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Swissray SR Medical GmbH, Willich 34% $ 16,892 $ -- $ 16,892 $ --
Swissray Medical, s.r.o., Bratislava 34% 6,757 -- 6,757 --
Swissray Medical, s.r.o., Brno 34% 6,757 -- 6,757 --
Teleray s.r.o., Willich 49% 38,403 -- 38,403 --
Teleray s.r.o., Brno 34% 6,757 -- 6,757 --
Digitec GmbH, Neuss 20% 59,641 -- 59,641 --
Total $135,207 $ -- $135,207 $ --
======== ======== ======== =======
</TABLE>
NOTE 10 - NOTES PAYABLE - BANKS
The Company has negotiated a revolving line-of-credit agreement with Migros Bank
of Switzerland, dated March 23, 1998, for up to $1,314,924. The company has also
negotiated an agreement for up to $1,314,924 for the issuance of guarantees and
letter of credit, both with a commission of 15 % per $ 1,000,000, quarterly
while outstanding. There were $ 971,644 outstanding guarantees and $ -0- of
letter of credits as of June 30, 1998 The Company also negotiated a fixed line
of credit for up to $2,630,000. All lines of credit are based on the Exchange
rate in effect on June 30, 1998
The Company had negotiated a line-of-credit agreement with the Union Bank of
Switzerland dated July 16, 1996 for borrowing availability up to $ 376,310 in
excess of cash balances on deposit with the bank, based on the
exchange rate in effect on June 30, 1997. As of October 31, 1997, the bank
reduced the line of credit to the cash balances on deposit with the bank.
The Company had negotiated a line-of-credit agreement with the Swiss Bank
Corporation for up to $1,505,240, based on the exchange rate in effect on June
30, 1997. This line of credit was terminated during Fiscal 1998.
The Company had negotiated a line-of-credit agreement with Cantonal Bank of
Lucerne for up to $ 1,368,400, based on the exchange rate in effect on June 30,
1997. The line of credit was terminated during Fiscal 1998.
F-18
<PAGE>
Empower, Inc., a subsidiary, had negotiated a line-of-credit agreement with the
State Bank of Long Island dated October 21, 1996 with a maximum borrowing base
of $450,000 as of June 30, 1997. The maximum borrowing base was reduced by
$25,000 per quarter beginning January 1, 1997. The full line of credit was
terminated during Fiscal 1998. .
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
June 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Migros Bank revolving line of credit, due on
demand,with interest at 4.75% per
annum, collateralized by certain accounts
receivable $ 408,786 $ --
Migros Bank, on demand with six week notice,
with interest at 4 % per annum, collateralized
by land and building 2,630,000 --
Union Bank of Switzerland, due on demand,
with interest at 8% per annum, collateralized
by the cash on deposit at Union Bank of Switzerland
and certain accounts receivable. Cash balances on
deposit at Union Bank of Switzerland at June 30,
1998 and 1997 were $627,625 and $2,805,747, respectively 512,305 1,421,075
Swiss Bank Corporation, due on demand, with interest
at 5.25% per annum, collaterized by the cash on
deposit at Swiss Bank Corporation and accounts
receivable of $ -0- and $ 853,065 as of June 30,
1998 and 1997, respectively. . Cash balances on deposit at
Swiss Bank Corporation at June 30, 1997 were $106,007 -- 695,231
State Bank of Long Island, due on demand, with
interest at prime plus 2.25%, (prime rate as June 30,
1997 was 8.5.%) collateralized by the assets of Empower,
Inc. and guaranteed by the Company Total assets of
Empower, Inc. were $1,983,502 at June 30, 1997 -- 350,000
Cantonal Bank of Lucerne, on demand with three months
notice, with interest at 5.25% payable quarterly,
collateralized by land and building -- 1,368,400
---------- ----------
$3,551,091 $3,834,706
========== ==========
</TABLE>
F-19
<PAGE>
NOTE 11 - LOAN PAYABLE
The Company has negotiated a 5% demand loan from a private foundation fund. The
loan balance payable at June 30, 1998 and 1997 was $125,029 and $133,008
respectively. Interest expenses for the years ended June 30, 1998, 1997 and 1996
were $3,223, $16,258 and $ -0-, respectively.
NOTE 12 - DUE FROM STOCKHOLDERS
The Company made unsecured advances to its former Chairman of the Board of
Directors (a principal stockholder) during the year ended June 30, 1997
requiring interest at 6% per annum. The balance at June 30, 1997 was $69,587 and
by June 30, 1998 had been repaid. Interest charged to the stockholder for the
year ended June 30, 1997 was $3,460. No interest had been charged to the
stockholder for the year ended June 30, 1998 because repayment took place on
July 1, 1997.
NOTE 13 - DUE TO STOCKHOLDERS AND OFFICERS
In June 1997, the President of the Company (a principal stockholder) made
non-interest bearing advances to the Company in the amount of $5,862. The amount
of the non-interest-bearing advance for June 30, 1998 was $2,207
Prior to the acquisition of Empower, Inc., the president of Empower, Inc.
advanced that company funds for operating expenses at 8.25% interest. As part of
the acquisition, the Company agreed to continue to pay this obligation. The
balance due the stockholder of the Company at June 30, 1997 was $112,013
including unpaid interest of $25,695. Interest payable to the stockholder for
the period from April 1, 1997 (date of acquisition) to June 30, 1997 was $2,315.
The whole amount was repaid during Fiscal 1998. The balance at June 30, 1998 was
$0
An officer of Swissray Corporation made non-interest bearing advances to the
subsidiary for operating expenses during 1997. The balance due at June 30, 1997
was $21,951. The amount was repaid and the balance was $0 at June 30, 1998.
Pursuant to agreements between the President of the Company and the Company,
dated as of December 1996 and June 1997, the Company incurred additional
compensation to the officer payable as 48,259 shares with a fair value of
$1,122,973. The compensation was in consideration of the officer's agreement for
the cancellation of 1,608,633 shares of common stock held by the officer or
companies controlled by him which allowed the Company to maintain a sufficient
number of shares of common stock to meet certain obligations of the Company to
issue common stock and to permit certain financings prior to the increase in the
number of authorized shares of common stock from 15,000,000 to 30,000,000
shares. The shares were issued by the Compny on July 22, 1997 and at June 30.
1997 are recorded as "Common Stock to be Issued to Officer" in the equity
section of the balance sheet.
F-20
<PAGE>
NOTE 14 - CONVERTIBLE DEBENTURES
Convertible debentures consist of the following:
<TABLE>
<CAPTION>
June 30,
1998 1997
----------- -----------
<S> <C> <C>
Convertible debenture dated April 28, 1997 and due April 28, 1998 with
interest at 6% per annum. The principle shall be convertible into common shares
one year from the issue date of the note at the greater of eighty (80%) percent
of bid price or $2.50 per share on the date of conversion. Interest due on the
note shall similarly be paid in common stock at the time of conversion $ 0 $ 2,000,000
2,000,000
Convertible debenture dated May 15, 1997 and due May 15, 2000 with interest at
6% per annum. The debentures are convertible into common shares at a price equal
to eighty (80%) of the average closing bid price for the five (5) trading days
preceding the date of conversion. One-half of the debentures are convertible at
the earlier of a registration effective date or August 7, 1997.
</TABLE>
<TABLE>
<S> <C> <C>
The remainder are convertible 30 days thereafter. Any debenture not so converted
is subject to mandatory conversion on May 15, 2000 Debt issuance cost was
$327,310, beneficial conversion feature was $500,000 0 2,000,000
Convertible debenture dated June 13, 1997 and due June 13, 2000 with interest
at 6% per annum. The debentures are convertible into common shares at a price
equal to eighty (80%) of the average closing bid price for the five (5) trading
days preceding the date of conversion. One-half of the debentures are
convertible at the earlier of a registration effective date or September 13,
1997. The remainder are convertible 30 days thereafter. Any debenture not so
converted is subject to mandatory conversion on June 13, 2000. Debt
issuance cost was $308,575, beneficial conversion feature was $500,000 0 2,000,000
2,000,000
F-21
<PAGE>
Convertible debenture dated December 11, 1997 and due December 11,
1999 with interest at 8% per annum. The debentures are convertible into common
shares at a price equal to seventy five (75%) of the average closing bid price
for the five (5) trading days preceding the date of conversion. Twenty five
percent (25%) of the debentures are convertible at the earlier of a registration
effective date or March 21, 1998. Additionally twenty five percent (25%) of the
debentures are convertible at the earlier of 30 days after the effective date of
the Registration Statement or April 20, 1998. Additionally twenty five percent
(25%) of the debentures are convertible at the earlier of 60 days after the
effective date of the Registration Statement or May 20, 1998. The remaining
twenty five percent (25%) are convertible at the earlier of 90 days after the
effective date of the Registration Statement or June 20, 1998. Any debenture not
so converted is subject to mandatory conversion on December 11, 1999. Debt
issuance cost was $690,000, beneficial conversion feature was $1,949,428 145,969 0
Convertible debenture dated March 14, 1998 and due March 14, 2000 with interest
at 6% per annum. The debentures are convertible into common shares at a price
equal to eighty (80%) of the average closing bid price for the ten (10) trading
days preceding the date of conversion. All of the debentures are convertible at
the earlier of a registration effective date or May 14, 1998. Any debenture not
so converted is subject to mandatory conversion on March 14, 2000 On July 21,
1998 and August 13, 1998 a total of $1,500,000 was converted into 484,254
shares. On August 31, 1998 the amount of $3,000,000 was refinanced (See Note 25
- - Subsequent Events) Debt issuance cost was $615,000, beneficial conversion
feature was $857,500 5,500,000 0
Convertible debenture dated June 15, 1998 and due June 15, 2000 with interest at
6% per annum. The debentures are convertible into common shares at a price equal
to eighty (80%) of the average closing bid price for the ten (10) trading days
preceding the date of conversion. All of the debentures are convertible at the
earlier of a registration effective date or August 15, 1998
Any debenture not so converted is subject to mandatory conversion on June 15,
2000. Debt issuance cost was $240,000, beneficial conversion feature was $420,436 2,000,000 0
----------- -----------
7,645,969 6,000,000
Less discount due to beneficial conversion features, net of accumulated
amortization of $105,109 and $310,559 respectively (315,327) (689,441)
(689,441)
----------- -----------
$ 7,330,642 $ 5,310,559
=========== ===========
</TABLE>
The Company is currently in violation of certain covenants in their debenture
agreements. Such covenants have been waived by the holders.
F-22
<PAGE>
NOTE 15 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Note payable - Edward Coyne, in weekly installments of $817, including principal
and interest at 8% per annum, maturing on October 9, 2002 $153,603 $182,617
Note payable - Thatcher Company of New York, in monthly installments of $855,
including interest at 10.25% per annum, maturing on October 3, 2001,
collateralized by various x-ray chemical mixing machines. The full note was
assumed by the purchaser of Empower during Fiscal 1998 -- 35,623
Note payable - Union Bank of Switzerland, related to the acquisition of
equipment sold to a customer (see Accounts Receivable -Long-Term), in monthly
installments of $12,589 With imputed interest at 6.0% per annum, maturing on
September 30, 2000 335,062 450,417
Capitalized leases related to the acquisition of various computer and office
equipment in payable monthly installments over periods ranging up to June 4,
2001 with interest imputed at rates ranging from 9.1% to 28.3%. These leases are
collaterlized by the specific equipment 13,377 30,747
Note payable - Dr. Zeman-Wiegand Helga,
due on demand, requires interest only
payments at 7% per annum with no current
amortization required. The note was repaid during Fiscal 1998 -- 68,420
Capitalized leases related to the acquisition of various computer and office
equipment in monthly installments over periods ranging up to April 2001 with
interest imputed at rates ranging from 18% - 21%. These leases are collaterlized
by the specific equipment 172,378 --
-------- --------
674,420 767,824
Less: Current portion (233,746) (243,135)
-------- --------
$440,674 $524,689
======== ========
</TABLE>
The aggregate long-term debt principal payment are as follows:
<TABLE>
<CAPTION>
Years Ending
June 30,
- -----------
<S> <C>
1999 $233,746
2000 247,275
2001 142,154
2002 40,006
2003 11,239
--------
$674,420
========
</TABLE>
F-23
<PAGE>
NOTE 16 - SHAREHOLDERS' EQUITY
Authorized Shares
On March 12, 1997, the Company amended its certificate of incorporation to
change the number of authorized common shares from 15,000,000 to 30,000,000 of
$.01 par value common shares. On December 26, 1997, the Company amended its
certificate of incorporation to change the number of authorized common shares
from 30,000,000 to 50,000,000 of $.01 par value common shares.
The Company's outstanding shares of common stock of $.01 par value at June 30,
1998 and 1997 were 4,142,622 and 1,969,443, respectively.
Common Stock
The Company issued 2,030,588 shares for $13,725,246 for the year ended June 30,
1998 (including 16,900 shares for $123,370 issued under stock option plan) and
535,876 shares for $7,753,222 (including 16,100 shares for $117,530 issued under
stock option plan) for the year ended June 30, 1997 and 215,000 shares for
$7,250,000 (includes 105,000 shares for $2,050,000 issued under stock option
plan) for the year ended June 30, 1996.
Stock Option
The Stock Option Plans provide for the grant of options to officers, directors,
employees and consultants. Options may be either incentive stock options or
non-qualified stock options, except that only employees may be granted incentive
stock options. The maximum number of shares of Common Stock with respect to
which options may be granted under the Stock Option Plans is 500,000 shares.
Options vest at the discretion of the Board of Directors. All options granted in
1997 and 1996 vested immediately. The maximum term of an option is ten years.
The 1996 Stock Option Plan will terminate in January, 2006, though options
granted prior to termination may expire after that date. The 1997 Stock Option
Plan will terminate at the discretion of the Board of Directors. In Fiscal 1998.
there were no grants or vesting of stock options. In Fiscal 1997 and 1996, had
compensation cost for the Stock Option Plans been determined based on the fair
value at the grant dates for awards under the Stock Option Plans, except for
grants to consultants for which compensation expense has been recognized
consistent with the method of SFAS No. 123, as discussed in Note 1, the
Company's net loss and net loss per share would have increased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996
------------------------ ------------------------
As Pro As Pro
Reported Forma Reported Forma
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss (in thousands) $ (13,685) $ (13,959) $ (8,266) $ (8,365)
Basic and diluted
net loss per share $ (8.65) $ (8.82) $ (6.37) $ (6.45)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black Scholes option-pricing method with the following weighted average
assumptions used for grants.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Dividend yield 0% 0%
Expected volatility 61.6% 23.1%
Risk-free interest rate 6.25% 6.25%
Expected lives, in years 1 1
</TABLE>
A summary of the weighted-average fair market values and weighted-average
exercise prices, both as of the date of grant, is presented below. No options
were granted in Fiscal year 1998.
F-24
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------- -------- -------- -------
Weighted Weighted Weighted Weighted
Average Average Average Average
Fair Exercise Fair Exercise
Value Price Value Price
-------- ------- ------ ------
<S> <C> <C> <C> <C>
Options granted above fair value $ - $ - $ 7.20 $48.90
Options granted below fair value $22.80 $ 7.60 $29.20 $21.60
</TABLE>
A summary of the status of the Stock Option Plans at June 30, 1998, 1997 and
1996 and the changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ---------------------- -----------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Underlying Exercise Underlying Exercise Underlying
Exercise
Options Price Options Price Options Price
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 318,000 $ 23.40 238,500 $ 25.20 0
$ --
Granted -- $ -- 79,500 $ 17.80 238,500 $ 25.20
Exercised (16,900) $ 7.30
Outstanding at end of year 301,100 $ 24.30 318,000 $ 23.40 238,500 $ 25.20
======== ======== ========= ======== ======== ========
Exercisable at end of year 301,100 $ 24.30 318,000 $ 23.40 238,500 $ 25.20
======== ======== ========= ======== ======== ========
</TABLE>
The following table summarizes information about stock options under the Stock
Option Plans at June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercisable
Exercise Price Outstanding Life Price Exercisable Price
-------------- ----------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 7.30 - $ 10.00 40,100 8.4 $ 8.00 40,100 $ 8.00
$20.00 - $ 40.00 227,500 7.8 $ 22.10 227,500 $ 22.10
$47.50 - $ 65.00 33,500 7.5 $ 58.70 33,500 $ 58.70
------- -------
301,100 301,100
======= ========
</TABLE>
F-25
<PAGE>
NOTE 17 - DEFINED CONTRIBUTION PLANS
The Swiss and German Subsidiaries, mandated by government regulations, are
required to contribute approximately five (5%) percent of all eligible, as
defined, employees' salaries into a government pension plan. The subsidiaries
also contribute approximately five (5%) percent of eligible employee salaries
into a private pension plan. Total contributions charged to operations for the
years ended June 30, 1998, 1997 and 1996, were $ 347,854, $274,009 and $198,722,
respectively.
Effective March 1, 1992, Empower, Inc., a U.S. subsidiary, adopted a qualified
401(k) retirement plan for the benefit of all its employees. Under the plan,
employees can contribute and defer taxes on compensation contributed. The
subsidiary matches, within prescribed limits, the contributions of the
employees. The subsidiary also has the option to make an additional contribution
to the plan. The subsidiary's contribution to the plan for the period April 1,
1997 (date of acquisition) to June 30, 1998 and 1997 was $ 10,260 and $4,185,
respectivly.
Effective April 3, 1992, Empower, Inc., a U.S. subsidiary, adopted a "Section
125" employee benefits plan, which is also referred to as a "Cafeteria" plan.
The subsidiary pays for approximately 85% of the employees' health coverage and
the employee pays approximately 15% of the cost of coverage. With the
implementation of the Cafeteria plan, the employees' payments for coverage are
on a pre-tax basis. A new employee has only a ninety (90) day waiting period
before he or she becomes eligible to participate in the group insurance plan and
the Cafeteria plan.
NOTE 18 - OTHER INCOME (EXPENSES)
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Interest income $ 58,902 $ 68,950 $ 131,166
Interest income - stockholder and officer -- 4,351 12,530
Foreign currency income (87,148) 484,846 377,587
Miscellaneous income 60,648 6,833 512
Loss from investments -- (246,217) --
Loss on sale of certain asset and Liabilities 313,629 -- --
Licensing income -- -- 482,138
---------- ---------- ----------
TOTAL OTHER INCOME (EXPENSES) $ (281,227) $ 318,763 $1,003,933
========== ========== ==========
</TABLE>
F-26
<PAGE>
NOTE 19 - INCOME TAXES
Deferred income tax assets as of June 30, 1998 of $9,500,000 as a result of net
operating losses, have been fully offset by valuation allowances. The valuation
allowances have been established equal to the full amounts of the deferred tax
assets, as the Company is not assured that it is more likely than not that these
benefits will be realized.
A reconciliation between the statutory United States corporate income tax rate
(34%) and the effective income tax rates based on continuing operations is as
follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Statutory federal income tax (benefit) $(7,754,000) $(4,101,913) $(3,077,078)
Foreign income tax (benefit) in
excess of domestic rate 543,000 509,203 (325,715)
Benefit not recognized on operating loss 5,111,000 2,816,057 3,038,145
Permanent, timing and other differences 2,100,000 886,886 --
----------- ----------- -----------
$ -0- $ 110,223 $ (364,648)
=========== =========== ===========
</TABLE>
Net operating loss carryforwards at June 30, 1998 were approximately as follows:
United States (expiring through June 30, 2013) $15,200,000
Switzerland (expiring through June 30, 2008) 15,600,000
-----------
$30,800,000
===========
The income tax related to the extraordinary gain on sale of marketable
securities was approximately $343,000 for the year ended June 30, 1996.
F-27
<PAGE>
No income tax benefit has been recognized related to the extraordinary loss
incurred as a result of fire damage or the year ended June 30, 1997.
NOTE 20 - EXTRAORDINARY ITEMS
In June of 1996, the Company sold marketable securities for $962,500, at a cost
of $200,000, resulting in an extraordinary gain of $419,500 ($ 0.32 per share),
net of income taxes of approximately $343,000.
On April 12, 1997, the Company sustained significant fire damage at a leased
production and office facility in Hochdorf, Switzerland, resulting in an
extraordinary loss, net of insurance proceeds, of $387,514 ($ 0.24) per share),
net of income taxes of $-0-.
On July 31, 1997 the Company refinanced Convertible debentures issued in May and
June 1997. A gain on extinguishment of debt of $154,212 resulted from that
transaction net of income taxes of $-0-.
In December, 1997 the Company refinanced part of the Convertible debentures
issued in August 1997. A gain on extinguishment of debt of $150,711 resulted
from that transaction net of income taxes of $-0-.
Note 21 SIGNICIANT CUSTOMER AND CONCENTRATION OF CREDIT RISK
The company sells its products to various customers primarily in Europe and USA.
The company performs ongoing credit evaluations on its customers and generally
does not require collateral. Export sales are usually made under letter of
credit agreements. The company establishes reserves for expected credit losses
and such losses, in the aggregate, have not exceeded management's expectations.
The company maintains its cash balances with major Swiss, United States and
German financial institutions. Funds on deposit with financial institutions in
the United States are insured by the Federal Deposits Insurance Corporation
("FDIC) up to $ 100,000.
During the years ended June 30, 1998. 1997 and 1996 there were sales to four
customers that exceeded 10% of net consolidated sales. Sales to these customers
were: 1998 customer A, $ 0 (0%), customer B $7,647,354 (33%), customer C $0 (0%)
and customer D $1,209,390 (5%); 1997 customer A , $0 (0%), customer B $
1,899,084 (14%) customer C $0 (0%) and customer D $2,389,613 (18%); 1996
customer A $1,603,631 (15%), customer B $1,505,954 (14%), customer C $1,390,308
(13%) and customer D $0 (0%) The company operates in a single industry segment,
providing x-ray medical equipment.
The Company derives all of its revenues from its subsidiaries located in the
United States, Switzerland and Germany. Sales by geographic areas for the years
ended June 30, 1998, 1997 and 1996 were as follows:.
F-28
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
United States $ 9,127,569 $ 2,000,608 $ 0
Switzerland 12,851,115 2,184,161 2,002,374
Germany 914,294 1,393,072 4,976,503
Other export sales -- 7,573,860 3,920,345
----------- ------------ ------------
Total $22,892,978 $ 13,151,701 $ 10,899,222
</TABLE>
The following summarizes identifiable assets by geographic area:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
<S> <C> <C> <C>
United States $ 8,075,151 $ 2,008,307 $ --
Switzerland 17,454,379 22,031,388 18,129,362
Germany 385,067 748,539 664,076
------------ ----------- -----------
$ 25,914,597 $24,788,234 $ 18,793,438
============ =========== ===========
</TABLE>
F-29
<PAGE>
The following summarizes operating losses before provision for income tax:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
<S> <C> <C> <C>
United States $(13,962,842) $( 175,254) $ --
Switzerland ( 8,803,842) (12,678,800) (8,986,555)
Germany (42,184) (333,397) (63,673)
------------ ------------ ------------
$(22,808,032) $(13,187,451) $ (9,050,228)
============ ============ ============
</TABLE>
NOTE 22 - COMMITMENTS
The Company leases various facilities and vehicles under operating lease
agreements expiring through September 2003. The company has excluded all vehicle
leases in its presentation because they are deemed to be immaterial. The
facilities lease agreements provide for a base monthly payment of $22,285 per
month. Rent expense for the years ended June 30, 1998, 1997 and 1996 was
$324,726, $ 297,926 and $ 242,658 respectively Future minimum annual lease
payments, based on the exchange rate in effect on June 30, 1998, under the
facilities lease agreements are as follows: 1999 $267,422, 2000 $173,549, 2001
$162,526, 2002 $166,995, 2003 $137,994, Thereafter $0
On January 1, 1996, the Company entered into a long term purchase agreement with
a major vendor to supply the camera module for a product the Company sells. At
June 30, 1998, future minimum payments under this contract, which is cancelable
with four months notice, are as follows: 1999 $ 7,717,921. The Company's total
purchases under this agreement was for the year ended June 30, 1998 $1,685,611
respectively for the year ended June 30, 1997 $ 1,534,646.--. Due to a change of
the production plant of its vendor from Europe to the USA this contract is
presently in process to be renegotiated. The company believes that the outcome
of this renegotiations will have a positive impact to lower the existing
commitments into the future.
The Company has employment agreements with six of its executives. Minimum
compensation under these agreements are as follows:
<TABLE>
<CAPTION>
Year Ended
----------
<S> <C>
June 30, 1999 $ 963,000
June 30, 2000 843,000
June 30, 2001 500,000
June 30, 2002 273,000
June 30, 2003 147,000
----------
$2,726,000
==========
</TABLE>
F-30
<PAGE>
NOTE 23 - LITIGATION
In October 1997, the Registrant and Swissray Healthcare, Inc. were served with a
complaint by a company engaged in the business of providing services related to
imaging equipment alleging that defendant
received benefits from breach of fiduciary duties and contract obligations and
misappropriation of trade secrets by certain former employees of such
competitor. Such company also obtained a temporary restraining order against the
Registrant and Swissray Healthcare, Inc. On November 10, 1997, the Court denied
a Motion for a preliminary injunction and the temporary restraining order was
vacated. On December 1, 1997 and January 30, 1998 the Registrant answered the
Complaint and Amended Complaint respectively by denying the allegations
contained therein. The Plaintiff in such action (on December 2, 1997) filed a
Motion to reargue and renew its prior denied Motion for a Preliminary Injunction
and such Motion was (by Order and Decision dated June 17, 1998) denied. The
Company denied the allegations, vigorously defended the litigation and
thereafter settled such litigation and all outstanding matters with respect
thereto for $60,000 in July 1998.
Dispute with Gary J. Durday ("Durday"), Kenneth R. Montler ("Montler") and
Michael E. Harle ("Harle"). On July 17, 1998, two legal proceedings were
commenced by Swissray, and two of its subsidiaries against Durday, Montler and
Harle. Harle and Montler are former Chief Executive Officers of Swissray Medical
Systems Inc. and Swissray Healthcare Inc., respectively, and Durday is the
former Chief Financial Officer of both of those companies. Each of them was
employed pursuant to an Employment Agreement dated October 17, 1997. In addition
these three individuals were owners of a company by the name of Service Support
Group LLC ("SSG"), the assets of which were sold to Swissray Medical Systems
Inc. pursuant to an Asset Purchased Agreement dated as of October 17, 1997.
whereby Messrs. Durday, Montler and Harle received, among other consideration
33,333 shares of the Company's common stock, together with a put option
entitling these individuals to require Swissray to purchase any or all of such
shares at a purchase price equal to $ 45.00 per share (on or after June 30, 1998
and until April 16, 1999, subject to certain adjustments set forth in the Asset
Purchase Agreement).
On July 17, 1998, Swissray and its subsidiaries, Swissray Medical Systems Inc.
and Swissray Healthcare Inc. commenced an arbitration proceeding before the
American Arbitration Association in Seattle, Washington (Case No. 75 489 00196
98) alleging that Messrs. Durday, Montler and Harle fraudulently induced
Swissray and its subsidiaries to enter into the above referenced Asset Purchase
Agreement and otherwise breached that Agreement. The relief sought in the
arbitration proceeding is the recovery of damages suffered as a result of this
alleged wrongful conduct and a rescission of the put option provided for in the
Asset Purchase Agreement. Messrs. Durday, Montler and Harle responded to the
allegations made in the arbitration proceeding and asserted counterclaims
against Swissray and its subsidiaries claiming a breach by them of their
obligations under the Asset Purchase Agreement and other relief.
The current status with respect to this matter is that an arbitration has been
selected, but no date has yet been set for a hearing.
In addition to the above referenced arbitration proceeding, Swissray and its
subsidiaries commenced an action against Messres Durday, Montler and Harle in
the Supreme Court of the State of New York, County of New York (Index
603512/98), alleging that these individuals breached the obligations undertaken
by them in their respective Employment Agreements. Messrs. Durday Montler and
Harle have removed this action to the United States District Court for the
Southern District of New York (File No. 98 Civ. 5895; Judge McKenna), where it
is now pending. Counsel for Messrs. Durday, Montler and Harle have since
acknowledged that the action was improperly removed to federal court and have
agreed to remand that action to the Supreme Court of the State of New York,
County of New York. Counsel for Messrs. Durday, Montler and Harle have also
indicated that it is their intention to attempt to dismiss or stay the New York
action in order to have the issues raised in the action consolidated with the
issues to be determined in the American Arbitration Association proceeding, but
no formal action has been taken in that regard.
F-31
<PAGE>
While the above may be considered to be in its early stage of litigation or
arbitration as indicated, it is the Company's management's intention to contest
each of these matters vigorously since Swissray believes that its claims are
meritorious, and that it has meritorious defenses to the claims asserted against
them.
NOTE 24 - RESTRUCTURING
During the year ended June 30, 1998 the Company recorded restructuring charges
of $500,000, as a result of its decision to relocate two facilities. The charges
consist primarily of the present value of the remaining lease obligations of
those facilities.
NOTE 25 - SUBSEQUENT EVENTS
On August 31, 1998 the Company issued $3,832,849 aggregate principal amount of
5% convertible debentures (the "Convertible Debentures") including a 25% premium
and accrued interest, convertible into Common Stock of the Company. The Company
did not receive any cash proceeds from the offering of the Convertible
Debentures. The full amount was paid by investors to holders of the Company's
Convertible Debentures issued on March 14, 1998 holding $3,000,000 of such
Convertible Debentures as repayment in full of the Company's obligations under
such Convertible Debentures. During the same period the Company issued
$2,311,000 aggregate principal amount of 5% Convertible Debentures, convertible
into Common Stock of the Company. After deducting fees, commissions and escrow
fees in the aggregate amount of $311,000 the Company received a net amount of
$2,000,000. The face amount of both Convertible Debentures are convertible into
shares of Common Stock of the Company commencing March 1, 1998 at a conversion
price equal to the lesser of 82% of the average closing bid price for the ten
trading days preceding the date of the conversion or $1.00. Any Convertible
Debentures not so converted are subject to mandatory conversion by the Company
on the 24th monthly anniversary of the date of issuance of the Convertible
Debentures.
Subsequent to the closing of the Company's June 30, 1998 fiscal year, the
Company held a Special Meeting of Stockholders on August 31, 1998, at which time
Company stockholders were asked to consider and act upon proposals to (1)
reverse stock split the currently issued and outstanding shares of Company
Common Stock on the basis of no less than 1 : 4 and no greater than 1 for 10;
the exact number, (if any) within such parameter to be determined by the Board
of Directors in its discretion and (2) authorize the creation of a class of
Preferred Stock. The number of shares of Common Stock voted at the Special
Meeting approximated 75 % of all issued and outstanding securities as of the
record date and approximately 88 % of those shares voted in favor of the
aforesaid reverse stock split proposal (while the Company did not receive a
sufficient number of affirmative votes for the creation of a class of Preferred
Stock).
On October 6, 1998 the Company issued $2,940,000 aggregate principal amount of
5% convertible debentures (the "Convertible Debentures") including $540,000
repurchase of stock, convertible into Common Stock of the Company. After
deducting fees, commissions and escrow fees in the aggregate amount of $300,000
the Company received a net amount of $2,100,000. The face amount of the
Convertible Debentures is convertible into shares of Common Stock of the Company
any time after the closing date at a conversion price equal to the lesser of 82%
of the average closing bid price for the ten trading days preceding the date of
the conversion or $1.00. Any Convertible Debentures not so converted are subject
to mandatory conversion by the Company on the 24th monthly anniversary of the
date of issuance of the Convertible Debentures.
F-32
<PAGE>
NOTE 26 - RESTATEMENT
The accompanying financial statements have been restated to properly record the
accounting treatment of certain benefical conversion features and debt issuance
costs of convertible debentures issued during the year ended June 30, 1997, the
accounting for the value of stock options granted during the years ended June
30, 1997 and 1996, and the accounting for the value of common stock to be issued
to an officer as additional compensation during the year ended June 30, 1997.
The effect of such restatements on the Company's 1997 and 1996 financial
statements follow:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------- -----------------------------------------
As As As AS
Reported Adjustments Restated Reported Adjustments
Restated
-------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Adjustments
Assets $24,352,915 $ 435,319 $24,788,234 $18,793,438 $ -- $18,793,438
Liabilities 17,784,487 (689,441) 17,095,046 8,138,182 -- 8,138,182
Stockholders' equity 6,568,428 1,124,760 7,693,188 10,655,256 -- 10,655,256
Statement of Operations
Adjustments
Operating expenses $15,165,898 $2,284,435 $17,450,333 $ 8,591,679 $6,374,468 $14,966,147
Other income (expenses) 67,720 (511,125) (443,405) 810,003 -- 810,003
Loss from operations (10,502,114) (2,795,560) (13,297,674) (2,311,112) (6,374,468) (8,685,580)
Net loss (10,889,628) (2,795,560) (13,685,188) (1,891,612) (6,374,468) (8,266,080)
Net loss per common share basic $ (.69) $ (.17) $ (.86) $ (.15) $ (.49)$ (.64)
</TABLE>
F-33
<PAGE>
Stockholders' equity has been restated to reflect the following:
<TABLE>
<CAPTION>
Additional Accumulated
Paid-in Capital Deficit
--------------- -----------
<S> <C> <C>
As originally reported, June 30, 1996 $19,268,400 $ (7,918,948)
Value of stock options granted 6,374,468 (6,374,468)
----------- -------------
As restated, June 30, 1996 $25,642,868 $(14,293,416)
=========== =============
As originally reported, June 30, 1997 $26,608,594 $(18,808,576)
Effect of 1996 restatement 6,374,468 (6,374,468)
----------- -------------
32,983,062 (25,183,044)
Beneficial conversion feature 1,000,000 (310,559)
Debt issuance cost 635,885 (200,566)
Value of stock options granted 1,161,462 (1,161,462)
value of common stock to be issued -- (1,122,973)
----------- -------------
$35,780,409 $(27,978,604)
=========== =============
</TABLE>
NOTE 27 - UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
The following unaudited proforma condensed combined statements of operations for
the years ended June 30, 1998 and 1997 give retroactive effect of the
acquisition of Empower, Inc. on April 1, 1997 and SSG on October 17, 1997, which
has been accounted for as a purchase. The unaudited proforma condensed combined
statements of operations give retroactive effect to the foregoing transaction as
if it had occurred at the beginning of each year presented. The proforma
statements do not purport to represent what the Company's results of operations
would actually have been if the foregoing transactions had actually been
consummated on such dates or project the Company's results of operations for any
future period or date.
The proforma statements should be read in conjunction with the historical
financial statements and notes thereto.
SWISSRAY INTERNATIONAL, INC
UNAUDITED PROFORMA CONDENSED COMBINED CONSOLIDATED STATEMENT
OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
Year Ended June 30
------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 23,837,000 $ 21,223,000
Loss before extraordinary items (21,963,000) (13,568,000)
Net loss (22,403,000) (13,956,000)
Loss per share (8.33) (8.79)
Weighted average number of shares outstanding 2,690,695 1,587,757
</TABLE>
It was not practicable to include information for SSG for the year ended
June 30, 1997
F-34
<PAGE>
<TABLE>
<CAPTION>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1998 June 30,
(Unaudited) 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,224,828 $ 1,281,552
Accounts receivable, net of allowance for doubtful
accounts of $ 34,833 and $ 32,356 4,567,610 2,584,651
Inventories 8,321,841 7,701,145
Prepaid expenses and sundry receivables 1,338,067 1,501,909
------------- -------------
TOTAL CURRENT ASSETS 15,452,346 13,069,257
------------- -------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation
of $ 794,307 and $ 581,077 6,004,371 6,010,378
------------- ------------
OTHER ASSETS
Loan receivable 18,031 20,005
Licensing agreement, net of accumulated amortization of 3,352,438 3,600,766
$ 1,614,137 and $ 1,365,809
Patents and trademarks, net of accumulated amortization of 214,936 230,614
$ 98,394 and $ 82,716
Software development costs, net of accumulated amortization of 402,210 455,318
$ 175,000 and $ 121,892
Security deposits 31,146 38,280
Note receivable - long-term, net of allowance of $ 30,733 and $ 30,733 513,643 513,643
Goodwill, net of accumulated amortization of $ 223,939 and $ 136,939 1,709,336 1,796,336
Debt issance costs on convertible debentures, net of accumulated
amortization of $ 207,333 and $ 60,000 103,667 180,000
------------- -------------
TOTAL OTHER ASSETS 6,345,407 6,834,962
------------- -------------
TOTAL ASSETS $ 27,802,124 $ 25,914,597
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 215,486 $ 233,746
Notes payable - banks 4,756,527 3,551,091
Note payable 1,080,000 -
Loan payable 134,364 125,029
Accounts payable 6,846,261 5,030,449
Accrued expenses 1,501,005 2,365,450
Restructuring 500,000 500,000
Customer deposits 30,844 176,583
Due to stockholders and officers - 2,206
------------- ------------
TOTAL CURRENT LIABILITIES 15,064,487 11,984,554
------------- ------------
CONVERTIBLE DEBENTURES 12,229,818 7,645,969
Conversion Benefit - (315,327)
------------- ------------
Net Convertible Debentures 12,229,818 7,330,642
------------- ------------
LONG-TERM DEBT, less current maturities 367,725 440,674
COMMON STOCK SUBJECT TO PUT 1,819,985 1,819,985
------------ ------------
STOCKHOLDERS' EQUITY
Common stock 46,380 41,426
Additional paid-in capital 59,657,215 58,074,793
Treasury stock (540,000) -
Accumulated deficit (57,567,759) (50,481,713)
Accumulated other comprehensive loss (1,455,742) (1,475,779)
Common stock subject to put (1,819,985) (1,819,985)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (1,679,891) 4,338,742
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,802,124 $ 25,914,597
============= =============
F-35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
December 31,
---------------------------------------
1998 1997
Restated
Unaudited Unaudited
----------- -----------
<S> <C> <C>
NET SALES $ 10,101,147 $ 11,302,578
COST OF SALES 7,969,342 8,590,947
----------- ------------
GROSS PROFIT 2,131,805 2,711,631
----------- -----------
OPERATING EXPENSES
Officers and directors compensation 396,894 250,547
Salaries 2,064,577 1,926,769
Selling 1,438,281 1,674,198
Research and development 843,589 1,422,482
General and administrative 710,818 883,598
Other operating expenses 561,007 264,398
Bad debts 7,383 (25,046)
Depreciation and amortization 590,762 436,646
---------- ---------
TOTAL OPERATING EXPENSES 6,613,311 6,833,592
---------- ---------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND INCOME TAXES (4,481,506) (4,121,961)
----------- -----------
Other income (expenses) (358,995) 156,145
Interest expense (1,412,696) (4,416,914)
----------- -----------
OTHER EXPENSES (1,771,691) (4,260,769)
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS (6,253,197) (8,382,730)
Income tax provision (benefit) - -
Extraordinary income (expenses) (832,849) 304,923
------------ -----------
NET LOSS $ (7,086,046) $(8,077,807)
============ ===========
LOSS PER COMMON SHARE BASIC
Loss from continuing operations $ (1.35) $ (3.36)
Extraordinary items (0.18) 0.12
------------ -----------
NET LOSS $ (1.53) $ (3.24)
------------ -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,625,626 2,495,918
F-36
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 31,
---------------------------------
1998 1997
Restated
Unaudited Unaudited
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $ (7,086,046) $ (8,077,807)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization 617,486 471,094
Provision for bad debts 2,477 (53,061)
Financing costs incurred - 240,347
Issuance of common stock in lieu of
interest payments - 93,254
Interest expense on debt issuance cost and
conversion benefit 1,297,158 4,033,747
Early extinguishment of debt (gain) 832,849 (304,923)
(Increase) decrease in operating assets:
Accounts receivable (1,985,436) (1,145,294)
Inventories (620,696) (2,027,483)
Prepaid expenses and sundry receivables 163,842 (356,224)
Increase (decrease) in operating liabilities:
Accounts payable 1,815,812 869,883
Accrued expenses (864,444) (77,558)
Customers deposits (145,739) (141,436)
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (5,972,737) (6,475,460)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment (207,223) (252,119)
Patents and trademarks - (37,430)
Other intangibles - (138,327)
Assets purchased net of cash acquired - (591,108)
Security deposits 7,134 9,478
Loans receivable 1,974 (3,463)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (198,115) (1,012,969)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 16,669,384 266,900
Proceeds from long-term borrowings - 477,892
Principal payment of short-term borrowings (11,188,135) (122,024)
Principal payment of long-term borrowings (72,950) -
Issuance of common stock for cash 1,500,000 6,996,370
Purchase of treasury stock (540,000) -
Payments to stockholders and officers (2,207) (70,590)
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 6,366,092 7,548,547
----------- -----------
EFFECT OF EXCHANGE RATE ON CASH (251,964) 73,847
----------- -----------
NET INCREASE (DECREASE) IN CASH (56,724) 133,965
CASH AND CASH EQUIVALENT - beginning of period 1,281,552 3,091,307
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 1,224,828 $ 3,225,272
----------- -----------
F-37
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998
(1)The accompanying financial statements are unaudited. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Registrant believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Registrant's annual
report on Form 10-K for the fiscal year ended June 30, 1998.
(2)In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting of only a
normal and recurring nature, necessary to present fairly the financial position
of the Registrant as of December 31, 1998 and the results of operations and
cash flows for the interim periods presented. Operating results for the six
months ended December 31, 1998 are not necessarily indicative of the results to
be expected for the full year ending June 30, 1999.
(3)INVENTORIES
Inventories are summarized by major classification as follows:
<TABLE>
<CAPTION>
December 31, June 30,
---------------------------
1998 1998
---------- ----------
<S> <C> <C>
Raw materials, parts and supplies $7,199,118 $7,047,001
Work in process 287,008 160.064
Finished goods 835,715 494.080
---------- ----------
$8,321,841 $7,701,145
========== ==========
</TABLE>
Inventories are stated at lower of cost or market, with cost being determined on
the first-in, first-out (FIFO) method. Inventory cost include material,
labor, and overhead.
F-38
<PAGE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
TABLE OF CONTENTS
Page
Available Information 3
Prospectus Summary 4
Risk Factors 8
The Company 18
Determination of Offering Price 20
Use of Proceeds 20
Market Prices and Dividend Policy 20
Capitalization 22
Dilution 22
Selected Consolidated Financial Data 23
Management's Discussion and Analysis Of Financial Condition and
Results of Operations 24
Business 33
Management 46
Stock Options Granted in 1997 49
Aggregated Option Exercises in Last Fiscal Year and Year-End
Option Values 50
Principal Stockholders 53
Certain Transactions 55
Selling Holders and Plan of Distribution 55
Description of Capital Stock 58
Legal Matters 63
Independent Auditors 63
Index to Consolidated Financial Statements 64
- 65 -
<PAGE>
SWISSRAY INTERNATIONAL, INC.
12,585,480 SHARES OF
COMMON STOCK
PROSPECTUS
April____, 1999
- 66 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SECURITIES AND EXCHANGE COMMISSION REGISTRATION FEE $ 9,628.93
PRINTING EXPENSES 15,000.00
ACCOUNTING FEES AND EXPENSES 15,000.00
LEGAL FEES AND EXPENSES 140,000.00
TRANSFER AGENT AND REGISTRATION FEES 1,500.00
BLUE SKY FEES AND EXPENSES 15,000.00
MISCELLANEOUS EXPENSES 5,000.00
Total $201,128.93
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 721 of the New York Business Corporation Law provides that the
indemnification and advancement of expenses of directors and officers may be
provided by the certificate of incorporation or by-laws of a corporation, or
when authorized by the certificate of incorporation or by-laws, a resolution of
shareholders, a resolution of directors or an agreement providing for
indemnification (except in cases where a judgment or other final adjudication
establishes that such acts were committed in bad faith or were the result of
active or deliberate dishonesty and were material to the cause of action so
adjudicated or that a person personally gained in fact a financial profit or
other advantage to which he was not legally entitled).
Section 722 of the New York Business Corporation Law provides that a
corporation may indemnify any person made, or threatened to be made, a party of
an action or proceeding other than one by or in the right of the corporation to
procure a judgment in its favor, whether civil or criminal, including an action
by or in the right of any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he was a director or officer of the corporation or served such
other corporation, partnership, joint venture, trust, employee benefit plan or
other entity in any other capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or in the case of
service for any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
corporation and, in criminal acts or proceedings, in addition, had no reasonable
cause to believe that his conduct was unlawful.
Section 722 of the New York Business Corporation Law also states that a
corporation may indemnify any person made, or threatened to be made, a party to
an action by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director or officer of the
corporation or any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity at the request of the corporation, against
amounts paid in settlement and reasonable expenses actually and necessarily
II - 1
<PAGE>
incurred by him in connection with the defense or settlement of such action, or
in connection with an appeal therein if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or in the case of
service for any other corporation, partnership, joint venture, employee benefit
plan or other entity, not opposed to, the best interests of the corporation,
except that no indemnification shall be made in respect to a threatened or
pending action which is settled or otherwise disposed of, or any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless the court determines the person is fairly and reasonably
entitled to indemnity for such portion of the settlement amount and expenses as
the court deems proper.
Section 726 of the New York Business Corporation Law provides that a
corporation shall have the power to purchase and maintain insurance for
indemnification of directors and officers. However, no insurance may provide for
any payment, other than cost of defense, to or on behalf of any director or
officer for a judgment or a final adjudication adverse to the insured director
or officer if (i) a judgment or other final adjudication establishes that his
acts of active and deliberate dishonesty were material to the cause of action
adjudicated or that he personally gained a financial profit or other advantage
to which he was not legally entitled or (ii) if prohibited under the insurance
law of New York.
Section 724 of the New York Business Corporation Law provides that
indemnification shall be awarded by a court to the extent authorized under
Sections 722 and 723 (a) of the New York Business Corporation Law
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders.
The By-Laws of the Registrant provide for indemnification as follows:
(a) Any person made a party to any action, suit or proceeding, by
reason of the fact that he, his testator or intestate representative is or was a
director, officer or employee of the Corporation, or of any Corporation in which
he served as such at the request of the Corporation, shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding, or in connection with any appeal therein that such officer, director
or employee is liable for negligence or misconduct in the performance of his
duties.
(b) The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which any officer or director or employee may
be entitled apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors except that in any case where
there is no disinterested majority of the Board available, the amount shall be
fixed by arbitration pursuant to the then existing rules of the American
Arbitration Association.
The Certificate of Incorporation of the Registrant, as amended,
provides for indemnification as follows:
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for damages for any breach of duty in such
capacity, provided that nothing contained in this Article shall eliminate or
limit the liability of any director if a judgment or final adjudication adverse
to him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law to which he was not legally
entitled or that his acts violated Section 719 of the New York Business
Corporation Law.
II - 2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 20, 1995, the Registrant issued 2,000,000 shares of Common Stock
to non-U.S. persons in reliance on Regulation S promulgated under the Securities
Act for an aggregate consideration of $4,250,000. Placement agents were
Interfinance Investment Co., Ltd., Berkshire Capital Management Corp. and Rolcan
Finance Ltd. Net proceeds received by the Company after costs related to the
financing were $4,000,000.
On December 10, 1995, the Registrant issued 1,000,000 shares of Common
Stock to non-U.S. persons in reliance on Regulation S. Placement agent was
Berkshire Capital Management Corp. Net proceeds received by the Company were
$4,500,000.
On September 11, 1996, the Registrant issued $3,800,000 aggregate
principal amount of convertible debentures to non-U.S. persons in reliance on
Regulation S. The convertible debentures were all converted into shares of
Common Stock at a conversion price equal to 81% of the average closing bid price
for the five trading days preceding the date of conversion. The Registrant
received net proceeds of $2,774,000.
On January 10, 1997, the Registrant issued $3,500,000 aggregate
principal amount of convertible debentures to non-U.S. persons in reliance on
Regulation S. Placement agent was IS-Targas Trading Ltd. Such convertible
debentures were all converted into shares of Common Stock at a conversion price
equal to 81% of the average closing bid price for the five trading days
preceding the date of conversion. Any convertible debentures not so converted
are subject to mandatory conversion by the Registrant on the 36th monthly
anniversary of the date of issuance of the convertible debentures. Net proceeds
received by the Registrant were $3,085,000.
On March 5, 1997, the Registrant issued 1,000,000 shares of Common
Stock for an aggregate price of $2,000,000 to non-U.S. persons in reliance on
Regulation S under the Securities Act. The placement agent for such shares was
Rolcan Finance Ltd. The Registrant received net proceeds of $1,925,000.
On April 28, 1997, the Registrant issued $2,000,000 aggregate principal
amount of convertible debentures, which were all converted into shares of Common
Stock of the Registrant at a conversion price equal to the higher of 80% of the
average closing bid price on the date of conversion or $2.50 per share. The
Registrant received net proceeds of $1,822,500.
On each of May 15, 1997 and June 15, 1997, the Registrant issued
$2,000,000 principal amount of 6% convertible debentures convertible into Common
Stock on terms similar to those of the April 28, 1997 issuance to accredited
investors as defined in Rule 501(a) of Regulation D. Placement agent for such
convertible debentures was Rolcan Finance Ltd. The aggregate offering price for
such convertible debentures was $4,000,000. After deducting underwriting
discounts, commissions and escrow fees in the aggregate amount of $528,610, the
Registrant received an aggregate net amount of $3,458,890. Such convertible
debentures were refinanced on July 31, 1997, with the proceeds of $4,262,500
principal amount of convertible debentures issued to non-U.S. persons under
Regulation S.
On July 31, 1997, the Registrant issued $4,262,500 of 7% convertible
debentures. The proceeds of such issuance were used to refinance $4,000,000
principal amount of 6% convertible debentures dated May 15, 1997 and June 13,
II - 3
<PAGE>
1997 plus interest. The Registrant did not receive any cash proceeds from this
transaction. Such convertible debentures, due July 31, 2000, were all converted
into shares of Common Stock at a price equal to 80% of the average closing bid
price for the five (5) trading days preceding the date of conversion.
On August 19, 1997, the Registrant issued $5,000,000 aggregate
principal amount of 6% convertible debentures, convertible into Common Stock of
the Registrant. Placement Agent for such convertible debentures was Rolcan
Finance Ltd. The aggregate offering price of such convertible debentures was
$5,000,000. After deducting underwriting discounts, commissions and escrow fees
in the aggregate amount of $681,250 the Registrant received a net amount of
$4,318,750. All such convertible debentures were issued to accredited investors
as defined in Rule 501(a) of Regulation D promulgated under the Act ("Regulation
D") and the Registrant has received written representations from each investor
to that effect. Fifty percent of the face amount of such convertible debentures
were convertible into shares of Common Stock of the Registrant at any time after
November 3, 1997 and the remaining 50% of the face value of such convertible
debentures were convertible into shares of Common Stock of the Registrant after
December 3, 1997, in each case at a conversion price equal to 80% of the average
closing bid price for the five trading days preceding the date of conversion.
Any such convertible debentures not so converted are subject to mandatory
conversion by the Registrant on the 36th monthly anniversary of the date of
issuance of such Convertible Debentures. All conversions have been competed (or
rolled over as indicated below).
Between November 26, 1997 and December 11, 1997, the Company issued
$2,158,285 aggregate principal amount of 5% convertible debentures (the
"Convertible Debentures") including a 15% premium, and accrued interest,
convertible into Common Stock of the Company. The Registrant did not receive any
cash proceeds from the offering of the Convertible Debentures. An amount of
$2,158,285 was paid by investors to holders of the Company's Convertible
Debentures issued on August 19, 1997 holding $1,850,000 of such Convertible
Debentures as repayment in full of the Company's obligations under such
Convertible Debentures. During the same period the Company issued $3,690,000
aggregate principal amount of 8% Convertible Debentures, convertible into Common
Stock of the Company. After deducting fees, commissions and escrow fees in the
aggregate amount of $690,000 the Company received a net amount of $3,000,000.
All Convertible Debentures were issued to accredited investors as defined in
Rule 501(a) of Regulation D promulgated under the Act ("Regulation D") and the
Company has received written representation from each investor to that effect.
Twenty-five percent of the face amount of both Convertible Debentures are
convertible into shares of Common Stock of the Company as at the effective date
of a registration statement covering the underlying shares of Common Stock, to
wit: March 12, 1998. An additional twenty-five percent of the face amount of
both Convertible Debentures may be converted each 30 days thereafter, in each
case at a conversion price equal to 75% of the average closing bid price for the
five trading days preceding the date of the conversion. Any Convertible
Debenture not so converted are subject to mandatory conversion by the Company on
the 24th monthly anniversary of the date of issuance of the Convertible
Debentures. As of March 31, 1999 all conversions were completed.
In March of 1998, the Company issued $5,500,000 aggregate principal
amount of 6% convertible debentures (the "Convertible Debentures"), convertible
into Common Stock of the Company. After deducting fees directly attributable to
such offering the Company received a net amount of $4,915,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D")
II - 4
<PAGE>
and the Company has received written representations from each investor to that
effect. One Hundred percent of the face amount of the Convertible Debentures are
convertible into shares of Common Stock of the Company at the earlier of May 15,
1998 or the effective date of this Registration Statement at a conversion price
equal to 80% of the average closing bid price for the ten trading days preceding
the date of conversion. Any Convertible Debentures not so converted are subject
to mandatory conversion by the Company on the 24th monthly anniversary of the
date of issuance of the Convertible Debentures. As of March 31, 1999 an
unconverted balance of $334,228 remains outstanding.
In June of 1998, the Company issued $2,000,000 aggregate principal
amount of 6% convertible debentures (the "Convertible Debentures"), convertible
into Common Stock of the Company. After deducting fees directly attributable to
such offering the Company received a net amount of $1,760,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") and the Company has
received written representation from each investor to that effect. One Hundred
percent of the face amount of the Convertible Debentures are convertible into
shares of Common Stock of the Company at the earlier of August 14, 1998 or the
effective date of this Registration Statement at a conversion price equal to 80%
of the average closing bid price for the ten trading days preceding the date of
conversion. Any Convertible Debentures not so converted are subject to mandatory
conversion by the Company on the 24th monthly anniversary of the date of
issuance of the Convertible Debentures. None of these debentures have been
converted as of March 24, 1999.
On August 31, 1998 the Company issued a principal aggregate total
amount of $6,143,849 of 5% convertible debentures ("Convertible Debentures"),
convertible into Common Stock of the Company at a conversion price of 82% of the
average closing bid price for the ten trading days preceding the date of
conversion as follows: (a) The Company issued $3,832,849 aggregate principal for
which the Company received no cash; investors having paid the holders of
$3,000,000 in Convertible Debentures (originally issued in March 1998) together
with 25% premium and accrued interest; and (b ) the Company issued new
Convertible Debentures convertible into shares of Company Common Stock. After
deducing fees directly attributable to such offering the Company received a net
amount of $ 2,000,000. All Convertible Debentures were issued to accredited
investors as defined in Rule 501(a) of Regulation D promulgated under the Act
("Regulation D") and the Company has received written representations from each
investor to that effect. Any Convertible Debentures not so converted are subject
to mandatory conversion by the Company on the 24th anniversary of the date of
issuance of the Convertible Debentures. As of March 31, 1999 an unconverted
balance of $5,784,421 remains outstanding.
On October 6, 1998 the Company issued a principal aggregate amount of
$2,940,000 of 5% convertible debentures ("Convertible Debentures"), convertible
into Common Stock of the Company at a conversion price of 82% of the average
closing bid price for the ten trading days preceding the date of conversion.
After deducting fees directly attributable to such offering (including the
Company's repurchase of 1,465,000 pre-split shares of its common stock for a
cash consideration of $540,000) the Company received a net amount of $
2,100,000. All Convertible Debentures were issued to accredited investors as
defined in Rule 501(a) of Regulation D promulgated under the Act ("Regulation
D") and the Company has received written representations from each investor to
that effect. Any Convertible Debentures not so converted are subject to
mandatory conversion by the Company on the 24th anniversary of the date of
issuance of the Convertible Debentures. None of these Convertible Debentures
have been converted as of March 31, 1999.
II - 5
<PAGE>
The Registrant received gross proceeds of $1,080,000 in December 1998
pursuant to promissory notes bearing interest at the rate of 8% per annum for
the first 90 calendar days (through March 13, 1999) with the Company having the
option to extend the notes for an additional 60 days with interest increasing 2%
per annum during the 60 day period. The Company exercised its extension option.
As further consideration for the loan, the Company issued Lenders Warrants to
purchase up to 50,000 shares of the Company's common stock exercisable, in whole
or in part, for a period of up to 5 years at $.375 (the bid price for Company
shares on the date of closing). The notes are secured by a second mortgage on
land and building as well as certain Company inventory. In the event that the
promissory notes are not paid by their due date then the terms of a Contingent
Subscription Agreement, Debenture and Registration Rights Agreement shall apply.
In that respect the convertible debentures are to bear interest at the rate of
5% per annum (payable in stock or cash at the Company's option) and are
convertible, at any time at the lesser of (a) 82% of the 10 day average bid
price for the 10 consecutive trading days immediately preceding the conversion
date or (b) $1.00 per share. The documents also provide for certain Company
redemption rights at percentages ranging from 115% of the face amount of the
Debenture to 125% of the face amount of the debenture dependent upon redemption
date, if any.
The Company is also required to register those shares of common stock
underlying the convertible debentures. Accordingly, 745,330 shares are being
registered pursuant to the terms of such agreements, notwithstanding the fact
that the current due date on the promissory note is May 13, 1999 and the
contingent convertible debenture terms are not in effect (but will be in effect
as of May 13, 1999). In the event that the promissory note is paid off prior to
its due date those shares registered hereunder regarding the contingent
convertible debenture shall be deregistered by post effective amendment or
otherwise.
On January 29, 1999 the Company issued a principal aggregate amount of
$1,170,000 of convertible debentures ("Convertible Debentures"), convertible
into Common Stock of the Company at a conversion price of 82% of the average
closing bid price for the ten trading days preceding the date of conversion
together with accrued interest of 3% for the first 90 days, 3.5% for 91-120 days
and 4% for 120 days and thereafter. After deducing fees directly attributable to
such offering the Company received a net amount of $ 1,020,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") and the Company has
received written representations from each investor to that effect. Any
Convertible Debentures not so converted are subject to mandatory conversion by
the Company on the 24th anniversary of the date of issuance of the Convertible
Debentures. None of these Convertible Debentures have been converted as of March
31, 1999.
On March 2, 1999, the Company entered into a second promissory note
(contingent convertible debenture financing) with the same lenders as the
December 1998 transaction described directly above with terms and conditions
identical to those set forth above excepting (a) gross proceeds amounted to
$1,110,000, (b) the initial due date of such notes are May 31, 1999, (c) the
potential 60 day extension date on such promissory notes is July 30, 1999, (d)
the conversion price is 80% of the 10 day average closing bid price for the 10
consecutive trading days preceding conversion date and (e) Warrants were issued
(similarly exercisable over 5 years) to purchase up to 50,000 shares of common
stock at 125% of the average 5 day closing bid price of the Company's common
stock immediately preceding the date of closing but in no event at less than
$1.00 per share. In all other respects the terms and conditions of each of the
documents executed with respect to this transaction are identical to those
described above (under "Contingently Convertible Promissory Notes - December
1998") in all material respects. The number of shares being registered for this
transaction amounts to 766,032 shares and to the extent not issued will be
properly deregistered.
II - 6
<PAGE>
On March 26, 1999 the Company entered into a third promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, (b) gross proceeds
amounted to $550,000, (c) the initial due date of such note is June 25, 1999,
(d) the potential 60 day extension date on such promissory note is August 24,
1999, (e) Warrants were issued (similarly exercisable over 5 years) to purchase
up to 27,500 shares of common stock at 125% of the average 5 day closing bid
price of the Company's common stock immediately preceding the date of closing
but in no event at less than $1.00 per share. In all other respects the terms
and conditions of each of the documents executed with respect to this
transaction are identical to those described in the above referenced March 2,
1999 transaction. The number of shares being registered for this transaction
amounts to 379,566 shares and to the extent not issued will be properly
deregistered.
Item 16. Exhibits and Financial Statement Schedules
Exhibit
No. Description
2.1 Acquisition Agreement, dated May 1995, by and between Registrant, a New
York corporation (now Swissray International, Inc.); Berkshire
International Finance, Inc., SR Medical AG (a Swiss corporation),
Teleray AG (a Swiss corporation) and others (Incorporated by reference
to Exhibit 6(a) of the Registrant's Registration Statement on Form
10SB, Registration No . 0-26972, effective February 14, 1996).
2.2 Exchange Agreement, dated as of November 22, 1996 by and between the
Registrant and Douglas Maxwell ("Maxwell"); Registration Rights
Agreement, dated as of March 13, 1997, between the Registrant and
Maxwell; Assignment and Assumption Agreement, dated March 13, 1997,
between the Registrant and Maxwell; Option Agreement, dated January 24,
1997, granting options for 125,000 shares of the Registrant to Maxwell
(Incorporated by reference to Exhibit 2.2 of the Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB filed
on September 30, 1997).
3.1 Registrant's Certificate of Incorporation, dated December 20, 1967
(Incorporated by reference to Exhibit 2(a) of the Registrant's
Registration Statement on Form 10SB, Registration No.0- 26972,effective
February 14, 1996).
3.2 Amendment to Registrant's Certificate of Incorporation, dated September
19, 1968 (Incorporated by reference to Exhibit 2(b) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996).
3.3 Amendment to Registrant's Certificate of Incorporation, dated September
8, 1972 (Incorporated by reference to Exhibit 2(c) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996).
3.4 Amendment to Registrant's Certificate of Incorporation, dated October
30, 1981 (Incorporated by reference to Exhibit 2(d) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996).
II - 7
<TABLE>
<PAGE>
<CAPTION>
Exhibit
No. Description
<S> <C>
3.5 Certificate of Merger of Direct Marketing Services, Inc. and CGS Units
Incorporated into CGS Units Incorporated, dated June 16, 1994
(Incorporated by reference to Exhibit 2(e) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996).
3.6 Amendment to Registrant's Certificate of Incorporation,dated August 10,
1994 (Incorporated by reference to Exhibit 3.6 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.7 Certificate of Correction of Certificate of Merger of Direct Marketing
Services, Inc. and CGS Units Incorporated into CGS Units Incorporated,
filed August 5, 1994 (Incorporated by reference to Exhibit 2(f) of the
Registrant's Registration Statement on Form 10SB, Registration No.
0-26972, effective February 14, 1996).
3.8 Amendment to Registrant's Certificate of Incorporation, dated May 24,
1995 (Incorporated by reference to Exhibit 2(g) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996)
3.9 Amendment to Registrant's Certificate of Incorporation, dated August
29, 1996 (Incorporated by reference to Exhibit 3.9 of Registrant's
Annual Report for the fiscal year ended June 30, 1997 on Form 10-KSB,
filed September 30, 1997).
3.10 Amendment to Registrant's Certificate of Incorporation, dated December
13, 1996 (Incorporated by reference to Exhibit 3.10 of Registrant's
Annual Report for the fiscal year ended June 30, 1997 on Form 10-KSB,
filed September 30, 1997).
3.11 Amendment to Registrant's Certificate of Incorporation, dated March 12,
1997 (Incorporated by reference to Exhibit 3.11 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.12 Registrant's By-Laws (Incorporated by reference to Exhibit 2 (h) of the
Registrant's Registration Statement on Form 10SB, Registration No.
0-26972, effective February 14, 1996).
3.13 Amendment to Registrant's Certificate of Incorporation, dated December
26, 1997 (Incorporated by reference to Exhibit 3.13 of Registrant's
Form S-1 Registration Statement, Registration No. 333-43401, effective
March 12, 1998).
5.1 Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
10.1 License Agreement, dated June 24, 1995, by and between the Registrant
and Hans-Jurgen Behrendt (Incorporated by reference to Exhibit 6(b) of
Registrant's Registration Statement on Form 10SB, Registration No.
0-26972, effective February 14, 1996).
II - 8
<PAGE>
Exhibit
No. Description
10.2 1996 Swissray International Corporation, Inc. Non-Statutory Stock
Option Plan. (Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement, Registration
No. 333-38229, filed December 17, 1997).
10.3 Agreement, dated June 11, 1996 between the Registrant and Philips
Medical Systems (Incorporated by reference to Exhibit 10.3 of
Registrant's Annual Report for the fiscal year ended June 30, 1997 on
Form 10-KSB, filed September 30, 1997).
10.4 License Agreement, dated as of July 18, 1997, by and between the
Registrant and Agfa-Gevaert N.V., certain portions of which are filed
under a request for confidential treatment pursuant to Rule 24b-2
promulgated pursuant to the Securities Exchange Act of 1934, as
amended, and Rule 80(b)(4) of Organization; Conduct and Ethics; and
Information and Requests adopted under the Freedom of Information Act,
under Rule 406 of the Securities Act of 1933, as amended, and the
Freedom of Information Act (Incorporated by reference to Exhibit
10.4 of Registrant's Annual Report for the fiscal year ended June 30,
1997 on Form 10-KSB/A2, filed December 3, 1997).
10.5 Agreement, dated July 14, 1995, by and between Teleray AG and
Optische Werke G. Roderstock, certain portions of which are
filed under a request for confidential treatment pursuant to Rule
24b-2 promulgated pursuant to the Securities Exchange Act of 1934,
as amended, and Rule 80(b)(4) of Organization; Conduct and Ethics; and
Information and Requests adopted under the Freedom of Information
Act, under Rule 406 of the Securities Act of 1933, as amended, and
the Freedom of Information Act (Incorporated by reference to
Exhibit 10.5 of Registrant's Annual Report for the fiscal year ended
June 30, 1997 on Form 10-KSB/A2, filed December 3, 1997).
10.6 Agreement, dated as of June 30, 1997, between the Registrant and Ruedi
G. Laupper. (Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement, Registration No.
333-38229, filed December 17, 1997).
10.7 Form of Registration Rights Agreement, dated as of August , 1997, by
and between Swissray International, Inc. and the person named on the
signature page hereto. (Incorporated by reference to Exhibit 10.2 of
Registrant's Amendment No. 1 to Form S-1 Registration Statement,
Registration No. 333-38229, filed December 17, 1997).
10.8 Form of Debenture of Swissray International, Inc. (Incorporated by
reference to Exhibit 10.2 of Registrant's Amendment No. 1 to Form S-1
Registration Statement, Registration No. 333-38229, filed December 17,
1997).
10.9 Asset Purchase Agreement, dated as of October 17, 1997 by and among
Swissray Medical Systems, Inc., Swissray International, Inc., Service
Support Group LLC, Gary Durday, Michael Harle and Kenneth Montler
(Incorporated by reference to Exhibit 2.1 of the Registrant's Current
Report on Form 8-K, filed November 4, 1997).
II - 9
<PAGE>
Exhibit
No. Description
10.10 Registration Rights Agreement, dated as of October 17, 1997, by and
among Swissray International, Inc., Service Support Group, LLC, Gary
Durday, Michael Harle and Kenneth Montler (Incorporated by reference to
Exhibit 2.2 of the Registrant's Current Report on Form 8-K, filed
November 4, 1997).
10.11 Employment Agreement between the Registrant and Ruedi G. Laupper, dated
as of December , 1997 (Incorporated by reference as Exhibit 10.11 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.12 Employment Agreement between the Registrant and Josef Laupper, dated as
of December , 1997 (Incorporated by reference as Exhibit 10.12 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.13 Employment Agreement between the Registrant and Herbert Laubscher,
dated as of December , 1997 (Incorporated by reference as Exhibit 10.13
to Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.14 Employment Agreement between the Registrant and Ueli Laupper, dated as
of December , 1997 (Incorporated by reference as Exhibit 10.14 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.15 Form of Registration Rights Agreement, dated as of November , 1997
(Incorporated by reference as Exhibit 10.15 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401
filed December 29, 1997).
10.16 Form of Debenture of Swissray International, Inc., dated November ,
1997 (Incorporated by reference as Exhibit 10.16 to Registrant's
initial filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.17 Form of Subscription Agreement, dated November , 1997 (Incorporated
by reference as Exhibit 10.17 to Registrant's initial filing of
Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.18 Form of Registration Rights Agreement (rollover), dated as of November,
1997 (Incorporated by reference as Exhibit 10.18 to Registrant's
initial filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.19 Form of Debenture of Swissray International, Inc. (rollover), dated
November , 1997 (Incorporated by reference as Exhibit 10.19 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.20 Form of Subscription Agreement (rollover), dated November , 1997
II - 10
<PAGE>
(Incorporated by reference as Exhibit 10.20 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401
filed December 29, 1997).
10.21 Agreement Regarding August, 1997 Regulation D offering (Incorporated
by reference as Exhibit 10.21 to Registrant's initial filing of
Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.22 Form of Subscription Agreement dated March , 1998 (Incorporated by
reference as Exhibit 10.22 to Registrant's initial filing of
Form S-1 Registration Statement, Registration No. 333-50069 filed
April 14, 1998).
10.23 Form of Registration Rights Agreement dated March , 1998 (Incorporated
by reference as Exhibit 10.23 to Registrant's initial filing of Form
S-1 Registration Statement, Registration No. 333-50069 filed
April 14, 1998).
10.24 Form of Debenture dated March , 1998 (Incorporated by reference as
Exhibit 10.24 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333-50069 filed April 14, 1998).
10.25 This Exhibit Number skipped.
10.26 Form of Subscription Agreement dated June, 1998. (Incorporated by
reference as Exhibit 10.26 to Registrant's initial filing of Form S-1
Registration Statement, Registration No.333-59829 filed July 24, 1998).
10.27 Form of Registration Rights Agreement dated June, 1998.(Incorporated by
reference as Exhibit 10.27 to Registrant's initial filing of Form S-1
Registration Statement, Registration No.333-59829 filed July 24, 1998).
10.28 Form of Debenture dated June, 1998. (Incorporated by reference as
Exhibit 10.28 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No.333-59829 filed July 24, 1998).
10.29 Form of Subscription Agreement dated August, 1998 with March 17, 1999
amendment.
10.30 Form of Registration Rights Agreement dated August, 1998.
10.31 Form of Debenture dated August, 1998 with March 17, 1999 amendment.
10.32 Form of Subscription Agreement dated October, 1998 with March 17, 1999
amendment.
10.33 Form of Registration Rights Agreement dated October, 1998.
10.34 Form of Debenture dated October, 1998 with March 17, 1999 amendment.
10.35 Form of Promissory Note dated December, 1998.
10.36 Form of Contingent Subscription Agreement dated December, 1998 with
March 17, 1999 amendment.
II - 11
<PAGE>
Exhibit
No. Description
10.37 Form of Registration Rights Agreement dated December, 1998.
10.38 Form of Debenture dated December, 1998 with March 17, 1999 amendment.
10.39 Form of Warrant dated December, 1998.
10.40 Form of Subscription Agreement dated January, 1999.
10.41 Form of Registration Rights Agreement dated January, 1999.
10.42 Form of Debenture dated January, 1999.
10.43 Form of Warrant dated January 28, 1999 with March 17, 1999 amendment.
10.44 Form of Promissory Note dated March 2, 1999.
10.45 Form of Contingent Subscription Agreement dated March 2, 1999.
10.46 Form of Registration Rights Agreement dated March 2, 1999.
10.47 Form of Debenture dated March 2, 1999.
10.48 Form of Warrant dated March 2, 1999.
10.49 Form of Promissory Note dated March 26, 1999.
10.50 Form of Contingent Subscription Agreement dated March 26, 1999.
10.51 Form of Registration Rights Agreement dated March 26, 1999.
10.52 Form of Debenture dated March 26, 1999.
10.53 Form of Warrant dated March 26, 1999.
</TABLE>
21.1 List of Subsidiaries (Incorporated by reference to Exhibit 21 of
Registrant's Annual Report for the fiscal year ended June 30, 1997 on
Form 10-KSB, filed September 30, 1997).
23.1 Consent of Bederson & Company LLP
II - 12
<PAGE>
Exhibit
No. Description
23.1(a) Consent of Bederson & Company LLP.
23.2 Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1).
23.3 Consent of Feldman Sherb Ehrlich & Co., P.C.
27 FINANCIAL DATA SCHEDULES
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement;
(ii) To include any prospectus required by Section 10(a)(3) of the
Act;
(iii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price, set forth in the "Calculation of
Registration Fee" table in the effective registration statement
and
II - 13
<PAGE>
(iv) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-offering
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II - 14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hochdorf, Country of Switzerland, on March 25, 1999.
SWISSRAY INTERNATIONAL, INC.
/Ruedi G. Laupper/
By:_______________________
Name: Ruedi G. Laupper
Title: Chairman of the Board of
Directors, President &
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/RUEDI G. LAUPPER/ Chairman of the Board of Dated: Mar. 25, 1999
- -------------------------------
Reudi G. Laupper Directors, President & Chief Dated: Mar. 25, 1999
Executive Officer
/JOSEF LAUPPER/ Secretary, Treasurer and a Dated: Mar. 25, 1999
- --------------------------------
Josef Laupper Director
/MICHAEL LAUPPER/ Interim Chief Financial Officer Dated: Mar. 25, 1999
- --------------------------------
Michael Laupper
/UELI LAUPPER/ Vice President and a Director Dated: Mar. 25, 1999
- --------------------------------
Ueli Laupper
/DR. ERWIN ZIMMERLI/ Director Dated: Mar. 25, 1999
- --------------------------------
Dr. Erwin Zimmerli
/DR. SC. DOV MAOR/ Director Dated: Mar. 25, 1999
- ---------------------------------
Dr. Sc. Dov Maor
</TABLE>
II - 15
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
2.1 Acquisition Agreement, dated May 1995, by and between Registrant, a New
York corporation (now Swissray International, Inc.); Berkshire
International Finance, Inc., SR Medical AG (a Swiss corporation),
Teleray AG (a Swiss corporation) and others (Incorporated by
reference to Exhibit 6(a) of the Registrant's Registration
Statement on Form 10SB, Registration No . 0-26972, effective
February 14, 1996).
2.2 Exchange Agreement, dated as of November 22, 1996 by and between
the Registrant and Douglas Maxwell ("Maxwell"); Registration Rights
Agreement, dated as of March 13, 1997, between the Registrant and
Maxwell; Assignment and Assumption Agreement, dated March 13, 1997,
between the Registrant and Maxwell; Option Agreement, dated January 24,
1997, granting options for 125,000 shares of the Registrant to Maxwell
(Incorporated by reference to Exhibit 2.2 of the Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB filed
on September 30, 1997).
3.1 Registrant's Certificate of Incorporation, dated December 20, 1967
(Incorporated by reference to Exhibit 2(a) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996).
3.2 Amendment to Registrant's Certificate of Incorporation, dated September
19, 1968 (Incorporated by reference to Exhibit 2(b) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996).
3.3 Amendment to Registrant's Certificate of Incorporation, dated September
8, 1972 (Incorporated by reference to Exhibit 2(c) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996).
3.4 Amendment to Registrant's Certificate of Incorporation, dated October
30, 1981 (Incorporated by reference to Exhibit 2(d) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996).
3.5 Certificate of Merger of Direct Marketing Services, Inc. and CGS Units
Incorporated into CGS Units Incorporated, dated June 16, 1994
(Incorporated by reference to Exhibit 2(e) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996).
3.6 Amendment to Registrant's Certificate of Incorporation, dated August
10, 1994 (Incorporated by reference to Exhibit 3.6 of Registrant's
Annual Report for the fiscal year ended June 30, 1997 on Form 10-KSB,
filed September 30, 1997).
3.7 Certificate of Correction of Certificate of Merger of Direct Marketing
Services, Inc. and CGS Units Incorporated into CGS Units Incorporated,
filed August 5, 1994 (Incorporated by reference to Exhibit 2(f) of the
Registrant's Registration Statement on Form 10SB, Registration No.
0-26972, effective February 14, 1996).
<PAGE>
Exhibit
No. Description
3.8 Amendment to Registrant's Certificate of Incorporation, dated May 24,
1995 (Incorporated by reference to Exhibit 2(g) of the Registrant's
Registration Statement on Form 10SB, Registration No.0-26972, effective
February 14, 1996)
3.9 Amendment to Registrant's Certificate of Incorporation, dated August
29, 1996 (Incorporated by reference to Exhibit 3.9 of Registrant's
Annual Report for the fiscal year ended June 30, 1997 on Form 10-KSB,
filed September 30, 1997).
3.10 Amendment to Registrant's Certificate of Incorporation, dated December
13, 1996 (Incorporated by reference to Exhibit 3.10 of Registrant's
Annual Report for the fiscal year ended June 30, 1997 on Form 10-KSB,
filed September 30, 1997).
3.11 Amendment to Registrant's Certificate of Incorporation, dated March 12,
1997 (Incorporated by reference to Exhibit 3.11 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.12 Registrant's By-Laws (Incorporated by reference to Exhibit 2 (h) of the
Registrant's Registration Statement on Form 10SB, Registration No.
0-26972, effective February 14, 1996).
3.13 Amendment to Registrant's Certificate of Incorporation, dated December
26, 1997 (Incorporated by reference to Exhibit 3.13 of Registrant's
Form S-1 Registration Statement, Registration No. 333-43401, effective
March 12, 1998).
5.1 Opinion of Gary B. Wolff, P.C., counsel to the Registrant.^
10.1 License Agreement, dated June 24, 1995, by and between the Registrant
and Hans-Jurgen Behrendt (Incorporated by reference to Exhibit 6(b) of
Registrant's Registration Statement on Form 10SB, Registration No.
0-26972, effective February 14, 1996).
10.2 1996 Swissray International Corporation, Inc. Non-Statutory Stock
Option Plan. (Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement, Registration No.
333-38229, filed December 17, 1997).
10.3 Agreement, dated June 11, 1996 between the Registrant and Philips
Medical Systems (Incorporated by reference to Exhibit 10.3 of
Registrant's Annual Report for the fiscal year ended June 30, 1997 on
Form 10-KSB, filed September 30, 1997).
10.4 License Agreement, dated as of July 18, 1997, by and between the
Registrant and Agfa-Gevaert N.V., certain portions of which are filed
under a request for confidential treatment pursuant to Rule 24b-2
promulgated pursuant to the Securities Exchange Act of 1934, as amended
and Rule 80(b)(4) of Organization; Conduct and Ethics; and Information
and Requests adopted under the Freedom of Information Act, under Rule
406 of the Securities Act of 1933, as amended, and the Freedom of
Information Act (Incorporated by reference to Exhibit 10.4 of
Registrant's Annual Report for the fiscal year ended June 30, 1997 on
Form 10-KSB/A2, filed December 3, 1997).
<PAGE>
Exhibit
No. Description
10.5 Agreement, dated July 14, 1995, by and between Teleray AG and
Optische Werke G. Roderstock, certain portions of which are filed
under a request for confidential treatment pursuant to Rule 24b-2
promulgated pursuant to the Securities Exchange Act of 1934, as
amended, and Rule 80(b)(4) of Organization; Conduct and Ethics; and
Information and Requests adopted under the Freedom of Information
Act, under Rule 406 of the Securities Act of 1933, as amended, and
the Freedom of Information Act (Incorporated by reference to
Exhibit 10.5 of Registrant's Annual Report for the fiscal year ended
June 30, 1997 on Form 10-KSB/A2, filed December 3, 1997).
10.6 Agreement, dated as of June 30, 1997, between the Registrant and Ruedi
G. Laupper. (Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement, Registration No.
333-38229, filed December 17, 1997).
10.7 Form of Registration Rights Agreement, dated as of August , 1997, by
and between Swissray International, Inc. and the person named on the
signature page hereto. (Incorporated by reference to Exhibit 10.2 of
Registrant's Amendment No.1 to Form S-1 Registration Statement,
Registration No. 333-38229, filed December 17, 1997).
10.8 Form of Debenture of Swissray International, Inc. (Incorporated by
reference to Exhibit 10.2 of Registrant's Amendment No. 1 to Form S-1
Registration Statement, Registration No. 333-38229, filed December 17,
1997).
10.9 Asset Purchase Agreement, dated as of October 17, 1997 by and among
Swissray Medical Systems, Inc., Swissray International, Inc., Service
Support Group LLC, Gary Durday, Michael Harle and Kenneth Montler
(Incorporated by reference to Exhibit 2.1 of the Registrant's Current
Report on Form 8-K, filed November 4, 1997).
10.10 Registration Rights Agreement, dated as of October 17, 1997, by and
among Swissray International, Inc., Service Support Group, LLC, Gary
Durday, Michael Harle and Kenneth Montler (Incorporated by reference to
Exhibit 2.2 of the Registrant's Current Report on Form 8-K, filed
November 4, 1997).
10.11 Employment Agreement between the Registrant and Ruedi G. Laupper, dated
as of December , 1997 (Incorporated by reference as Exhibit 10.11 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.12 Employment Agreement between the Registrant and Josef Laupper, dated as
of December , 1997 (Incorporated by reference as Exhibit 10.12 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.13 Employment Agreement between the Registrant and Herbert Laubscher,
dated as of December , 1997 (Incorporated by reference as Exhibit 10.13
to Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
<PAGE>
Exhibit
No. Description
10.14 Employment Agreement between the Registrant and Ueli Laupper, dated as
of December , 1997 (Incorporated by reference as Exhibit 10.14 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.15 Form of Registration Rights Agreement, dated as of November , 1997
(Incorporated by reference as Exhibit 10.15 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401
filed December 29, 1997).
10.16 Form of Debenture of Swissray International, Inc., dated November ,
1997 (Incorporated by reference as Exhibit 10.16 to Registrant's
initial filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.17 Form of Subscription Agreement, dated November , 1997 (Incorporated
by reference as Exhibit 10.17 to Registrant's initial filing of
Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.18 Form of Registration Rights Agreement (rollover), dated as of November
1997 (Incorporated by reference as Exhibit 10.18 to Registrant's
initial filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.19 Form of Debenture of Swissray International, Inc. (rollover), dated
November , 1997 (Incorporated by reference as Exhibit 10.19 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.20 Form of Subscription Agreement (rollover), dated November , 1997
(Incorporated by reference as Exhibit 10.20 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.21 Agreement Regarding August, 1997 Regulation D offering (Incorporated
by reference as Exhibit 10.21 to Registrant's initial filing of
Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.22 Form of Subscription Agreement dated March , 1998 (Incorporated by
reference as Exhibit 10.22 to Registrant's initial filing of
Form S-1 Registration Statement, Registration No. 333-50069 filed
April 14, 1998).
10.23 Form of Registration Rights Agreement dated March , 1998 (Incorporated
by reference as Exhibit 10.23 to Registrant's initial filing of Form
S-1 Registration Statement, Registration No. 333-50069 filed
April 14, 1998).
10.24 Form of Debenture dated March , 1998 (Incorporated by reference as
Exhibit 10.24 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333-50069 filed April 14, 1998).
<PAGE>
Exhibit
No. Description
10.25 This Exhibit Number skipped.
10.26 Form of Subscription Agreement dated June, 1998. (Incorporated by
reference as Exhibit 10.26 to Registrant's initial filing of Form S-1
Registration Statement, Registration No.333-59829 filed July 24, 1998).
10.27 Form of Registration Rights Agreement dated June, 1998.(Incorporated by
reference as Exhibit 10.27 to Registrant's initial filing of Form S-1
Registration Statement, Registration No.333-59829 filed July 24, 1998).
10.28 Form of Debenture dated June, 1998. (Incorporated by reference as
Exhibit 10.28 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No.333-59829 filed July 24, 1998).
10.29 Form of Subscription Agreement dated August, 1998 with March 17, 1999
amendment.
10.30 Form of Registration Rights Agreement dated August, 1998.
10.31 Form of Debenture dated August, 1998 with March 17, 1999 amendment.
10.32 Form of Subscription Agreement dated October, 1998 with March 17, 1999
amendment.
10.33 Form of Registration Rights Agreement dated October, 1998.
10.34 Form of Debenture dated October, 1998 with March 17, 1999 amendment.
10.35 Form of Promissory Note dated December, 1998.
10.36 Form of Contingent Subscription Agreement dated December, 1998 with
March 17, 1999 amendment.
10.37 Form of Registration Rights Agreement dated December, 1998.
10.38 Form of Debenture dated December, 1998 with March 17, 1999 amendment.
10.39 Form of Warrant dated December, 1998.
10.40 Form of Subscription Agreement dated January, 1999.
10.41 Form of Registration Rights Agreement dated January, 1999.
10.42 Form of Debenture dated January, 1999.
10.43 Form of Warrant dated January 28, 1999 with March 17, 1999 amendment.
10.44 Form of Promissory Note dated March 2, 1999.
10.45 Form of Contingent Subscription Agreement dated March 2, 1999.
10.46 Form of Registration Rights Agreement dated March 2, 1999.
<PAGE>
Exhibit
No. Description
10.47 Form of Debenture dated March 2, 1999.
10.48 Form of Warrant dated March 2, 1999.
10.49 Form of Promissory Note dated March 26, 1999.
10.50 Form of Contingent Subscription Agreement dated March 26, 1999.
10.51 Form of Registration Rights Agreement dated March 26, 1999.
10.52 Form of Debenture dated March 26, 1999.
10.53 Form of Warrant dated March 26, 1999.
21.1 List of Subsidiaries (Incorporated by reference to Exhibit 21 of
Registrant's Annual Report for the fiscal year ended June 30, 1997 on
Form 10-KSB, filed September 30, 1997).
23.1 Consent of Bederson & Company LLP.
23.1(a) Consent of Bederson & Company LLP.
23.2 Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1).^
23.3 Consent of Feldman Sherb Ehrlich & Co., P.C.
27 FINANCIAL DATA SCHEDULES
* To be filed by amendment.
Exhibit 5.1 a
April 22, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: SWISSRAY International, Inc. (the "Company")
Registration Statement on Form S-1 File No. 333-59829
Relating to shares of the Company's Common Stock, par
value $.01 per share underlying Convertible Debentures
Gentlemen:
I have been requested by the Company, a New York corporation, to
furnish you with my opinion as to the matters hereinafter set forth in
connection with the above captioned Registration Statement (the "Registration
Statement") covering all of the shares which will be offered by the Selling
Shareholders who acquired the shares under various agreements including, but not
limited to, Subscription Agreement, Convertible Debenture and related
Registration Rights Agreement - the number of shares being as indicated on the
calculation chart to the cover page of the Company's aforementioned S-1
Registration Statement.
In connection with this opinion, I have examined the Registration
Statement, the Certificate of Incorporation and By-Laws of the Company, each as
amended to date, copies of the records of corporate proceedings of the Company,
and copies of such other agreements, instruments and documents as I have deemed
necessary to enable me to render the opinion hereinafter expressed.
Based upon and subject to the foregoing, I am of the opinion that the
shares referred to above when sold in the manner described in the Registration
Statement, will be legally issued, fully paid and non-assessable.
I render no opinion as to the laws of any jurisdiction other than the
internal laws of the State of New York. I hereby consent to the use of this
opinion as an exhibit to the Registration Statement and to the reference to my
name under the caption "Legal Matters" in the prospectus included in the
Registration Statement.
Very truly yours,
/Gary B. Wolff/
Gary B. Wolff, P.C.
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $6,143,849
This offering consists of $6,143,849 of Convertible Debentures of Swissray
International, Inc.
--------------------
SUBSCRIPTION AGREEMENT
-------------------
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $6,143,849 The
Debentures will be transferable to the extent that any such transfer is
permitted by law. This offering is being made in accordance with the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D promulgated under the Act (the
"Regulation D Offering").
The Investor Questionnaire is designed to enable the Investor
to demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9:"Request
for Taxpayer Identification Number and Certification" for U.S. citizens or
residents of the U.S. for U.S. federal income tax purposes only. (Foreign
investors should consult their tax advisors regarding the need to complete
Internal Revenue Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer as provided below:
Immediately available funds should be sent via wire transfer to the escrow
account stated below and the completed subscription documents should be
forwarded to the Escrow Agent. Your subscription funds will be deposited into a
non-interest bearing escrow account of Joseph B. LaRocco, Esq., Escrow Agent, at
First Union Bank of Connecticut, Stamford, Connecticut. In the event of a
termination of the Regulation D Offering or the rejection of this subscription,
all subscription funds will be returned without interest. The wire instructions
are as follows:
First Union Bank of Connecticut
Executive Office
300 Main Street, P. O. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
Convertible Debentures (the "Debentures"). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the "Offering") of up to $6,143,849 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the "Regulation D Offering") in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and Rule 506 of Regulation D promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $________________ of the Company's Debentures. The Debentures shall pay
an 5% cumulative interest payable annually, in cash or in freely trading Common
Stock of the Company, at the Company's option, at the time of each conversion.
If paid in Common Stock, the number of shares of the Company's Common Stock to
be received shall be determined by dividing the dollar amount of the dividend by
the then applicable Market Price, as of the interest payment date. "Market
Price" shall mean the lesser of (a) 82% of the 10-day average closing bid price,
as reported by Bloomberg, LP, for the ten (10) consecutive trading days
immediately preceding the date of conversion or (b) $1.00 (each being referred
to as the "Conversion Price"). If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
date the funds are received by the Company or its designated attorney (the
"Closing Date").
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent's own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully
read the applicable form of Debenture included herein as Exhibit A and
the form of Registration Rights Agreement annexed hereto as Exhibit B
(the "Registration Rights Agreement"), and is familiar with and
understands the terms of the Offering. With respect to tax and other
economic considerations involved in his investment, the undersigned is
not relying on the Company. The undersigned has carefully considered
and has, to the extent the undersigned believes such discussion
necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in
the Company, by purchasing the Debentures, for the undersigned's
particular tax and financial situation and has determined that the
investment being made by the undersigned is a suitable investment for
the undersigned.
(b) The undersigned acknowledges that all documents, records,
and books pertaining to this investment which the undersigned has
requested includes Form 10-KSB for the fiscal year ended June 30, 1997
inclusive of 10-KSB/A1, 10-KSB/A2 and 10-KSB/A3 and Form 10-Q for the
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998
inclusive of 10-Q/A1 for September 30, 1997 and December 31, 1997 (the
"Disclosure Documents") have been made available for inspection by the
undersigned or the undersigned has access to the Disclosure Documents.
(c) The undersigned has 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 and all such questions
have been answered to the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the
Debentures without registration under the Act or applicable state
securities laws or an exemption therefrom. The Debentures have not been
registered under the Act or under the securities laws of any states.
The Common Stock underlying the Debentures is to be registered by the
Company pursuant to the terms of the Registration Rights Agreement
attached hereto as Exhibit B and incorporated herein and made a part
hereof. Without limiting the right to convert the Debentures and sell
the Common Stock pursuant to the Registration Rights Agreement, the
undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not
with a view to resale or distribution except in compliance with the
Act. The undersigned has not offered or sold any portion of the
Debentures being acquired nor does the undersigned have any present
intention of dividing the Debentures with others or of selling,
distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined
event or circumstance in violation of the Act. Except as provided in
the Registration Rights Agreement, the Company has no obligation to
register the Common Stock issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire
amount of such investment. Further, the undersigned has carefully read
and considered the schedule entitled Pending Litigation matters
attached hereto as Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each
certificate representing the Debentures unless registered
pursuant to the Registration Rights Agreement, shall be
stamped or otherwise imprinted with a legend substantially in
the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE
ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF
THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Common Stock issued upon conversion shall
contain the following legend if converted prior to effectiveness of Registration
Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) Common Stock issued upon conversion and
subsequent to effective date of Registration Statement
(pursuant to which shares underlying conversion are
registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered
on behalf of a corporation, (i) such corporation has the full legal
right and power and all authority and approval required (a) to execute
and deliver, or authorize execution and delivery of, this Subscription
Agreement and all other instruments (including, without limitation, the
Registration Rights Agreement) executed and delivered by or on behalf
of such corporation in connection with the purchase of the Debentures
and (b) to purchase and hold the Debentures: (ii) the signature of the
party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the
specific purpose of acquiring the Debentures, unless each beneficial
owner of such entity is qualified as an accredited investor within the
meaning of Rule 501(a) of Regulation D and has submitted information
substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the
Company and each stockholder, executive, employee, representative,
affiliate, officer, director, agent (including Counsel) or control
person of the Company, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made
by the undersigned to the Company or omitted or alleged to have been
omitted by the undersigned, concerning the undersigned or the
undersigned's subscription for and purchase of the Debentures or the
undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in this
Subscription Agreement, the Questionnaire or any other document
submitted by the undersigned, against losses, liabilities and expenses
for which the Company, or any stockholder, executive, employee,
representative, affiliate, officer, director, agent (including Counsel)
or control person of the Company has not otherwise been reimbursed
(including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the
Company, or such officer, director stockholder, executive, employee,
agent (including Counsel), representative, affiliate or control person
in connection with such action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures
as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar
or meeting.
(j) The undersigned or the undersigned's representatives, as
the case may be, has such knowledge and experience in financial, tax
and business matters so as to enable the undersigned to utilize the
information made available to the undersigned in connection with the
Offering to evaluate the merits and risks of an investment in the
Debentures and to make an informed investment decision with respect
thereto.
(k) The Purchaser is purchasing the Debentures for its
own account for investment, and not with a view toward the resale or
distribution thereof. Purchaser is neither an underwriter of, nor a
dealer in, the Debentures or the Common Stock issuable upon conversion
thereof and is not participating in the distribution or resale of the
Debentures or the Common Stock issuable upon conversion thereof.
(l) There has never been represented, guaranteed, or warranted
to the undersigned by any broker, the Company, its officers, directors
or agents, or employees or any other person, expressly or by
implication (i) the percentage of profits and/or amount of or type of
consideration, profit or loss to be realized, if any, as a result of
the Company's operations; and (ii) that the past performance or
experience on the part of the management of the Company, or of any
other person, will in any way result in the overall profitable
operations of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued and enforceable in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. At least 200%
of the number of shares of Common Stock issuable upon conversion of all the
Debentures issued pursuant to this Offering have been duly and validly reserved
for issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares or stockholder approval
to authorize additional shares as described in the proxy statement for the
August 31, 1998 meeting has or will be obtained and, upon issuance shall be duly
and validly issued, fully paid, and non-assessable (the "Reserved Shares"). From
time to time, the Company shall keep such additional shares of Common Stock
reserved so as to allow for the conversion of all the Debentures issued pursuant
to this offering.
Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures outstanding would result in an insufficient number of
authorized shares of Common Stock being available to cover all the conversions,
then in such event, the Company will move to call and hold a shareholder's
meeting within 60 days of such event for the purpose of authorizing additional
shares of Common Stock to facilitate the conversions. In such an event the
Company shall recommend to all shareholders to vote their shares in favor of
increasing the authorized number of shares of Common Stock. Seller represents
and warrants that under no circumstances will it deny or prevent Purchaser's
right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has
been duly authorized, validly executed and delivered on behalf of Seller and is
a valid and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(c) Non-contravention. The execution and
delivery of this Agreement and the consummation of the issuance of the
Debentures, and the transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Seller of any of the terms or
provisions of, or constitute a default under, the articles of incorporation
or by-laws of Seller, or any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Seller is a party or by which it or
any of its properties or assets are bound, or any existing applicable law, rule,
or regulation of the United States or any State thereof or any applicable
decree, judgment, or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental body
having jurisdiction over Seller or any of its properties or assets.
(d) Company Compliance. The Company represents and warrants
that the Company and its subsidiaries are: (i) in full compliance, to the extent
applicable, with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; (ii) not in violation of any term or
provision of its Certificate of Incorporation or by-laws; (iii) not in default
in the performance or observance of any obligation, agreement or condition
contained in any bond, debenture (excepting for reservation of number of shares
required if all Debentures were to be converted), note or any other evidence of
indebtedness or in any mortgage, deed of trust, indenture or other instrument or
agreement to which they are a party, either singly or jointly, by which it or
any of its property is bound or subject. Furthermore, the Company is not aware
of any other facts, which it has not disclosed which could have a material
adverse effect on the business, condition, (financial or otherwise), operations,
earnings, performance, properties or prospects of the Company and its
subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in
Exhibit C, there is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental body now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its subsidiaries is or
may be a party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and
no law, statute, rule, regulation, order or ordinance has been enacted, adopted
or issued by any Governmental Body that prevents the issuance of the Debentures
or the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D. In
the past six months the Company raised $7,500,000 in Regulation S and Regulation
D offerings.
(l) Current Authorized Shares. As of August 31, 1998 there were
50,000,000 authorized shares of Common Stock of which approximately 41,436,813
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's initial
filing on Form 10-KSB for the year ended June 30, 1997 (or the filing of
necessary amendments thereto so as to restate certain financial statements for
fiscal years ended June 30, 1997 and 1996 so as to properly record the
accounting treatment of certain beneficial conversion features and debt issuance
cost of convertible debentures issued during the year ended June 30, 1997 and
the auditing for the value of stock options granted during the years June 30,
1997 and 1996), which could make any of the disclosures contained therein (as
subsequently amended and restated) misleading The financial statements of the
Company included in the Disclosure Documents have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the audit
adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and changes in financial position for the periods then
ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Closing Date the Debentures being
purchased hereunder shall be delivered to Joseph B. LaRocco, Esq. as Escrow
Agent, who will simultaneously wire to the Company's counsel the funds being
held in escrow, less placement fees, if not already directly wired to Company
Counsel, at which time the Escrow Agent shall then have the Debentures delivered
to the Purchaser, per the Purchaser's instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(q) No Default. Except as may be set forth in the Company's report on
form 10-KSB for the fiscal year ending June 30, 1997, as initially filed and
subsequnetly amended, the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement or the
Debentures, other than the conversion provision thereof, will conflict with or
result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, (i) any material
indenture, mortgage, deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound,
(ii) any statute applicable to the Company or its property, (iii) the
Certificate of Incorporation or ByLaws of the Company, (iv) any decree ,
judgment, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its properties, or (v) the Company's
listing agreement for its Common Stock.
(r) Use of Proceeds. The Company represents that the net proceeds
of this offering will be primarily used for the purposes set forth on page 4 of
the term sheet under the caption "Closing Proceeds".
(s) The Purchaser has been advised that the Company has entered
into a consulting agreement with Net Financial International, Ltd. pursuant to
which it will pay a fee of $250,000 from the gross proceeds of this Offering.
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Purchaser's signed Notice of Conversion
followed by receipt of the original Debenture to be converted in whole or in
part (within 5 business days as indicated in 4(b) below), the Company shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debenture is convertible in
accordance with the provisions regarding conversion set forth in Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Conversion Procedures. The face amount of each Debenture
may be converted anytime six (6) months following the Closing Date. Such
conversion shall be effectuated by surrendering to the Company, or its attorney,
the Debentures to be converted together with a facsimile or original of the
signed Notice of Conversion which evidences Purchaser's intention to convert
those Debentures indicated. The date on which the Notice of Conversion is
effective ("Conversion Date") shall be deemed to be the date on which the
Purchaser has delivered to the Company a facsimile or original of the signed
Notice of Conversion, as long as the original Debentures to be converted are
received by the Company or its designated attorney within 5 business days
thereafter. Unless otherwise notified by the Company in writing via facsimile,
the Company's designated attorney is Gary B. Wolff, Esq., 747 Third Avenue,
New York, NY 10017 (P) 212-644-6446 (f) 212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its designated attorney of a
facsimile or original of Purchaser's signed Notice of Conversion (see Exhibit D)
Seller shall instruct Seller's transfer agent to issue Stock Certificates
without restrictive legend or stop transfer instructions, if at that time the
Registration Statement has been deemed effective (or with proper restrictive
legend if the Registration Statement has not as yet been declared effective), in
the name of Purchaser (or its nominee) and in such denominations to be specified
at conversion representing the number of shares of Common Stock issuable upon
such conversion, as applicable. Seller warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely transferable on the books and
records of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its option,
to convert the face amount of each Debenture, plus accrued interest, anytime six
(6) months following the Closing Date, at the lesser of (a) 82% of the 10 day
average closing bid price, as reported by Bloomberg, LP for the 10 consecutive
trading days immediately preceding the applicable Conversion Date or (b) $1.00
(each being referred to as the "Conversion Price"). No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up or down, as the case may be, to
the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser's conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser's original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 4(b), the Company shall deliver a
certificate in accordance with Section 4(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of
authorized but unissued shares of Common Stock, the provisions of this
Section 4(g) shall not apply but instead the provisions of Section 4(h)
shall apply. The Company shall make any payments incurred under this
Section 4(g) in immediately available funds within five (5) business
days from the Conversion Date if late. Nothing herein shall limit a
Purchaser's right to pursue actual damages or cancel the conversion for
the Company's failure to issue and deliver Common Stock to the Holder
within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Purchasers of the entire
amount of Debentures then outstanding. If, at any time Purchaser submits a
Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the
Purchaser all of the shares of Common Stock which are available, and the Notice
of Conversion as to any Debentures requested to be converted but not converted
(the "Unconverted Debentures"), upon Purchaser's sole option, may be deemed null
and void. The Company shall provide notice of such Conversion Default ("Notice
of Conversion Default") to all existing Purchasers of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Purchaser shall give notice
to the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser's right to pursue actual damages for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) During the remainder of 1998, the Purchaser agrees to make
up to an additional $3,000,000 in financing available to the Company upon
mutually agreeable terms. In the event the Company receives any additional
financing from the Purchaser or other investor(s) the six (6) month period
restricting conversions shall terminate and the Purchaser shall be entitled to
convert any or all of the Debentures, even though the Registration Statement
covering those Debentures may not have been declared effective at that time, in
which case the Purchaser shall receive legended Common Stock until the
Registration Statement is declared effective or in the written opinion of legal
counsel the legend may be removed.
(j) Right of First Refusal: The Purchaser is granted the Right
of First Refusal on any subsequent financing the Company may seek during the
next twelve months.
(k) Redemption: Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
Debentures during the two year period following the Closing Date. In the event
the Company exercises such right of redemption up to and including the last day
of the fourth (4th) month following the Closing Date it shall pay the Purchaser,
in U.S. currency One Hundred Fifteen (115%) of the face amount of the Debentures
to be redeemed, plus accrued interest. In the event the Company exercises such
right of redemption at anytime during the fifth (5th) or sixth (6th) months
following the Closing Date it shall pay the Purchaser, in U.S. currency One
Hundred Twenty (120%) of the face amount of the Debentures to be redeemed, plus
accrued interest. In the event the Company exercises such right of redemption at
anytime after the last day of the sixth (6th) month following the Closing Date
it shall pay the Purchaser, in U.S. currency One Hundred Twenty-five (125%) of
the face amount of the Debentures to be redeemed, plus accrued interest. The
date by which the Debentures must be delivered to the Escrow Agent shall not be
later than 5 business days following the date the Company notifies the Purchaser
by facsimile of the redemption. The Company shall give the Purchaser at least 5
business day's notice of its intent to redeem.
(l) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption or (ii) if
the Company is in default of any of its obligations under the Debenture,
Subscription Agreement, or the Registration Rights Agreement and the Purchaser
has asserted such default) shall the Purchaser be entitled to convert any
Debentures to the extent that, after such conversion, the sum of (1) the number
of shares of Common Stock beneficially owned by the Purchaser and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Debentures), and (2) the
number of shares of Common Stock issuable upon the conversion of the Debentures
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Purchaser and its affiliates of more than
9.99% of the outstanding shares of Common Stock (after taking into account the
shares to be issued to the Purchaser upon such conversion). 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 (the "1934 Act"), except as otherwise provided in clause (1) of
such proviso. The Purchaser further agrees that if the Purchaser transfers or
assigns any of the Debentures to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section as
if such transferee or assignee were a signatory to the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Closing Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Closing Date the Company shall
deliver to the Escrow Agent a signed Registration Rights Agreement in the form
attached hereto as Exhibit B. The Debentures being purchased hereunder shall be
delivered to Joseph B. LaRocco, Esq. as Escrow Agent, who will hold them in
escrow until funds have been wired to the Company or its Counsel at which time
the Escrow Agent shall then have the Debentures delivered to the Purchaser, per
the Purchaser's instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF ANY MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New
York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 9(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions:
the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds $1,000,000; or
the shareholder is a natural person who had an individual income* in
excess of $200,000 in each of 1996 and 1997 and who reasonably expects an
individual income in excess of $200,000 in 1998; or Each of the shareholders of
the undersigned CORPORATION is able to certify that such shareholder is a
natural person who, together with his or her spouse, has had a joint income
in excess of $300,000 in each of 1996 and 1997 and who reasonably expects a
joint income in excess of $300,000 during 1998; and the undersigned CORPORATION
has its principal place of business in.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A)
of the Securities Act whether acting in its
individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of
1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section
2(a)(48) of the Investment Company Act of
1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration
under Section 301 (c) or (d) of the Small
Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the
Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Debentures will be
solely for the CORPORATION'S own account and not for the
account of any other person or entity; and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification
number as set forth in this Questionnaire are true, correct
and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:__________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser's
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Amount of Debentures subscribed for Date
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1998
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
<PAGE>
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the "Company") according to the conditions set forth in the
Subscription Agreement dated September ____, 1998.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
<PAGE>
Exhibit E
_______________, 1998
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the "Company"), in connection with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company's Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of _______
shares of Common Stock, ________ par value per share, ("Common Stock") and
______________ Preferred Stock, par value $________ per share; [describe classes
if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
<PAGE>
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not violate
the applicable listing agreement between the Company and any securities exchange
or market on which the Company's securities are listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September ___, 1998,
("this Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New
York corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement, dated as of September ___, 1998, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor 5% Convertible Debentures of the
Company (the "Debentures"), which will be convertible into shares of the common
stock, $.01 par value (the "Common Stock"), of the Company (the "Conversion
Shares") upon the terms and subject to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Closing Date" means the date funds are received by the
Company or its designated attorney pursuant to the
Subscription Agreement.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a
permitted transferee or assignee of the Registrable Securities
pursuant to Section 9 of this Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Closing Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the $6,143,849 of Debentures, plus accrued
interest, in the total offering would be convertible. In the event the
Registration Statement is not filed within forty-five (45) calendar days after
the Closing Date, then in such event the Company shall pay the Investor 2% of
the face amount of each Debenture for each 30 day period, or portion thereof,
after forty-five (45) calendar days following the Closing Date that the
Registration Statement is not filed. The Investor is also granted additional
Piggy-back registration rights on any other Registration Statement filings made
by the Company. Such Registration Statement shall state that, in accordance with
the Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable to prevent dilution resulting from
Stock splits, or stock dividends). If at any time the number of shares of Common
Stock into which the Debenture(s) may be converted exceeds the aggregate number
of shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of written notice from any Investor, either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by the
SEC at that time, to register all shares of Common Stock into which the
Debenture(s) may be converted, or (ii) if such Registration Statement has been
declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on such form as is applicable to register the shares of
Common Stock into which the Debenture may be converted that exceed the aggregate
number of shares of Common Stock already registered. The above damages shall
continue until the obligation is fulfilled and shall be paid within 5 business
days after each 30 day period, or portion thereof, until the Registration
Statement is filed. Failure of the Company to make payment within said 5
business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the
Closing Date will cause the Initial Investor to suffer damages in an amount that
will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Agreement a provision for liquidated damages. The
parties acknowledge and agree that the liquidated damages provision set forth in
this section represents the parties' good faith effort to qualify such damages
and, as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within ninety (90) calendar days following
the Closing Date, then the Company shall pay the Initial Investor 2% of the
purchase price paid by the Initial Investor for the Registrable Securities
pursuant to the Subscription Agreement for every thirty day period, or portion
thereof, following the ninety (90) calendar day period until the Registration
Statement is declared effective. Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel. The above damages shall continue until the obligation
is fulfilled and shall be paid within 5 business days after each 30 day period,
or portion thereof, until the Registration Statement is declared effective.
Failure of the Company to make payment within said 5 business days shall be
considered a default.
The Company acknowledges that its failure to have the Registration
Statement declared effective within said ninety (90) calendar day period, will
cause the Initial Investor to suffer damages in an amount that will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve the Company from its obligations to register the Common Stock and
deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
3. Obligation of the Company. In connection with the registration
of the Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Closing Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) ninety (90) days after the Closing
Date, and keep the Registration Statement effective at all times until the
earliest (the "Registration Period") of (i) the date that is two years after the
Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation; and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE DEBENTURE DUE September , 1998
September , 2000
$
Number SEPT -1998-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay
______________________________________ or registered assigns (the
"Holder") on September 2000, (the "Maturity Date"), the principal
amount of __________HUNDRED THOUSAND Dollars ($ 00,000) U.S., and to
pay interest on the principal amount hereof, in such amounts, at such
times and on such terms and conditions as are specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the rate of Five Percent (5.0%) per year, payable
at the time of each conversion until the principal amount hereof is paid in full
or has been converted. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months. Each payment shall be paid in cash or in freely trading
Common Stock of the Company, at the Company's option. If paid in Common Stock,
the number of shares of the Company's Common Stock to be received shall be
determined by dividing the dollar amount of the interest by the then applicable
Market Price as of the interest payment date. "Market Price" shall mean (a) the
lesser of 82% of the average of the 10 day closing bid prices, as reported by
Bloomberg, LP for the ten (10) consecutive trading days immediately preceding
the date of conversion or (b) $1.00. If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Holder, or per Holder's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 3.2. The closing shall be deemed to have occurred on the
date the funds are received by the Company or its Counsel (the "Closing Date").
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall have
the option of paying the interest on this Debenture in United States dollars or
in common stock upon conversion pursuant to Article 1 hereof. The Company may
draw a check for the payment of interest to the order of the Holder of this
Debenture and mail it to the Holder's address as shown on the Register (as
defined in Section 7.2 below). Interest and principal payments shall be subject
to withholding under applicable United States Federal Internal Revenue Service
Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at its option,
to convert it into shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at any time six (6) months following the Closing Date
and which is before the close of business on the Maturity Date, except as set
forth in Section 3.1(c) below. The number of shares of Common Stock issuable
upon the conversion of this Debenture is determined pursuant to Section 3.2 and
rounding the result to the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains
outstanding on the second anniversary of the date hereof, the unconverted
portion of such Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 3.2.
(d) During the remainder of 1998, the Holder agrees to make up to an
additional $3,000,000 in financing available to the Company upon mutually
agreeable terms. In the event the Company receives any additional financing
from the Holder or other investor(s) the six (6) month period restricting
conversions shall terminate and the Holder shall be entitled to convert any or
all of the Debentures, even though the Registration Statement covering those
Debentures may not have been declared effective at that time, in which case the
Holder shall receive legended Common Stock until the Registration Statement
is declared effective or in the written opinion of legal counsel the legend may
be removed.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Holder's signed Notice of Conversion and
the receipt of the original Debenture to be converted in whole or in part in the
manner set forth in 3.2(b) below, the Company shall instruct its transfer agent
to issue one or more Certificates representing that number of shares of Common
Stock into which the Debenture is convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller's transfer agent
or attorney shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture
may be converted anytime six (6) months following the Closing Date. Such
conversion shall be effectuated by surrendering to the Company, or its attorney,
this Debenture to be converted together with a facsimile or original of the
signed Notice of Conversion which evidences Holder's intention to convert the
Debenture indicated. The date on which the Notice of Conversion is effective
("Conversion Date") shall be deemed to be the date on which the Holder has
delivered to the Company or its designated attorney a facsimile or original of
the signed Notice of Conversion, as long as the original Debenture(s) to be
converted are received by the Company or its designated attorney within 5
business days thereafter. Unless otherwise notified by the Company in writing
via facsimile the Company's designated attorney is Gary B. Wolff, Esq., 474
Third Avenue, 25th Floor, New York, New York 10017, (P) 212-644-6446, (F)
212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its attorney of a facsimile or
original of Holder's signed Notice of Conversion Seller shall instruct Seller's
transfer agent to issue Stock Certificates without restrictive legend or stop
transfer instructions, if at that time the Registration Statement has been
deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Holder (or its
nominee) and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion, as
applicable. Seller warrants that no instructions, other than these instructions,
have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller,
except as may be set forth herein.
(d) (i) Conversion Rate. Holder is entitled, at its option to
convert the face amount of this Debenture, plus accrued interest, anytime six
(6) months following the Closing Date, at the lesser of (a) 82% of the 10 day
average closing bid price, as reported by Bloomberg LP, for the ten (10)
consecutive trading days immediately preceding the applicable Conversion Date or
(b) $1.00 (each being referred to as the "Conversion Price"). No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded up or down, as the case may
be, to the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Holder's conversion of all the Debentures, the Company raises money
under either Regulation D or Regulation S on terms that are more favorable than
those terms set forth in this Debenture, then in such event, the Holder at its
sole option shall be entitled to completely replace the terms of this Debenture
with the terms of the more beneficial Debenture as to that balance, including
accrued interest and any accumulated liquidated damages, remaining on Holder's
original investment. The Debentures are subject to a mandatory, 24 month
conversion feature at the end of which all Debentures outstanding will be
automatically converted, upon the terms set forth in this section ("Mandatory
Conversion Date").
(e) Nothing contained in this Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(b), the Company shall deliver a
certificate, in accordance with Section 3(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein "No. Business Days Late" is
defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.
The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the Conversion
Date if late. Nothing herein shall limit a Holder's right to pursue actual
damages or cancel the conversion for the Company's failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Holders of the entire
amount of Debentures then outstanding. If, at any time Holder submits a Notice
of Conversion and the Company does not have sufficient authorized but unissued
shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), upon Holder's sole option, may be deemed null and
void. The Company shall provide notice of such Conversion Default ("Notice of
Conversion Default") to all existing Holders of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Holder shall give notice to
the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Holder's option, payable as follows: (i) in
the event Holder elects to take such payment in cash, cash payments shall be
made to such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at the
conversion rate set forth in section 4(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture.
Nothing herein shall limit the Holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(i) The Company shall furnish to Holder such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
(j) The Holder is limited in the amount of this Debenture it
may convert and own. Other than the Mandatory Conversion provisions contained in
this Debenture which are not limited by the following, in no other event shall
the Holder be entitled to convert any amount of Debentures in excess of that
amount upon conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debenture, and (2) the number of shares of Common
Stock issuable upon the conversion of the Debentures with respect to which the
determination of this provision is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock of the Company. For purposes of this provision 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 Regulation 13 D-G thereunder, except as otherwise provided in
clause (1) of such provision.
(k) Redemption. Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
Debentures during the two year period following the Closing Date. In the event
the Company exercises such right of redemption up to and including the last day
of the fourth (4th) month following the Closing Date it shall pay the Holder, in
U.S. currency One Hundred Fifteen (115%) of the face amount of the Debentures
to be redeemed, plus accrued interest. In the event the Company exercises
such right of redemption at anytime during the fifth (5th) or sixth (6th) months
following the Closing Date it shall pay the Holder, in U.S. currency One Hundred
Twenty (120%) of the face amount of the Debentures to be redeemed, plus accrued
interest. In the event the Company exercises such right of redemption at anytime
after the last day of the sixth (6th) month following the Closing Date it shall
pay the Holder, in U.S. currency One Hundred Twenty-five (125%) of the face
amount of the Debentures to be redeemed, plus accrued interest. The date by
which the Debentures must be delivered to the Escrow Agent shall not be
later than 5 business days following the date the Company notifies the
Holder by facsimile of the redemption. The Company shall give the Holder at
least 5 business day's notice of its intent to redeem.
Section 3.3. Fractional Shares. The Company shall not issue
fractional shares of Common Stock, or scrip representing fractions of such
shares, upon the conversion of this Debenture. Instead, the Company shall round
up or down, as the case may be, to the nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder
shall pay any such tax which is due because the shares are issued in a name
other than its name.
Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in Section 3(a) of the Subscription Agreement dated September of 1998, to
permit the conversion of this Debenture subject to certain options granted to
the Company and referred to in Section 3(a) of the Subscription Agreement. All
shares of Common Stock which may be issued upon the conversion hereof shall upon
issuance be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the "Act") and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable
upon the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange
for Common Stock, then as a condition of such merger, consolidation, sale or
transfer, the Company and any such successor, purchaser or transferee shall
amend this Debenture to provide that it may thereafter be converted on the terms
and subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 business days thereafter, (c) the Company fails to comply with any of its
other agreements in this Debenture and such failure continues for the period and
after the notice specified below, (d) the Company pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a
voluntary case; (ii) consents to the entry of an order for relief against it in
an involuntary case; (iii) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially all of its property or
(iv) makes a general assignment for the benefit of its creditors or (v) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that: (A) is for relief against the Company in an involuntary case; (B) appoints
a Custodian of the Company or for all or substantially all of its property or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days, (e) the Company's Common Stock is no longer
listed on any recognized exchange including electronic over-the-counter bulletin
board. As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least 25% of the aggregate
principal amount of the Debentures outstanding notify the Company of such
default and the Company does not cure it within five (5) business days after the
receipt of such notice, which must specify the default, demand that it be
remedied and state that it is a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable. Upon such
declaration, the remaining principal amount shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are referred to
herein collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the "Register") showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this Debenture is
the person exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may
be registered on the books of the Company maintained for such purpose pursuant
to Section 7.2 above (i.e., the Register). Transfers shall be registered when
this Debenture is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the appropriate person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including tax laws and
state and federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the transferee as the record holder thereof shall be issued in lieu
hereof. When this Debenture is presented to the Company with a reasonable
request to exchange it for an equal principal amount of Debentures of other
denominations, the Company shall make such exchange and shall cancel this
Debenture and issue in lieu thereof Debentures having a total principal amount
equal to this Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices, with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in the payment of principal or conversion into
Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of New York applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of New York.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.
SWISSRAY INTERNATIONAL, INC.
By
Name: Ruedi G. Laupper
Title: Chairman and President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated _________________,1998.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
- --------------------------------------------------------------------------------
(principal amount of Debenture, $5,000 or integral multiples of $5,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: Signed:
(Signature must conform in all
respects to name of Holder shown of face of Debenture)
Signature Guaranteed:
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $2,940,000
This offering consists of $2,940,00 of Convertible Debentures of Swissray
International, Inc.
--------------------
SUBSCRIPTION AGREEMENT
-------------------
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $2,940,000 The Debentures
will be transferable to the extent that any such transfer is permitted by law.
This offering is being made in accordance with the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and
Rule 506 of Regulation D promulgated under the Act (the "Regulation D
Offering").
The Investor Questionnaire is designed to enable the Investor
to demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9:
"Request for Taxpayer Identification Number and Certification" for U.S. citizens
or residents of the U.S. for U.S. federal income tax purposes only. (Foreign
investors should consult their tax advisors regarding the need to complete
Internal Revenue Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer as provided below:
Immediately available funds should be sent via wire transfer to the escrow
account stated below and the completed subscription documents should be
forwarded to the Escrow Agent. Your subscription funds will be deposited into a
non-interest bearing escrow account of Joseph B. LaRocco, Esq., Escrow Agent, at
First Union Bank of Connecticut, Stamford, Connecticut. In the event of a
termination of the Regulation D Offering or the rejection of this subscription,
all subscription funds will be returned without interest. The wire instructions
are as follows:
First Union Bank of Connecticut
Executive Office
300 Main Street, P. O. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
Convertible Debentures (the "Debentures"). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the "Offering") of up to $2,940,000 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the "Regulation D Offering") in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and Rule 506 of Regulation D promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $2,940,000 of the Company's Debentures. The Debentures shall pay an 5%
cumulative interest payable annually, in cash or in freely trading Common Stock
of the Company, at the Company's option, at the time of each conversion. If paid
in Common Stock, the number of shares of the Company's Common Stock to be
received shall be determined by dividing the dollar amount of the dividend by
the then applicable Market Price, as of the interest payment date. "Market
Price" shall mean the lesser of (a) 82% of the 10-day average closing bid price,
as reported by Bloomberg, LP, for the ten (10) consecutive trading days
immediately preceding the date of conversion or (b) $1.00 (each being referred
to as the "Conversion Price"). If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
date the funds are received by the Company or its designated attorney (the "
Closing Date").
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent's own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully
read the applicable form of Debenture included herein as Exhibit A and
the form of Registration Rights Agreement annexed hereto as Exhibit B
(the "Registration Rights Agreement"), and is familiar with and
understands the terms of the Offering. With respect to tax and other
economic considerations involved in his investment, the undersigned is
not relying on the Company. The undersigned has carefully considered
and has, to the extent the undersigned believes such discussion
necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in
the Company, by purchasing the Debentures, for the undersigned's
particular tax and financial situation and has determined that the
investment being made by the undersigned is a suitable investment for
the undersigned.
(b) The undersigned acknowledges that all documents, records,
and books pertaining to this investment which the undersigned has
requested includes Form 10-KSB for the fiscal year ended June 30, 1997
inclusive of 10-KSB/A1, 10-KSB/A2 and 10-KSB/A3 and Form 10-Q for the
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998
inclusive of 10-Q/A1 for September 30, 1997 and December 31, 1997 (the
"Disclosure Documents") have been made available for inspection by the
undersigned or the undersigned has access to the Disclosure Documents.
(c) The undersigned has 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 and all such questions have been answered
to the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the
Debentures without registration under the Act or applicable state
securities laws or an exemption therefrom. The Debentures have not been
registered under the Act or under the securities laws of any states.
The Common Stock underlying the Debentures is to be registered by the
Company pursuant to the terms of the Registration Rights Agreement
attached hereto as Exhibit B and incorporated herein and made a part
hereof. Without limiting the right to convert the Debentures and sell
the Common Stock pursuant to the Registration Rights Agreement, the
undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not
with a view to resale or distribution except in compliance with the
Act. The undersigned has not offered or sold any portion of the
Debentures being acquired nor does the undersigned have any present
intention of dividing the Debentures with others or of selling,
distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined
event or circumstance in violation of the Act. Except as provided in
the Registration Rights Agreement, the Company has no obligation to
register the Common Stock issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire amount of
such investment. Further, the undersigned has carefully read and considered the
schedule entitled Pending Litigation matters attached hereto
as Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each
certificate representing the Debentures unless registered pursuant to the
Registration Rights Agreement, shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE
ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF
THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Common Stock issued upon conversion shall
contain the following legend if converted prior to effectiveness of Registration
Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) Common Stock issued upon conversion and
subsequent to effective date of Registration Statement (pursuant to which shares
underlying conversion are registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered
on behalf of a corporation, (i) such corporation has the full legal
right and power and all authority and approval required (a) to execute
and deliver, or authorize execution and delivery of, this Subscription
Agreement and all other instruments (including, without limitation, the
Registration Rights Agreement) executed and delivered by or on behalf
of such corporation in connection with the purchase of the Debentures
and (b) to purchase and hold the Debentures: (ii) the signature of the
party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the
specific purpose of acquiring the Debentures, unless each beneficial
owner of such entity is qualified as an accredited investor within the
meaning of Rule 501(a) of Regulation D and has submitted information
substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the
Company and each stockholder, executive, employee, representative,
affiliate, officer, director, agent (including Counsel) or control
person of the Company, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made
by the undersigned to the Company or omitted or alleged to have been
omitted by the undersigned, concerning the undersigned or the
undersigned's subscription for and purchase of the Debentures or the
undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in this
Subscription Agreement, the Questionnaire or any other document
submitted by the undersigned, against losses, liabilities and expenses
for which the Company, or any stockholder, executive, employee,
representative, affiliate, officer, director, agent (including Counsel)
or control person of the Company has not otherwise been reimbursed
(including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the
Company, or such officer, director stockholder, executive, employee,
agent (including Counsel), representative, affiliate or control person
in connection with such action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures
as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar
or meeting.
(j) The undersigned or the undersigned's representatives, as
the case may be, has such knowledge and experience in financial, tax
and business matters so as to enable the undersigned to utilize the
information made available to the undersigned in connection with the
Offering to evaluate the merits and risks of an investment in the
Debentures and to make an informed investment decision with respect
thereto.
(k) The Purchaser is purchasing the Debentures for its
own account for investment, and not with a view toward the resale or
distribution thereof. Purchaser is neither an underwriter of, nor a
dealer in, the Debentures or the Common Stock issuable upon conversion
thereof and is not participating in the distribution or resale of the
Debentures or the Common Stock issuable upon conversion thereof.
(l) There has never been represented, guaranteed, or warranted
to the undersigned by any broker, the Company, its officers, directors
or agents, or employees or any other person, expressly or by
implication (i) the percentage of profits and/or amount of or type of
consideration, profit or loss to be realized, if any, as a result of
the Company's operations; and (ii) that the past performance or
experience on the part of the management of the Company, or of any
other person, will in any way result in the overall profitable
operations of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued and enforceable in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. At least 200%
of the number of shares of Common Stock issuable upon conversion of all the
Debentures issued pursuant to this Offering have been duly and validly reserved
for issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares or stockholder approval
to authorize additional shares as described in the proxy statement for the
August 31, 1998 meeting has or will be obtained and, upon issuance shall be duly
and validly issued, fully paid, and non-assessable (the "Reserved Shares"). From
time to time, the Company shall keep such additional shares of Common Stock
reserved so as to allow for the conversion of all the Debentures issued pursuant
to this offering.
Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures outstanding would result in an insufficient number of
authorized shares of Common Stock being available to cover all the conversions,
then in such event, the Company will move to call and hold a shareholder's
meeting within 60 days of such event for the purpose of authorizing additional
shares of Common Stock to facilitate the conversions. In such an event the
Company shall recommend to all shareholders to vote their shares in favor of
increasing the authorized number of shares of Common Stock. Seller represents
and warrants that under no circumstances will it deny or prevent Purchaser's
right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has
been duly authorized, validly executed and delivered on behalf of Seller and is
a valid and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(c) Non-contravention. The execution and
delivery of this Agreement and the consummation of the issuance of the
Debentures, and the transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Seller of any of the terms or
provisions of, or constitute a default under, the articles of incorporation
or by-laws of Seller, or any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Seller is a party or by which it or
any of its properties or assets are bound, or any existing applicable law,
rule, or regulation of the United States or any State thereof or any applicable
decree, judgment, or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental body
having jurisdiction over Seller or any of its properties or assets.
(d) Company Compliance. The Company represents and warrants
that the Company and its subsidiaries are: (i) in full compliance, to the extent
applicable, with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; (ii) not in violation of any term or
provision of its Certificate of Incorporation or by-laws; (iii) not in default
in the performance or observance of any obligation, agreement or condition
contained in any bond, debenture (excepting for reservation of number of shares
required if all Debentures were to be converted), note or any other evidence of
indebtedness or in any mortgage, deed of trust, indenture or other instrument or
agreement to which they are a party, either singly or jointly, by which it or
any of its property is bound or subject. Furthermore, the Company is not aware
of any other facts, which it has not disclosed which could have a material
adverse effect on the business, condition, (financial or otherwise), operations,
earnings, performance, properties or prospects of the Company and its
subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in
Exhibit C, there is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental body now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its subsidiaries is or
may be a party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and
no law, statute, rule, regulation, order or ordinance has been enacted, adopted
or issued by any Governmental Body that prevents the issuance of the Debentures
or the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D. In
the past six months the Company raised $13,643,849 in Regulation S and
Regulation D offerings, including redemptions and rollovers.
(l) Current Authorized Shares. As of September 25, 1998 there were
50,000,000 authorized shares of Common Stock of which approximately ___________
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's initial
filing on Form 10-KSB for the year ended June 30, 1997 (or the filing of
necessary amendments thereto so as to restate certain financial statements for
fiscal years ended June 30, 1997 and 1996 so as to properly record the
accounting treatment of certain beneficial conversion features and debt issuance
cost of convertible debentures issued during the year ended June 30, 1997 and
the auditing for the value of stock options granted during the years June 30,
1997 and 1996), which could make any of the disclosures contained therein (as
subsequently amended and restated) misleading The financial statements of the
Company included in the Disclosure Documents have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the audit
adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and changes in financial position for the periods then
ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Closing Date the Debentures being
purchased hereunder shall be delivered to Joseph B. LaRocco, Esq. as Escrow
Agent, who will simultaneously wire to the Company's counsel the funds being
held in escrow, less placement fees, if not already directly wired to Company
Counsel, at which time the Escrow Agent shall then have the Debentures delivered
to the Purchaser, per the Purchaser's instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(q) No Default. Except as may be set forth in the Company's report on
form 10-KSB for the fiscal year ending June 30, 1997, as initially filed and
subsequnetly amended, the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement or the
Debentures, other than the conversion provision thereof, will conflict with or
result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, (i) any material
indenture, mortgage, deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound,
(ii) any statute applicable to the Company or its property, (iii) the
Certificate of Incorporation or ByLaws of the Company, (iv) any decree ,
judgment, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its properties, or (v) the Company's
listing agreement for its Common Stock.
(r) Use of Proceeds. The Company represents that the
net proceeds of this offering will be primarily used for the purposes set forth
on page 4 of the term sheet under the caption "Closing Proceeds".
(s) The Company hereby represents that it shall be paying
consultant a fee of $230,000 from the gross proceeds of this Offering, which
fee shall be paid out of escrow by the Escrow Agent
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Purchaser's signed Notice of Conversion
followed by receipt of the original Debenture to be converted in whole or in
part (within 5 business days as indicated in 4(b) below), the Company shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debenture is convertible in
accordance with the provisions regarding conversion set forth in Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Conversion Procedures. The face amount of each Debenture
may be converted anytime following the Closing Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, the Debentures to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Purchaser's intention to convert those Debentures
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Purchaser has delivered to
the Company a facsimile or original of the signed Notice of Conversion, as long
as the original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile, the Company's designated attorney is
Gary B. Wolff, Esq., 747 Third Avenue, New York, NY 10017 (P) 212-644-6446 (f)
212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its designated attorney of a
facsimile or original of Purchaser's signed Notice of Conversion (see Exhibit D)
Seller shall instruct Seller's transfer agent to issue Stock Certificates
without restrictive legend or stop transfer instructions, if at that time the
Registration Statement has been deemed effective (or with proper restrictive
legend if the Registration Statement has not as yet been declared effective), in
the name of Purchaser (or its nominee) and in such denominations to be specified
at conversion representing the number of shares of Common Stock issuable upon
such conversion, as applicable. Seller warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely transferable on the books and
records of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its option,
to convert the face amount of each Debenture, plus accrued interest, anytime
following the Closing Date, at the lesser of (a) 82% of the 10 day average
closing bid price, as reported by Bloomberg, LP for the 10 consecutive trading
days immediately preceding the applicable Conversion Date or (b) $1.00 (each
being referred to as the "Conversion Price"). No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser's conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser's original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 4(b), the Company shall deliver a
certificate in accordance with Section 4(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 4(g) shall not
apply but instead the provisions of Section 4(h) shall apply. The Company shall
make any payments incurred under this Section 4(g) in immediately available
funds within five (5) business days from the Conversion Date if late. Nothing
herein shall limit a Purchaser's right to pursue actual damages or cancel the
conversion for the Company's failure to issue and deliver Common Stock to the
Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Purchasers of the entire
amount of Debentures then outstanding. If, at any time Purchaser submits a
Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the
Purchaser all of the shares of Common Stock which are available, and the Notice
of Conversion as to any Debentures requested to be converted but not converted
(the "Unconverted Debentures"), upon Purchaser's sole option, may be deemed null
and void. The Company shall provide notice of such Conversion Default ("Notice
of Conversion Default") to all existing Purchasers of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Purchaser shall give notice
to the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser's right to pursue actual damages for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) During the remainder of 1998, the Purchaser agrees to make
up to an additional $1,000,000 in financing available to the Company upon
mutually agreeable terms. Additional funding above $1,000,000 may be available
depending upon certain events and conditions including stock price, trading
volume and changes in the Company. The Purchaser shall be entitled to convert
any or all of the Debentures, even though the Registration Statement covering
those Debentures may not have been declared effective at that time, in which
case the Purchaser shall receive legended Common Stock until the Registration
Statement is declared effective or in the written opinion of legal counsel the
legend may be removed. As a further condition to the Purchaser providing the
funding set forth herein, the Company agrees to repurchase 1,465,000 shares of
Common Stock which the Purchaser currently owns at a price of $.36875 per share.
(j) Right of First Refusal: The Purchaser is granted the
Right of First Refusal on any subsequent financing the Company may seek during
the next twelve months.
(k) Redemption: Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
Debentures during the two year period following the Closing Date. In the event
the Company exercises such right of redemption up to and including the last day
of the fourth (4th) month following the Closing Date it shall pay the Purchaser,
in U.S. currency One Hundred Fifteen (115%) of the face amount of the Debentures
to be redeemed, plus accrued interest. In the event the Company exercises such
right of redemption at anytime during the fifth (5th) or sixth (6th) months
following the Closing Date it shall pay the Purchaser, in U.S. currency One
Hundred Twenty (120%) of the face amount of the Debentures to be redeemed, plus
accrued interest. In the event the Company exercises such right of redemption at
anytime after the last day of the sixth (6th) month following the Closing Date
it shall pay the Purchaser, in U.S. currency One Hundred Twenty-five (125%) of
the face amount of the Debentures to be redeemed, plus accrued interest. The
date by which the Debentures must be delivered to the Escrow Agent shall not be
later than 5 business days following the date the Company notifies the Purchaser
by facsimile of the redemption. The Company shall give the Purchaser at least 5
business day's notice of its intent to redeem.
(l) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption or (ii) if
the Company is in default of any of its obligations under the Debenture,
Subscription Agreement, or the Registration Rights Agreement and the Purchaser
has asserted such default) shall the Purchaser be entitled to convert any
Debentures to the extent that, after such conversion, the sum of (1) the number
of shares of Common Stock beneficially owned by the Purchaser and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Debentures), and (2) the
number of shares of Common Stock issuable upon the conversion of the Debentures
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Purchaser and its affiliates of more than
9.99% of the outstanding shares of Common Stock (after taking into account the
shares to be issued to the Purchaser upon such conversion). 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 (the "1934 Act"), except as otherwise provided in clause (1) of
such proviso. The Purchaser further agrees that if the Purchaser transfers or
assigns any of the Debentures to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section as
if such transferee or assignee were a signatory to the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Closing Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Closing Date the Company shall
deliver to the Escrow Agent a signed Registration Rights Agreement in the form
attached hereto as Exhibit B. The Debentures being purchased hereunder shall be
delivered to Joseph B. LaRocco, Esq. as Escrow Agent, who will hold them in
escrow until funds have been wired to the Company or its Counsel at which time
the Escrow Agent shall then have the Debentures delivered to the Purchaser, per
the Purchaser's instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF ANY MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New
York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE
CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions:
the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds $1,000,000; or the
shareholder is a natural person who had an individual income* in excess
of $200,000 in each of 1996 and 1997 and who reasonably expects an individual
income in excess of $200,000 in 1998; or Each of the shareholders of the
undersigned CORPORATION is able to certify that such shareholder is a natural
person who, together with his or her spouse, has had a joint income in excess
of $300,000 in each of 1996 and 1997 and who reasonably expects a joint income
in excess of $300,000 during 1998; and the undersigned CORPORATION has its
principal place of business in ___________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2 (a)(48) of the Investment Company Act of 1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration under Section 301 (c) or (d) of the
Small Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Debentures will be
solely for the CORPORATION'S own account and not for the account of any other
person or entity; and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification number as set forth
in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:__________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser's
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Amount of Debentures subscribed for Date
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title:_____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1998
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
<PAGE>
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the "Company") according to the conditions set forth in the
Subscription Agreement dated September ____, 1998.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
Exhibit E
_______________, 1998
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the "Company"), in connection with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company's Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of
_______ shares of Common Stock, ________ par value per share, ("Common Stock")
and ______________ Preferred Stock, par value $________ per share; [describe
classes if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not violate
the applicable listing agreement between the Company and any securities exchange
or market on which the Company's securities are listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September ___, 1998,
("this Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New
York corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement, dated as of September ___, 1998, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor 5% Convertible Debentures of the
Company (the "Debentures"), which will be convertible into shares of the common
stock, $.01 par value (the "Common Stock"), of the Company (the "Conversion
Shares") upon the terms and subject to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Closing Date" means the date funds are received by the
Company or its designated attorney pursuant to the Subscription Agreement.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Closing Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the $2,940,000 of Debentures, plus accrued
interest, in the total offering would be convertible. In the event the
Registration Statement is not filed within forty-five (45) calendar days after
the Closing Date, then in such event the Company shall pay the Investor 2% of
the face amount of each Debenture for each 30 day period, or portion thereof,
after forty-five (45) calendar days following the Closing Date that the
Registration Statement is not filed. The Investor is also granted additional
Piggy-back registration rights on any other Registration Statement filings made
by the Company. Such Registration Statement shall state that, in accordance with
the Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable to prevent dilution resulting from
Stock splits, or stock dividends). If at any time the number of shares of Common
Stock into which the Debenture(s) may be converted exceeds the aggregate number
of shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of written notice from any Investor, either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by the
SEC at that time, to register all shares of Common Stock into which the
Debenture(s) may be converted, or (ii) if such Registration Statement has been
declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on such form as is applicable to register the shares of
Common Stock into which the Debenture may be converted that exceed the aggregate
number of shares of Common Stock already registered. The above damages shall
continue until the obligation is fulfilled and shall be paid within 5 business
days after each 30 day period, or portion thereof, until the Registration
Statement is filed. Failure of the Company to make payment within said 5
business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the
Closing Date will cause the Initial Investor to suffer damages in an amount that
will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Agreement a provision for liquidated damages. The
parties acknowledge and agree that the liquidated damages provision set forth in
this section represents the parties' good faith effort to qualify such damages
and, as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within ninety (90) calendar days following
the Closing Date, then the Company shall pay the Initial Investor 2% of the
purchase price paid by the Initial Investor for the Registrable Securities
pursuant to the Subscription Agreement for every thirty day period, or portion
thereof, following the ninety (90) calendar day period until the Registration
Statement is declared effective. Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel. The above damages shall continue until the obligation
is fulfilled and shall be paid within 5 business days after each 30 day period,
or portion thereof, until the Registration Statement is declared effective.
Failure of the Company to make payment within said 5 business days shall be
considered a default.
The Company acknowledges that its failure to have the Registration
Statement declared effective within said ninety (90) calendar day period, will
cause the Initial Investor to suffer damages in an amount that will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve the Company from its obligations to register the Common Stock and
deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
3. Obligation of the Company. In connection with the registration
of the Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Closing Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) ninety (90) days after the Closing
Date, and keep the Registration Statement effective at all times until the
earliest (the "Registration Period") of (i) the date that is two years after the
Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE DEBENTURE DUE September , 1998
September , 2000
$ 2,940,000
Number SEPT-1998-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay DOMINION CAPITAL
FUND, LTD. or registered assigns (the "Holder") on September 2000, (the
"Maturity Date"), the principal amount of TWO MILLION NINE HUNDRED
FORTY THOUSAND Dollars ($ 2,940,000) U.S., and to pay interest on the
principal amount hereof, in such amounts, at such times and on such
terms and conditions as are specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the rate of Five Percent (5.0%) per year, payable
at the time of each conversion until the principal amount hereof is paid in full
or has been converted. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months. Each payment shall be paid in cash or in freely trading
Common Stock of the Company, at the Company's option. If paid in Common Stock,
the number of shares of the Company's Common Stock to be received shall be
determined by dividing the dollar amount of the interest by the then applicable
Market Price as of the interest payment date. "Market Price" shall mean (a) the
lesser of 82% of the average of the 10 day closing bid prices, as reported by
Bloomberg, LP for the ten (10) consecutive trading days immediately preceding
the date of conversion or (b) $1.00. If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Holder, or per Holder's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 3.2. The closing shall be deemed to have occurred on the
date the funds are received by the Company or its Counsel (the "Closing Date").
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall have
the option of paying the interest on this Debenture in United States dollars or
in common stock upon conversion pursuant to Article 1 hereof. The Company may
draw a check for the payment of interest to the order of the Holder of this
Debenture and mail it to the Holder's address as shown on the Register (as
defined in Section 7.2 below). Interest and principal payments shall be subject
to withholding under applicable United States Federal Internal Revenue Service
Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at its option,
to convert it into shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at any time following the Closing Date and which is
before the close of business on the Maturity Date, except as set forth in
Section 3.1(c) below. The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains
outstanding on the second anniversary of the date hereof, the unconverted
portion of such Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 3.2.
(d) During the remainder of 1998, the Holder
agrees to make up to an additional $1,000,000 in financing available to the
Company upon mutually agreeable terms. Any amount above $1,000,000 may be
available depending upon certain events and conditions including the Company's
stock price, trading volume and business condition. The Holder shall be entitled
to convert any or all of the Debentures, even though the Registration Statement
covering those Debentures may not have been declared effective at that time,
in which case the Holder shall receive legended Common Stock until the
Registration Statement is declared effective or in the written opinion of
legal counsel the legend may be removed. As a further condition to this
financing the Company agrees to repurchase 1,465,000 shares of common stock
which the Holder currently owns, at a price of $.36875 per share.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Holder's signed Notice of Conversion and
the receipt of the original Debenture to be converted in whole or in part in the
manner set forth in 3.2(b) below, the Company shall instruct its transfer agent
to issue one or more Certificates representing that number of shares of Common
Stock into which the Debenture is convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller's transfer agent
or attorney shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture
may be converted anytime following the Closing Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, this Debenture to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Holder's intention to convert the Debenture
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Holder has delivered to the
Company or its designated attorney a facsimile or original of the signed Notice
of Conversion, as long as the original Debenture(s) to be converted are received
by the Company or its designated attorney within 5 business days thereafter.
Unless otherwise notified by the Company in writing via facsimile the Company's
designated attorney is Gary B. Wolff, Esq., 474 Third Avenue, 25th Floor, New
York, New York 10017, (P) 212-644-6446, (F) 212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its attorney of a facsimile or
original of Holder's signed Notice of Conversion Seller shall instruct Seller's
transfer agent to issue Stock Certificates without restrictive legend or stop
transfer instructions, if at that time the Registration Statement has been
deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Holder (or its
nominee) and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion, as
applicable. Seller warrants that no instructions, other than these instructions,
have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller,
except as may be set forth herein.
(d) (i) Conversion Rate. Holder is entitled, at its option to
convert the face amount of this Debenture, plus accrued interest, anytime
following the Closing Date, at the lesser of (a) 82% of the 10 day average
closing bid price, as reported by Bloomberg LP, for the ten (10) consecutive
trading days immediately preceding the applicable Conversion Date or (b) $1.00
(each being referred to as the "Conversion Price"). No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up or down, as the case may be, to
the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Holder's conversion of all the Debentures, the Company raises money
under either Regulation D or Regulation S on terms that are more favorable than
those terms set forth in this Debenture, then in such event, the Holder at its
sole option shall be entitled to completely replace the terms of this Debenture
with the terms of the more beneficial Debenture as to that balance, including
accrued interest and any accumulated liquidated damages, remaining on Holder's
original investment. The Debentures are subject to a mandatory, 24 month
conversion feature at the end of which all Debentures outstanding will be
automatically converted, upon the terms set forth in this section ("Mandatory
Conversion Date").
(e) Nothing contained in this Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(b), the Company shall deliver a
certificate, in accordance with Section 3(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein "No. Business Days Late" is
defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.
The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the Conversion
Date if late. Nothing herein shall limit a Holder's right to pursue actual
damages or cancel the conversion for the Company's failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Holders of the entire
amount of Debentures then outstanding. If, at any time Holder submits a Notice
of Conversion and the Company does not have sufficient authorized but unissued
shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), upon Holder's sole option, may be deemed null and
void. The Company shall provide notice of such Conversion Default ("Notice of
Conversion Default") to all existing Holders of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Holder shall give notice to
the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Holder's option, payable as follows: (i) in
the event Holder elects to take such payment in cash, cash payments shall be
made to such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at the
conversion rate set forth in section 4(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture.
Nothing herein shall limit the Holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(i) The Company shall furnish to Holder such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
(j) The Holder is limited in the amount of this Debenture it
may convert and own. Other than the Mandatory Conversion provisions contained in
this Debenture which are not limited by the following, in no other event shall
the Holder be entitled to convert any amount of Debentures in excess of that
amount upon conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debenture, and (2) the number of shares of Common
Stock issuable upon the conversion of the Debentures with respect to which the
determination of this provision is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 9.9% of the outstanding
shares of Common Stock of the Company. For purposes of this provision 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 Regulation 13 D-G thereunder, except as otherwise provided in
clause (1) of such provision.
(k) Redemption. Company reserves the right,
at its sole option, to call a mandatory redemption of any percentage of the
balance on the Debentures during the two year period following the Closing Date.
In the event the Company exercises such right of redemption up to and including
the last day of the fourth (4th) month following the Closing Date it shall pay
the Holder, in U.S. currency One Hundred Fifteen (115%) of the face amount of
the Debentures to be redeemed, plus accrued interest. In the event the
Company exercises such right of redemption at anytime during the fifth (5th) or
sixth (6th) months following the Closing Date it shall pay the Holder, in U.S.
currency One Hundred Twenty (120%) of the face amount of the Debentures to be
redeemed, plus accrued interest. In the event the Company exercises such right
of redemption at anytime after the last day of the sixth (6th) month
following the Closing Date it shall pay the Holder, in U.S. currency One Hundred
Twenty-five (125%) of the face amount of the Debentures to be redeemed, plus
accrued interest. The date by which the Debentures must be delivered to the
Escrow Agent shall not be later than 5 business days following the date the
Company notifies the Holder by facsimile of the redemption. The Company shall
give the Holder at least 5 business day's notice of its intent to redeem.
Section 3.3. Fractional Shares. The Company shall not issue
fractional shares of Common Stock, or scrip representing fractions of such
shares, upon the conversion of this Debenture. Instead, the Company shall round
up or down, as the case may be, to the nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder
shall pay any such tax which is due because the shares are issued in a name
other than its name.
Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in Section 3(a) of the Subscription Agreement dated September of 1998, to
permit the conversion of this Debenture subject to certain options granted to
the Company and referred to in Section 3(a) of the Subscription Agreement. All
shares of Common Stock which may be issued upon the conversion hereof shall upon
issuance be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the "Act") and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable
upon the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 business days thereafter, (c) the Company fails to comply with any of its
other agreements in this Debenture and such failure continues for the period and
after the notice specified below, (d) the Company pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a
voluntary case; (ii) consents to the entry of an order for relief against it in
an involuntary case; (iii) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially all of its property or
(iv) makes a general assignment for the benefit of its creditors or (v) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that: (A) is for relief against the Company in an involuntary case; (B) appoints
a Custodian of the Company or for all or substantially all of its property or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days, (e) the Company's Common Stock is no longer
listed on any recognized exchange including electronic over-the-counter bulletin
board. As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least 25% of the aggregate
principal amount of the Debentures outstanding notify the Company of such
default and the Company does not cure it within five (5) business days after the
receipt of such notice, which must specify the default, demand that it be
remedied and state that it is a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable. Upon such
declaration, the remaining principal amount shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are referred to
herein collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the "Register") showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this Debenture is
the person exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may
be registered on the books of the Company maintained for such purpose pursuant
to Section 7.2 above (i.e., the Register). Transfers shall be registered when
this Debenture is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the appropriate person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including tax laws and
state and federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the transferee as the record holder thereof shall be issued in lieu
hereof. When this Debenture is presented to the Company with a reasonable
request to exchange it for an equal principal amount of Debentures of other
denominations, the Company shall make such exchange and shall cancel this
Debenture and issue in lieu thereof Debentures having a total principal amount
equal to this Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices, with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in the payment of principal or conversion into
Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of New York applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of New York.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.
SWISSRAY INTERNATIONAL, INC.
By
Name: Ruedi G. Laupper
Title: Chairman and President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated _________________,1998.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
- -------------------------------------------------------------------------------
(principal amount of Debenture, $5,000 or integral multiples of $5,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: Signed:
(Signature must conform in all
respects to name of Holder shown of face of Debenture)
Signature Guaranteed:
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
PROMISSORY NOTE
$540,000.00 Hochdorf, Switzerland
December 14, 1998
FOR VALUE RECEIVED, the undersigned, SWISSRAY INTERNATIONAL, INC., a
New York corporation, (the "Borrower"), hereby promises to pay to the order of
SOVEREIGN PARTNERS LIMITED PARTNERSHIP (the "Lender"), the principal amount of
$540,000.00 in lawful money of the United States of America in same day or other
immediately available funds, together with interest at the rate hereinafter set
forth, payable on or before March 14, 1999.
Interest on the principal balance of this Note from time to time
outstanding and unpaid shall be computed on the basis of a 360-day year for the
actual number of days elapsed at a simple interest rate per annum equal to eight
percent (8%) commencing on December 14, 1998.
Principal and all accrued interest, at the rate of eight percent (8%)
per annum, shall be payable without the necessity for demand or notice on March
14, 1999. All payments of principal and interest shall be paid by wire transfer
per the written instructions of Lender. As further consideration for this loan,
Borrower agrees to issue to Lender a Warrant to purchase 25,000 shares of the
Borrower's common stock, par value $0.01 per share, exercisable at the bid price
per share on date of closing for a period of five (5) years.
The Borrower, in Borrower's sole discretion, may extend the term of
this Note for an additional sixty (60) day period at an additional 2% interest
rate per annum. Borrower must send written notice of its election to extend the
term of this Note. Said written notice must be sent by facsimile pursuant to the
notice provisions of this Note, on or before March 12, 1999. Borrower shall not
be entitled to extend the term of this Note beyond May 13, 1999.
In the event the Promissory Note is not paid in full on or before its
due date, then in such event the terms of the Contingent Subscription Agreement,
Debenture and Registration Rights Agreement, which are incorporated herein by
reference and made a part hereof, shall apply and control.
The obligations of Borrower under this Note are secured under the
provisions of that certain Security Agreement dated December 14, 1998, by
the "Inventory" as that term is defined in the Security Agreement and by a
second mortgage on real estate owned by the Borrower and located in
Switzerland (the "Security"). The Security is being provided as an inducement
for Lender to enter into this loan transaction and so as to secure Lender
position in prior financings in
<PAGE>
which Lender have been unable to convert their debentures into shares
of the Borrower's common stock due to NASDAQ delisting and absence of
established trading market. The Security shall remain in effect throughout the
term of this loan so long as any portion of the Borrower's indebtedness to
Lender continues in effect and such Security shall be reduced utilizing
the following formula:
A. Reducing the Borrower's indebtedness (evidenced by convertible debentures
aggregating $12,500,000: when such $12,500,000 indebtedness is reduced to
$10,000,000 then (i) 25% of secured inventory shall be released from lien and
(ii) 25% of second mortgage on land and building shall similarly be released
from lien.
B. For each further reduction of an additional $2,500,000 in Borrower's
indebtedness from $10,000,000 to $5,000,000 releases from lien shall be
accomplished on a pro-rata basis in the same manner as indicated in A above,
i.e., each $2,500,000 reduction in indebtedness shall result in release of 25%
of each lien amount: and
C. When indebtedness is reduced to $5,000,000 or less, then the second
mortgage on land and building shall be release in its entirety and inventory
collateral shall continue to be reduced on a pro-rata basis in the same manner
as indicated in paragraphs designated A. and B. above.
Borrower hereby waives presentment, protest, notice of protest and
notice of dishonor of this Note. The non-exercise by the Lender of any rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any other subsequent instance. The Borrower shall not create any class
of indebtedness that ranks senior to this Note.
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
The Borrower and any endorsers hereof, for themselves and their
respective representatives, successors and assigns (except as specifically
provided in the Loan Agreement) expressly waive presentment, demand, protest,
notice of dishonor, notice of non-payment, notice of maturity, notice of
protest, diligence in collection, and the benefit of any applicable exemptions,
including, but not limited to, exemptions claimed under insolvency laws.
SECURED CREDITORS. Borrower represents and warrants that it does not have any
outstanding security interests in the inventory or real estate other than those
set forth in Schedule A attached hereto and made a part hereof and it shall not
create
<PAGE>
or incur any indebtedness or obligation for borrowed money except for
indebtedness with respect to trade obligations and other normal accruals in the
ordinary course of business not yet due and payable, and shall not grant any
other security interests until payment and performance in full of the
obligations hereunder, unless Lender otherwise consents in writing which consent
shall not be unreasonably withheld. Borrower represents, warrants and covenants
that the Collateral and proceeds are not subject to any security interest, lien,
prior assignment, or other encumbrance of any nature whatsoever except for the
security interest created by this Note other than as indicated in attached
Schedule A.
AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that
from the date hereof until payment and performance in full of the obligations
hereunder, unless Lender otherwise consents in writing:
(a) Use of Proceeds. The proceeds disbursed under the Note shall be
used primarily for working capital.
(b) Borrower represents and warrants that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
validity or enforceability of this Note and there are no outstanding orders or
judgments of any court or governmental authority or awards of any arbitrator or
arbitration board against the Borrower excepting for such law suits or
proceedings as are indicated and summarized in Borrower's Form 10K for fiscal
year ended June 30, 1998.
DEFAULT. If any of the following events occur (a "default"), the terms of the
Contingent Subscription Agreement, Debenture and Registration Rights Agreement
which are incorporated herein by reference and made a part hereof, shall apply
and control:
(a) Borrower fails to pay when due any principal or interest under
this Note;
(b) Borrower fails to observe or perform any covenant or agreement
set forth in this Note or in any instrument, document or agreement concerning
the Collateral;
(c) Borrower makes a general assignment for the benefit of its
creditors, files or become the subject of a petition in bankruptcy, for an
arrangement with its creditors or for reorganization under any federal or state
bankruptcy or other insolvency law;
(d) Borrower files or becomes the subject of a petition for the
appointment of a receiver, custodian, trustee or liquidator of the party or of
all or substantially all of its assets under any federal or state bankruptcy or
other insolvency law;
<PAGE>
(e) Borrower is voluntarily or involuntarily terminated or
dissolved;
(f) Borrower or any accommodation maker, endorser or guarantor enters
into any merger or consolidation, or sale, lease, liquidation or other
disposition of all or substantially all of its assets or any transaction outside
the ordinary course of its business or for less than fair consideration or
substantially equivalent value without Lender's prior written consent;
(g) Any judgment is entered against Borrower or any attachment upon or
garnishment of any property of Borrower is issued which materially effects
Borrower's ability to repay the Promissory Note; or
(h) Any representation or statement made herein or any other written
representation or statement made or furnished to Lender by Borrower was
materially incorrect or misleading at the time it was made or furnished.
LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
on or arising out of, under, or in connection with, this Promissory Note shall
be brought and maintained exclusively in the courts of Switzerland. The parties
hereby expressly and irrevocably submit to the jurisdiction of the state and
federal courts of Switzerland for the purpose of any such litigation as set
forth above and irrevocably agree to be bound by any final judgment rendered
thereby in connection with such litigation. The Borrower further irrevocably
consents to the service of process by registered mail, postage prepaid, or by
personal service within or without Switzerland. The Borrower hereby expressly
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may have or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in any inconvenient forum. To the extent that
the Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Lender and the Borrower hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
written statements or actions of the Lender or the Borrower. The Borrower
acknowledges and agrees that it has received full and sufficient consideration
for
<PAGE>
this provision and that this provision is a material inducement for the Lender
entering into this agreement.
MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
(b) Neither this Promissory Note nor any provision hereof shall be
waived, modified, changed, discharged, terminated, revoked or canceled, except
by an instrument in writing signed by the party effecting the same against whom
any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed: (i)
if to the Borrower, c/o Gary B. Wolff, Esq. 747 Third Avenue , 25th Floor, NY,
NY 10017 with a facsimile copy sent on the dame date and (ii) if to Lender c/o
Joseph B. LaRocco, Esq. 49 Locust Avenue, Suite 107, New Canaan, CT 06840.
(d) This Promissory Note shall be enforced, governed and construed in
all respects in accordance with the laws of Switzerland, as such laws are
applied by Switzerland courts to agreements entered into, and to be performed
in, Switzerland by and between residents of Switzerland, and shall be binding
upon the undersigned, the undersigned's heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Lender, its
successors and assigns. If any provision of this Promissory Note is invalid or
unenforceable under any applicable statue or rule of law, then such provisions
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
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS IN CONNECTION WITH
WHICH THIS NOTE WAS EXECUTED AND DELIVERED AND WHICH ARE CONTEMPLATED BY THE
TERMS OF THE AGREEMENT ARE, IN ALL CASES, COMMERCIAL TRANSACTIONS; AND THE
BORROWER HEREBY EXPRESSLY WAIVES ANY AND ALL CONSTITUTIONAL RIGHTS IT MAY HAVE
AS NOW CONSTITUTED OR HEREAFTER AMENDED, WITH REGARD TO NOTICE, ANY JUDICIAL
PROCESS AND ANY AND ALL OTHER RIGHTS IT MAY HAVE, AND THE LENDER MAY INVOKE ANY
PREJUDGMENT REMEDY AVAILABLE TO IT OR ITS SUCCESSORS OR ASSIGNS.
SWISSRAY INTERNATIONAL, INC.
By________________________
Ruedi G. Laupper its Chairman
and President duly authorized
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $1,119,600
This offering consists of $1,119,600 of
Convertible Debentures of Swissray
International, Inc.
--------------------
CONTINGENT SUBSCRIPTION AGREEMENT
-------------------
<PAGE>
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $1,119,600 The
Debentures will be transferable to the extent that any such transfer is
permitted by law. This offering is being made in accordance with the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D promulgated under the Act (the
"Regulation D Offering").
The Investor Questionnaire is designed to enable the Investor
to demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9: "Request for
Taxpayer Identification Number and Certification" for U.S. citizens or residents
of the U.S. for U.S. federal income tax purposes only. (Foreign investors
should consult their tax advisors regarding the need to complete Internal
Revenue Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
If and to the extent that there are any discrepancies or differences
between the Term Sheet and the underlying documents consisting of the Promissory
Note, Security Agreement, Title Search on Real Estate, Mortgage to be Recorded
on Swiss Land Records, Search of Swiss Records for Other Recorded Financing
Statements that may also Secure the Inventory, Financing Statement to Secure
Promissory Note with Inventory, Contingent Subscription Agreement, Convertible
Debenture, Registration Rights Agreement and Warrants, the terms contained in
the Term Sheet shall take precedence over those contained in the underlying
documents. For instance (but by no means limited to) if the Term Sheet indicates
interest at the rate of 8% per annum and the underlying documents refer to
interest at a different rate or on a different basis, then those terms contained
in the Term Sheet shall control. In the event that the Term Sheet is silent as
to any specific terms and conditions, then in that event the terms and
conditions in the underlying documents (absent any contradictions in the
aforesaid Term Sheet) shall control.
<PAGE>
CONTINGENT SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
Convertible Debentures (the "Debentures"). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the "Offering") of up to $1,119,600 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the "Regulation D Offering") in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and Rule 506 of Regulation D promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $_____________ of the Company's Debentures. The Purchaser entering into
this Contingent Subscription Agreement shall pay the purchase price for the
Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent. (Said amount shall be deemed to have been delivered
to the Company upon non-payment of the full amount of principal and interest due
on the Promissory Note dated December 14, 1998 between the Company and the
Purchaser. The fully executed Contingent Subscription Agreement, Registration
Rights Agreement and Debenture shall be held by the escrow agent and shall only
be delivered to the Purchaser upon non-payment of the full amount of principal
and interest due on the Promissory Note on its "Due Date". The "Due Date" of the
Promissory Note assuming non-payment of the Promissory Note, shall mean the
later of March 14, 1999, or sixty (60) days thereafter if the Company exercises
its option to extend the March 14, 1999 payoff date. The Debentures shall pay a
5% cumulative interest payable annually, in cash or in freely trading Common
Stock of the Company, at the Company's option, at the time of each conversion.
If paid in Common Stock, the number of shares of the Company's Common Stock to
be received shall be determined by dividing the dollar amount of the dividend by
the then applicable Market Price, as of the interest payment date. "Market
Price" shall mean the lesser of (a) 82% of the 10-day average closing bid price,
as reported by Bloomberg, LP, for the ten (10) consecutive trading days
immediately preceding the date of conversion or (b) $1.00 (each being referred
to as the "Conversion Price"). If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
Due Date, as that term is defined above.
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent's own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully
read the applicable form of Debenture included herein as Exhibit A and
the form of Registration Rights Agreement annexed hereto as Exhibit B
(the "Registration Rights Agreement"), and is familiar with and
understands the terms of the Offering. With respect to tax and other
economic considerations involved in his investment, the undersigned is
not relying on the Company. The undersigned has carefully considered
and has, to the extent the undersigned believes such discussion
necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in
the Company, by purchasing the Debentures, for the undersigned's
particular tax and financial situation and has determined that the
investment being made by the undersigned is a suitable investment for
the undersigned.
(b) The undersigned acknowledges that all documents, records,
and books pertaining to this investment which the undersigned has
requested includes Form 10-KSB for the fiscal year ended June 30, 1997
and 10K for fiscal year ended June 30, 1998 inclusive of any and all
amendments thereto and Form 10-Q for the quarters ended September 30,
1997, December 31, 1997, March 31, 1998 and September 30, 1998
inclusive of any and all amendments thereto (the "Disclosure
Documents") have been made available for inspection by the undersigned
or the undersigned has access to the Disclosure Documents.
(c) The undersigned has 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 and all such questions
have been answered to the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the
Debentures without registration under the Act or applicable state
securities laws or an exemption therefrom. The Debentures have not been
registered under the Act or under the securities laws of any states.
The Common Stock underlying the Debentures is to be registered by the
Company pursuant to the terms of the Registration Rights Agreement
attached hereto as Exhibit B and incorporated herein and made a part
hereof. Without limiting the right to convert the Debentures and sell
the Common Stock pursuant to the Registration Rights Agreement, the
undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not
with a view to resale or distribution except in compliance with the
Act. The undersigned has not offered or sold any portion of the
Debentures being acquired nor does the undersigned have any present
intention of dividing the Debentures with others or of selling,
distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined
event or circumstance in violation of the Act. Except as provided in
the Registration Rights Agreement, the Company has no obligation to
register the Common Stock issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire
amount of such investment. Further, the undersigned has carefully read
and considered the schedule entitled Pending Litigation matters
attached hereto as Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each
certificate representing the Debentures unless registered
pursuant to the Registration Rights Agreement, shall be
stamped or otherwise imprinted with a legend substantially in
the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE
ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF
THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Common Stock issued upon conversion shall
contain the following legend if converted prior to effectiveness of Registration
Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) Common Stock issued upon conversion and
subsequent to effective date of Registration Statement
(pursuant to which shares underlying conversion are
registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered
on behalf of a corporation, (i) such corporation has the full legal
right and power and all authority and approval required (a) to execute
and deliver, or authorize execution and delivery of, this Subscription
Agreement and all other instruments (including, without limitation, the
Registration Rights Agreement) executed and delivered by or on behalf
of such corporation in connection with the purchase of the Debentures
and (b) to purchase and hold the Debentures: (ii) the signature of the
party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the
specific purpose of acquiring the Debentures, unless each beneficial
owner of such entity is qualified as an accredited investor within the
meaning of Rule 501(a) of Regulation D and has submitted information
substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the
Company and each stockholder, executive, employee, representative,
affiliate, officer, director, agent (including Counsel) or control
person of the Company, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made
by the undersigned to the Company or omitted or alleged to have been
omitted by the undersigned, concerning the undersigned or the
undersigned's subscription for and purchase of the Debentures or the
undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in this
Subscription Agreement, the Questionnaire or any other document
submitted by the undersigned, against losses, liabilities and expenses
for which the Company, or any stockholder, executive, employee,
representative, affiliate, officer, director, agent (including Counsel)
or control person of the Company has not otherwise been reimbursed
(including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the
Company, or such officer, director stockholder, executive, employee,
agent (including Counsel), representative, affiliate or control person
in connection with such action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures
as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar
or meeting.
(j) The undersigned or the undersigned's representatives, as
the case may be, has such knowledge and experience in financial, tax
and business matters so as to enable the undersigned to utilize the
information made available to the undersigned in connection with the
Offering to evaluate the merits and risks of an investment in the
Debentures and to make an informed investment decision with respect
thereto.
(k) The Purchaser is purchasing the Debentures for its
own account for investment, and not with a view toward the resale or
distribution thereof. Purchaser is neither an underwriter of, nor a
dealer in, the Debentures or the Common Stock issuable upon conversion
thereof and is not participating in the distribution or resale of the
Debentures or the Common Stock issuable upon conversion thereof.
(l) There has never been represented, guaranteed, or warranted
to the undersigned by any broker, the Company, its officers, directors
or agents, or employees or any other person, expressly or by
implication (i) the percentage of profits and/or amount of or type of
consideration, profit or loss to be realized, if any, as a result of
the Company's operations; and (ii) that the past performance or
experience on the part of the management of the Company, or of any
other person, will in any way result in the overall profitable
operations of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued and enforceable in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. At least 200%
of the number of shares of Common Stock issuable upon conversion of all the
Debentures issued pursuant to this Offering have been duly and validly reserved
for issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares and, upon issuance shall
be duly and validly issued, fully paid, and non-assessable (the "Reserved
Shares" ). From time to time, the Company shall keep such additional shares of
Common Stock reserved so as to allow for the conversion of all the Debentures
issued pursuant to this offering.
Prior to conversion of all the Debentures, if at anytime the
conversion of all the Debentures outstanding would result in an insufficient
number of authorized shares of Common Stock being available to cover all the
conversions, then in such event, the Company will move to call and hold a
shareholder's meeting within 60 days of such event, or such greater period of
time if statutorily required or reasonabilly necessary as regards standard
brokerage house and/or SEC requirements and/or procedures, for the purpose of
authorizing additional shares of Common Stock to facilitate the conversions. In
such an event the Company shall recommend to all shareholders to vote their
shares in favor of increasing the authorized number of shares of Common Stock.
Seller represents and warrants that under no circumstances will it deny or
prevent Purchaser's right to convert the Debentures as permitted under the terms
of this Subscription Agreement or the Registration Rights Agreement. Nothing in
this Section shall limit the obligation of the Company to make the payments set
forth in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has
been duly authorized, validly executed and delivered on behalf of Seller and is
a valid and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(c) Non-contravention. The execution and
delivery of this Agreement and the consummation of the issuance of the
Debentures, and the transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Seller of any of the terms or
provisions of, or constitute a default under, the articles of
incorporation or by-laws of Seller, or any indenture, mortgage, deed of trust,
or other material agreement or instrument to which Seller is a party or by which
it or any of its properties or assets are bound, or any existing applicable law,
rule, or regulation of the United States or any State thereof or any applicable
decree, judgment, or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental body
having jurisdiction over Seller or any of its properties or assets.
(d) Company Compliance. The Company represents and warrants
that the Company and its subsidiaries are: (i) in full compliance, to the
extent applicable, with all reporting obligations under either Section 13(a) or
15(d) of the Securities Exchange Act of 1934; excepting that the Company
acknowledges that it did not timely file its Form 10-K for its fiscal year
ended June 30, 1998, and its Form 10-Q for the fiscal quarter ended September
30, 1998, both of which were subsequently filed on December 3, 1998, (ii) not
in violation of any term or provision of its Certificate of Incorporation or
by-laws; (iii) not in default in the performance or observance of any
obligation, agreement or condition contained in any bond, debenture (excepting
for reservation of number of shares required if all Debentures were to be
converted and excepting for registration of underlying shares as same relates to
preexisting debentures), note or any other evidence of indebtedness or in any
mortgage, deed of trust, indenture or other instrument or agreement to which
they are a party, either singly or jointly, by which it or any of its
property is bound or subject. Furthermore, the Company is not aware of any
other facts, which it has not disclosed which could have a material
adverse effect on the business, condition, (financial or otherwise), operations,
earnings, performance, properties or prospects of the Company and its
subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in
Exhibit C, there is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental body now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its subsidiaries is or
may be a party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and
no law, statute, rule, regulation, order or ordinance has been enacted, adopted
or issued by any Governmental Body that prevents the issuance of the Debentures
or the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D.
In the past nine months the Company raised $13,643,849 in Regulation S and
Regulation D offerings, including redemptions and rollovers.
(l) Current Authorized Shares. As of December 10, 1998 there were
50,000,000 authorized shares of Common Stock of which approximately 4,659,288
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's filing on
Form 10-K and 10-K/A for the year ended June 30, 1998 and Form 10-Q for quarter
ended September 30, 1998 which could make any of the disclosures contained
therein (as subsequently amended and/or restated) misleading The financial
statements of the Company included in the Disclosure Documents have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the audit adjustments) the consolidated financial position of the Company and
its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Due Date, assuming
non-payment of the Promissory Note, the Debentures being purchased hereunder
which are being held in escrow by Joseph B. LaRocco, Esq. as Escrow Agent, at
which time shall be delivered to the Purchaser, per the Purchaser's
instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
<PAGE>
(q) No Default. Except as may be set forth in the Company's report on
form 10-K for the fiscal year ending June 30, 1998, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it or
its property is bound, and neither the execution of, nor the delivery by the
Company of, nor the performance by the Company of its obligations under, this
Agreement or the Debentures, other than the conversion provision thereof, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, (i) any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, (ii) any statute applicable to the Company or its property,
(iii) the Certificate of Incorporation or By-Laws of the Company, (iv) any
decree , judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or (v) the
Company's listing agreement for its Common Stock, excepting for the fact that
the Company's securities were delisted from the Nasdaq Stock Market effective
with the close of business October 26, 1998, pursuant to letter dated October
26, 1998, from the Nasdaq Listing Qualifications Panel.
(r) Use of Proceeds. The Company represents that the net
proceeds of this offering will be primarily used for working capital.
(s) The Company hereby represents that it shall be paying
consultant a fee of $80,000 from the gross proceeds of this Offering, which fee
shall be paid out of escrow by the Escrow Agent
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Purchaser's signed Notice of Conversion
followed by receipt of the original Debenture to be converted in whole or in
part (within 5 business days as indicated in 4(b) below), the Company shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debenture is convertible in
accordance with the provisions regarding conversion set forth in Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Conversion Procedures. The face amount of each Debenture
may be converted anytime following the Due Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, the Debentures to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Purchaser's intention to convert those Debentures
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Purchaser has delivered to
the Company a facsimile or original of the signed Notice of Conversion, as long
as the original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile, the Company's designated attorney is
Gary B. Wolff, Esq., 747 Third Avenue, New York, NY 10017 (P) 212-644-6446 (f)
212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its designated attorney of a
facsimile or original of Purchaser's signed Notice of Conversion (see Exhibit D)
Seller shall instruct Seller's transfer agent to issue Stock Certificates
without restrictive legend or stop transfer instructions, if at that time the
Registration Statement has been deemed effective (or with proper restrictive
legend if the Registration Statement has not as yet been declared effective), in
the name of Purchaser (or its nominee) and in such denominations to be specified
at conversion representing the number of shares of Common Stock issuable upon
such conversion, as applicable. Seller warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely transferable on the books and
records of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its option,
to convert the face amount of each Debenture, plus accrued interest, anytime
following the Due Date, at the lesser of (a) 82% of the 10 day average closing
bid price, as reported by Bloomberg, LP for the 10 consecutive trading days
immediately preceding the applicable Conversion Date or (b) $1.00 (each being
referred to as the "Conversion Price"). No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser's conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser's original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 4(b), the Company shall deliver a
certificate in accordance with Section 4(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of
authorized but unissued shares of Common Stock, the provisions of this
Section 4(g) shall not apply but instead the provisions of Section 4(h)
shall apply. The Company shall make any payments incurred under this
Section 4(g) in immediately available funds within five (5) business
days from the Conversion Date if late. Nothing herein shall limit a
Purchaser's right to pursue actual damages or cancel the conversion for
the Company's failure to issue and deliver Common Stock to the Holder
within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares) and
have available all Common Stock necessary to meet conversion of the Debentures
by all Purchasers of the entire amount of Debentures then outstanding. If, at
any time Purchaser submits a Notice of Conversion and the Company does not have
sufficient authorized but unissued shares of Common Stock (or alternative shares
of Common Stock as may be contributed by stockholders) available to effect, in
full, a conversion of the Debentures (a "Conversion Default", the date of such
default being referred to herein as the "Conversion Default Date"), the Company
shall issue to the Purchaser all of the shares of Common Stock which are
available, and the Notice of Conversion as to any Debentures requested to be
converted but not converted (the "Unconverted Debentures"), upon Purchaser's
sole option, may be deemed null and void. The Company shall provide notice of
such Conversion Default ("Notice of Conversion Default") to all existing
Purchasers of outstanding Debentures, by facsimile, within three (3) business
day of such default (with the original delivered by overnight or two day
courier), and the Purchaser shall give notice to the Company by facsimile
within five business days of receipt of the original Notice of Conversion
Default (with the original delivered by overnight or two day courier) of its
election to either nullify or confirm the Notice of Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser's right to pursue actual damages for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) The Purchaser shall be entitled to convert any or all of
the Debentures, even though the Registration Statement covering those Debentures
may not have been declared effective at that time, in which case the Purchaser
shall receive legended Common Stock until the Registration Statement is declared
effective or in the written opinion of legal counsel the legend may be removed.
(j) Right of First Refusal: The Purchaser is granted
the Right of First Refusal on any subsequent financing the Company may seek
during the next twelve months.
(k) Redemption: Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
Debentures during the two year period following the Due Date. In the event the
Company exercises such right of redemption up to and including the last day of
the fourth (4th) month following the Due Date it shall pay the Purchaser, in
U.S. currency One Hundred Fifteen (115%) of the face amount of the Debentures to
be redeemed, plus accrued interest. In the event the Company exercises such
right of redemption at anytime during the fifth (5th) or sixth (6th) months
following the Due Date it shall pay the Purchaser, in U.S. currency One Hundred
Twenty (120%) of the face amount of the Debentures to be redeemed, plus accrued
interest. In the event the Company exercises such right of redemption at anytime
after the last day of the sixth (6th) month following the Due Date it shall pay
the Purchaser, in U.S. currency One Hundred Twenty-five (125%) of the face
amount of the Debentures to be redeemed, plus accrued interest. The date by
which the Debentures must be delivered to the Escrow Agent shall not be later
than 5 business days following the date the Company notifies the Purchaser by
facsimile of the redemption. The Company shall give the Purchaser at least 5
business day's notice of its intent to redeem.
(l) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption by the
Company or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company is being
merged, or (c) a change in control, shall the Purchaser be entitled to convert
any Debentures to the extent that, after such conversion, the sum of (1) the
number of shares of Common Stock beneficially owned by the Purchaser and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Debentures), and
(2) the number of shares of Common Stock issuable upon the conversion of the
Debentures with respect to which the determination of this proviso is being
made, would result in beneficial ownership by the Purchaser and its affiliates
of more than 4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion). 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 (the "1934 Act"), except as otherwise provided
in clause (1) of such proviso. The Purchaser further agrees that if the
Purchaser transfers or assigns any of the Debentures to a party who or which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section as if such transferee or assignee were a signatory to
the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Due Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Due Date the Company shall deliver
to the Escrow Agent a signed Registration Rights Agreement in the form attached
hereto as Exhibit B. The Debentures being purchased hereunder shall be delivered
to Joseph B. LaRocco, Esq. as Escrow Agent, who will hold them in escrow and if
Promissory Note is not paid, credit outstanding principal and interest towards
Debentures at which time the Escrow Agent shall then have the Debentures
delivered to the Purchaser, per the Purchaser's instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require. Wherever the term "Closing
Date" is used herein it shall have the same meaning as "Due Date".
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed: (i)
if to the Company, at SWISSRAY International, Inc., 200 East 32nd Street, Suite
34B,
<PAGE>
New York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff,
P.C., 747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the
undersigned, at the address for correspondence set forth in the Questionnaire,
or at such other address as may have been specified by written notice given in
accordance with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE
CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions:
the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds $1,000,000; or
the shareholder is a natural person who had an
individual income* in excess of $200,000 in each of 1996 and 1997 and who
reasonably expects an individual income in excess of $200,000 in 1998; or
Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder is a natural person
who, together with his or her spouse, has had a joint income in excess of
$300,000 in each of 1996 and 1997 and who reasonably expects a joint income in
excess of $300,000 during 1998; and the undersigned CORPORATION has its
principal place of business in
___________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A)
of the Securities Act whether acting in its
individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of
1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section
2(a)(48) of the Investment Company Act of
1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration
under Section 301 (c) or (d) of the Small
Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the
Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Debentures will be
solely for the CORPORATION'S own account and not for the account of any other
person or entity; and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification number as set forth
in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:__________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser's
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Amount of Debentures subscribed for Date
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1998
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
<PAGE>
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the "Company") according to the conditions set forth in the
Contingent Subscription Agreement dated December 14, 1998.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
Exhibit E
_______________, 1998
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the "Company"), in connection with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company's Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of _______
shares of Common Stock, ________ par value per share, ("Common Stock") and
______________ Preferred Stock, par value $________ per share; [describe classes
if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not violate
the applicable listing agreement between the Company and any securities exchange
or market on which the Company's securities are listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 14, 1998,
("this Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New
York corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Contingent
Subscription Agreement, dated as of December 14, 1998, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor 5% Convertible Debentures of the
Company (the "Debentures"), which will be convertible into shares of the common
stock, $.01 par value (the "Common Stock"), of the Company and Warrants to
purchase the Common Stock (collectively the "Conversion Shares") upon the terms
and subject to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Due Date" means the later of March 14, 1999, or sixty (60) days
thereafter if the Company exercises its option to extend the March 14, 1999, due
date on the promissory note dated December 14, 1998.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities
<PAGE>
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iv) "Registrable Securities" means the Conversion Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Due Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the Warrants would be exercised and the
$1,119,600 of Debentures, plus accrued interest, in the total offering would be
convertible. In the event the Registration Statement is not filed within
forty-five (45) calendar days after the Due Date, then in such event the Company
shall pay the Investor 2% of the face amount of each Debenture for each 30 day
period, or portion thereof, after forty-five (45) calendar days following the
Due Date that the Registration Statement is not filed. The Investor is also
granted Piggy-back registration rights on any other Registration Statement
filings made by the Company exclusive of Registration Statements on Form S-8 and
so long as permissible under the Securities Act. Such Registration Statement
shall state that, in accordance with the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
to prevent dilution resulting from Stock splits, or stock dividends). If at any
time the number of shares of Common Stock into which the Debenture(s) may be
converted exceeds the aggregate number of shares of Common Stock then
registered, the Company shall, within ten (10) business days after receipt of
written notice from any Investor, either (i) amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to register
all shares of Common Stock into which the Debenture(s) may be converted, or (ii)
if such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement on such form as is
applicable to register the shares of Common Stock into which the Debenture may
be converted that exceed the aggregate number of shares of Common Stock already
registered which new Registration Statement shall be filed within 45 days. The
above damages shall continue until the obligation is fulfilled and shall be paid
within 5 business days after each 30 day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said 5 business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the Due
Date will cause the Initial Investor to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate to
include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to qualify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within one hundred twenty (120) calendar
days following the Due Date, then the Company shall pay the Initial Investor 2%
of the purchase price paid by the Initial Investor for the Registrable
Securities pursuant to the Subscription Agreement for every thirty day period,
or portion thereof, following the one hundred twenty (120) calendar day period
until the Registration Statement is declared effective. Notwithstanding the
foregoing, the amounts payable by the Company pursuant to this provision shall
not be payable to the extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act timely by
the Initial Investor or its counsel. The above damages shall continue until the
obligation is fulfilled and shall be paid within 5 business days after each 30
day period, or portion thereof, until the Registration Statement is declared
effective. Failure of the Company to make payment within said 5 business days
shall be considered a default.
The Company acknowledges that its failure to have the Registration
Statement declared effective within said one hundred twenty (120) calendar day
period, will cause the Initial Investor to suffer damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to quantify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
3. Obligation of the Company.
In connection with the registration of the Registrable Securities, the
Company shall do each of the following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Due Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) one hundred twenty (120) days after
the Due Date, and keep the Registration Statement effective at all times until
the earliest (the "Registration Period") of (i) the date that is two years after
the Due Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN
EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF
THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING
MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE DEBENTURE DUE , 1999
, 2001
$
Number LN-1999-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay DOMINION CAPITAL
FUND, LTD. or registered assigns (the "Holder") on ___________ __,
2001, (the "Maturity Date"), the principal amount of
_____________________________________________________ Dollars ($
____________) U.S., and to pay interest on the principal amount hereof,
in such amounts, at such times and on such terms and conditions as are
specified herein. The purchase price for this Debenture shall be deemed
to have been delivered to the Company upon non-payment of the full
amount of principal and interest due on the Promissory Note dated
December 14, 1998 between the Company and the Holder. The fully
executed Contingent Subscription Agreement, Registration Rights
Agreement and this Debenture shall be held by the escrow agent and
shall only be delivered to the Holder upon non-payment of the full
amount of principal and interest due on the Promissory Note on its "Due
Date". The "Due Date" of the Promissory Note shall mean the later of
March 14, 1999, or sixty (60) days thereafter if the Company exercises
its option to extend the March 14, 1999 payoff date.
<PAGE>
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the rate of Five Percent (5.0%) per year, payable
at the time of each conversion until the principal amount hereof is paid in full
or has been converted. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months. Each payment shall be paid in cash or in freely trading
Common Stock of the Company, at the Company's option. If paid in Common Stock,
the number of shares of the Company's Common Stock to be received shall be
determined by dividing the dollar amount of the interest by the then applicable
Market Price as of the interest payment date. "Market Price" shall mean (a) the
lesser of 82% of the average of the 10 day closing bid prices, as reported by
Bloomberg, LP for the ten (10) consecutive trading days immediately preceding
the date of conversion or (b) $1.00. If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Holder, or per Holder's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 3.2. The closing shall be deemed to have occurred on the
Due Date as that term is defined above.
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall
have the option of paying the interest on this Debenture in United States
dollars or in common stock upon conversion pursuant to Article 1 hereof. The
Company may draw a check for the payment of interest to the order of the Holder
of this Debenture and mail it to the Holder's address as shown on the Register
(as defined in Section 7.2 below). Interest and principal payments shall be
subject to withholding under applicable United States
Federal Internal Revenue Service Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at its option,
to convert it into shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at any time following the Due Date and which is before
the close of business on the Maturity Date, except as set forth in Section 3.1
(c) below. The number of shares of Common Stock issuable upon the conversion of
this Debenture is determined pursuant to Section 3.2 and rounding the result to
the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains
outstanding on the second anniversary of the date hereof, the unconverted
portion of such Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 3.2.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Holder's signed Notice of Conversion and
the receipt of the original Debenture to be converted in whole or in part in the
manner set forth in 3.2(b) below, the Company shall instruct its transfer agent
to issue one or more Certificates representing that number of shares of Common
Stock into which the Debenture is convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller's transfer agent
or attorney shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture
may be converted anytime following the Due Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, this Debenture to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Holder's intention to convert the Debenture
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Holder has delivered to the
Company or its designated attorney a facsimile or original of the signed Notice
of Conversion, as long as the original Debenture(s) to be converted are received
by the Company or its designated attorney within 5 business days thereafter.
Unless otherwise notified by the Company in writing via facsimile the Company's
designated attorney is Gary B. Wolff, Esq., 474 Third Avenue, 25th Floor, New
York, New York 10017, (P) 212-644-6446, (F) 212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its attorney of a facsimile or
original of Holder's signed Notice of Conversion Seller shall instruct Seller's
transfer agent to issue Stock Certificates without restrictive legend or stop
transfer instructions, if at that time the Registration Statement has been
deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Holder (or its
nominee) and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion, as
applicable. Seller warrants that no instructions, other than these instructions,
have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller,
except as may be set forth herein.
(d) (i) Conversion Rate. Holder is entitled, at its option to
convert the face amount of this Debenture, plus accrued interest, anytime
following the Due Date, at the lesser of (a) 82% of the 10 day average closing
bid price, as reported by Bloomberg LP, for the ten (10) consecutive trading
days immediately preceding the applicable Conversion Date or (b) $1.00 (each
being referred to as the "Conversion Price"). No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
(ii) Most Favored Financing. If after the Due Date, but prior
to the Holder's conversion of all the Debentures, the Company raises money under
either Regulation D or Regulation S on terms that are more favorable than those
terms set forth in this Debenture, then in such event, the Holder at its sole
option shall be entitled to completely replace the terms of this Debenture with
the terms of the more beneficial Debenture as to that balance, including accrued
interest and any accumulated liquidated damages, remaining on Holder's original
investment. The Debentures are subject to a mandatory, 24 month conversion
feature at the end of which all Debentures outstanding will be automatically
converted, upon the terms set forth in this section ("Mandatory Conversion
Date").
(e) Nothing contained in this Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(b), the Company shall deliver a
certificate, in accordance with Section 3(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein "No. Business Days Late" is
defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.
The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the Conversion
Date if late. Nothing herein shall limit a Holder's right to pursue actual
damages or cancel the conversion for the Company's failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve and have available
all Common Stock necessary to meet conversion of the Debentures by all Holders
of the entire amount of Debentures then outstanding. If, at any time Holder
submits a Notice of Conversion and the Company does not have sufficient
authorized but unissued shares of Common Stock (or alternative shares of Common
Stock as may be contributed by Stockholders) available to effect, in full, a
conversion of the Debentures (a "Conversion Default", the date of such default
being referred to herein as the "Conversion Default Date"), the Company shall
issue to the Holder all of the shares of Common Stock which are available, and
the Notice of Conversion as to any Debentures requested to be converted but not
converted (the "Unconverted Debentures"), upon Holder's sole option, may be
deemed null and void. The Company shall provide notice of such Conversion
Default ("Notice of Conversion Default") to all existing Holders of outstanding
Debentures, by facsimile, within three (3) business day of such default (with
the original delivered by overnight or two day courier), and the Holder shall
give notice to the Company by facsimile within five business days of receipt of
the original Notice of Conversion Default (with the original delivered by
overnight or two day courier) of its election to either nullify or confirm the
Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Holder's option, payable as follows: (i) in
the event Holder elects to take such payment in cash, cash payments shall be
made to such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at the
conversion rate set forth in section 4(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture.
Nothing herein shall limit the Holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(i) The Company shall furnish to Holder such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
(j) The Holder is limited in the amount of this Debenture it
may convert and own. Other than the Mandatory Conversion provisions contained in
this Debenture which are not limited by the following, in no other event shall
the Holder be entitled to convert any amount of Debentures in excess of that
amount upon conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debenture, and (2) the number of shares of Common
Stock issuable upon the conversion of the Debentures with respect to which the
determination of this provision is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 9.9% of the outstanding
shares of Common Stock of the Company. For purposes of this provision 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 Regulation 13 D-G thereunder, except as otherwise provided in
clause (1) of such provision.
(k) Redemption. Company reserves the right,
at its sole option, to call a mandatory redemption of any percentage of the
balance on the Debentures during the two year period following the Due Date.
In the event the Company exercises such right of redemption up to and including
the last day of the fourth (4th) month following the Due Date it shall pay the
Holder, in U.S. currency One Hundred Fifteen (115%) of the face amount of the
Debentures to be redeemed, plus accrued interest. In the event the Company
exercises such right of redemption at anytime during the fifth (5th) or sixth
(6th) months following the Due Date it shall pay the Holder, in U.S.
currency One Hundred Twenty (120%) of the face amount of the Debentures to be
redeemed, plus accrued interest. In the event the Company exercises such right
of redemption at anytime after the last day of the sixth (6th) month following
the Due Date it shall pay the Holder, in U.S. currency One Hundred Twenty-five
(125%) of the face amount of the Debentures to be redeemed, plus accrued
interest. The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 5 business days following the date the Company notifies
the Holder by facsimile of the redemption. The Company shall give the Holder at
least 5 business day's notice of its intent to redeem.
Section 3.3. Fractional Shares. The Company shall not issue
fractional shares of Common Stock, or scrip representing fractions of such
shares, upon the conversion of this Debenture. Instead, the Company shall
round up or down, as the case may be, to the nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder
shall pay any such tax which is due because the shares are issued in a name
other than its name.
Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in this Debenture. All shares of Common Stock which may be issued upon
the conversion hereof shall upon issuance be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the "Act") and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable upon
the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 business days thereafter, (c) the Company fails to comply with any of its
other agreements in this Debenture and such failure continues for the period and
after the notice specified below, (d) the Company pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a
voluntary case; (ii) consents to the entry of an order for relief against it in
an involuntary case; (iii) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially all of its property or
(iv) makes a general assignment for the benefit of its creditors or (v) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that: (A) is for relief against the Company in an involuntary case; (B) appoints
a Custodian of the Company or for all or substantially all of its property or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days, (e) the Company's Common Stock is no longer
listed on any recognized exchange including electronic over-the-counter bulletin
board. As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least 25% of the aggregate
principal amount of the Debentures outstanding notify the Company of such
default and the Company does not cure it within five (5) business days after the
receipt of such notice, which must specify the default, demand that it be
remedied and state that it is a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable. Upon such
declaration, the remaining principal amount shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are referred to
herein collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the "Register") showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this Debenture is
the person exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may
be registered on the books of the Company maintained for such purpose pursuant
to Section 7.2 above (i.e., the Register). Transfers shall be registered when
this Debenture is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the appropriate person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including tax laws and
state and federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the transferee as the record holder thereof shall be issued in lieu
hereof. When this Debenture is presented to the Company with a reasonable
request to exchange it for an equal principal amount of Debentures of other
denominations, the Company shall make such exchange and shall cancel this
Debenture and issue in lieu thereof Debentures having a total principal amount
equal to this Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices, with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in the payment of principal or conversion into
Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance
with the laws of the State of New York applicable to agreements that are
negotiated, executed, delivered and performed solely in the State of New York.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.
SWISSRAY INTERNATIONAL, INC.
By
Name: Ruedi G. Laupper
Title: Chairman and President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated _________________,1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
SRMILN.DEBSOV Z/5
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
(principal amount of Debenture, $5,000 or integral multiples of $5,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: Signed:
(Signature must conform in all
respects to name of Holder shown of face of Debenture)
Signature Guaranteed:
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
WARRANT TO PURCHASE 25,000 SHARES OF
COMMON STOCK OF SWISSRAY INTERNATIONAL, INC.
Exercisable Commencing December 14, 1998;
Void after December 14, 2003
THIS CERTIFIES that, for value received SOVEREIGN PARTNERS LIMITED
PARTNERSHIP or its registered assigns (the "Warrantholder") is entitled, subject
to the terms and conditions set forth in this Warrant, to purchase from SWISSRAY
INTERNATIONAL, INC., a New York corporation (the "Company"), 25,000 fully paid,
duly authorized and nonassessable shares (the "Shares"), of Common Stock, $.01
par value per share, of the Company (the "Common Stock"), at any time commencing
December 14, 1998 and continuing up to 5:00 p.m. New York City time on December
14, 2003 at an exercise price of $.375 subject to adjustment pursuant to Section
8 hereof.
This Warrant is subject to the following provisions, terms and
conditions:
Section 1. Transferability.
1.1 Registration. The Warrants shall be issued only in registered form
and Shares issuable upon exercise of the Warrants shall have piggy back
registration rights and shall be registered by the Company pursuant to the terms
of a Registration Rights Agreement between the Company and SOVEREIGN PARTNERS
LIMITED PARTNERSHIP.
1.2 Transfer. This Warrant shall be transferable only on the
books of the Company maintained at its principal executive offices upon
surrender thereof for registration of transfer duly endorsed by the
Warrantholder or by its duly authorized
<PAGE>
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. Upon any registration of transfer, the
Company shall execute and deliver a new Warrant or Warrants in appropriate
denominations to the person or persons entitled thereto.
1.3 Legend on Warrant Shares. Each certificate for Shares
initially issued upon exercise of a Warrant, unless at time of exercise such
Shares are registered under the Securities Act of 1933, as amended (the
"Securities Act"), shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear the above
legend unless the Company receives an opinion of counsel acceptable to the
Company that registration or qualification of the securities represented thereby
under the laws referred to therein is not required.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates of like tenor entitling the
Warrantholder to purchase a like aggregate number of Shares as the certificate
or certificates surrendered then entitle such Warrantholder to purchase. Any
Warrantholder desiring to exchange a warrant certificate shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Terms of Warrants: Exercise of Warrants.
(a) Subject to the terms of this Warrant, the Warrantholder shall have
the right, at any time after December 14, 1998, but before 5:00 p.m., New York
City time on December 14, 2003 (the "Expiration Time"), to purchase from the
Company up to the number of Shares which the Warrantholder may at the time be
entitled to purchase pursuant to the terms of this Warrant, upon surrender to
the Company at its principal executive office, of the certificate evidencing
this Warrant to be exercised, together with the attached Election to Exercise
form duly filled in and signed, and upon payment to the Company of the Warrant
Price (as defined in and determined in accordance with the provisions of Section
7 and 8 hereof) for the number of Shares with respect to which such Warrant is
then exercised. Payment of the aggregate Warrant Price shall be made in cash,
wire transfer or by cashier's check or any combination thereof.
(b) Subject to the terms of this Warrant, upon such surrender of this
Warrant and payment of such Warrant Price as aforesaid, the Company shall
promptly issue and cause to be delivered to the Warrantholder or to such person
or persons as the Warrantholder may designate in writing, a certificate or
certificates (in such name or names as the Warrantholder may designate in
writing) for the number of duly authorized, fully paid and non-assessable whole
Shares to be purchased upon the exercise of this Warrant, and shall deliver to
the Warrantholder Common Stock or cash, to the extent provided in Section 9
hereof, with respect to any fractional Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Shares as of the close of business on the date of the surrender
of this Warrant and payment of the Warrant Price, notwithstanding that the
certificates representing such Shares shall not actually have been delivered or
that the Share and Warrant transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the sole election of the Warrantholder,
either in full or from time to time in part and, in the event that any
certificate evidencing this Warrant (or any portion thereof) is exercised prior
to the Termination Date with respect to less than all of the Shares specified
therein at any time prior to the Termination Date, a new certificate of like
tenor evidencing the remaining portion of this Warrant shall be issued by the
Company, if so requested by the Warrantholder.
(c) Upon the Company's receipt of a facsimile or original of
Warrantholder's signed Election to Exercise, the Company shall instruct its
transfer agent to issue one or more stock Certificates representing that number
of shares of Common Stock which the Warrantholder is entitled to purchase in
accordance with the terms and conditions of this Warrant and the Election to
Exercise attached hereto. The Company's transfer agent or attorney shall act as
Registrar and shall maintain an appropriate ledger containing the necessary
information with respect to each Warrant.
(d) Such exercise shall be effectuated by surrendering to the Company,
or its attorney, the Warrants to be converted together with a facsimile or
original of the signed Election to Exercise which evidences Warrantholder's
intention to exercise those Warrants indicated. The date on which the Election
to Exercise is effective ("Exercise Date") shall be deemed to be the date on
which the Warrantholder has delivered to the Company a facsimile or original of
the signed Election to Exercise, as long as the original Warrants to be
exercised are received by the Company or its designated attorney within 5
business days thereafter. As long as the Warrants to be exercised are received
by the Company within five business days after it receives a facsimile or
original of the signed Election to Exercise, the Company shall deliver to the
Warrantholder, or per the Warrantholder's instructions, the shares of Common
Stock to an address in the U.S., without restrictive legend or stop transfer
instructions, within 5 business days of receipt of the Warrants to be converted.
(e) Nothing contained in this Warrant shall be deemed to establish or
require the payment of interest to the Warrantholder at a rate in excess of the
maximum rate permitted by governing law. In the event that the rate of interest
required to be paid exceeds the maximum rate permitted by governing law, the
rate of interest required to be paid thereunder shall be automatically reduced
to the maximum rate permitted under the governing law and such excess shall be
returned with reasonable promptness by the Warrantholder to the Company.
(f) It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Certificate of Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person in whose name
the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the exercise date. Upon surrender of any
Warrants that are to be converted in part, the Company shall issue to the
Warrantholder new Warrants equal to the unconverted amount, if so requested by
Warrantholder.
Nothing herein shall limit the Warrantholder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock.
(g) The Company shall furnish to Warrantholder such number of
prospectuses and other documents incidental to the registration of the Common
Stock underlying the Warrants, including any amendment of or supplements
thereto.
(h) Each person in whose name any certificate for shares of Common
Stock shall be issued shall for all purposes be deemed to have become the holder
of record of the Common Stock represented thereby on the date on which the
Warrant was surrendered and payment of the purchase price and any applicable
taxes was made, irrespective of date of issue or delivery of such certificate,
except that if the date of such surrender and payment is a date when the Shares
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such Shares on the next succeeding date on which such Share
transfer books are open. The Company shall not close such Share transfer books
at any one time for a period longer than seven days.
Section 4. Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the Shares;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable, (i) with respect to any secondary transfer of this
Warrant or the Shares or (ii) as a result of the issuance of the Shares to any
person other than the Warrantholder, and the Company shall not be required to
issue or deliver any certificate for any Shares unless and until the person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have produced evidence that such tax has been paid to the
appropriate taxing authority.
Section 5. Mutilated or Missing Warrant. In case the certificate or
certificates evidencing this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and of a bond of indemnity, if requested, also
satisfactory to the Company in form and amount, and issued at the applicant's
cost. Applicants for such substitute Warrant certificate shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
Section 6. Reservation of Shares. The Company has duly and validly
reserved, and shall at all times so long as this Warrant remains outstanding,
keep reserved, out of its authorized and unissued capital stock, sufficient
shares of Common Stock as shall be subject to purchase under this Warrant (the
"Reserved Shares"). The issuance, sale and delivery of the Warrants and Reserved
Shares have been duly authorized by all required corporate action on the part of
the Company and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and therein, will be
duly and validly issued, fully paid, and non-assessable and enforceable in
accordance with their terms, subject to the laws of bankruptcy and creditors'
rights generally. The Company shall pay all taxes in respect of the issue
thereof. As a condition precedent to the taking of any action that would result
in the effective purchase price per share of Common Stock upon the exercise of
this Warrant being less than the par value per share (if such shares of Common
Stock then have a par value), the Company will take such corporate action as
may, in the opinion of its counsel, be necessary in order that the Company may
comply with all its obligations under this Agreement with regard to the exercise
of this Warrant.
Prior to exercise of all the Warrants, if at anytime the conversion of
all the Shares and exercise of all the Warrants outstanding results in an
insufficient number of Reserved Shares being available to cover all the
conversions and exercises, then in such event, the Company will move to call and
hold a shareholder's meeting within 45 days of such event for the purpose of
authorizing additional Shares to facilitate the conversions. In such an event
the Company shall: (1) recommend to its current or future officers, directors
and other control people to vote their shares in favor of increasing the
authorized number of shares of Common Stock and (2) recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock. As for any shareholders who do not vote on the issue
of increasing the authorized number of shares of Common Stock, such failure to
vote shall automatically be taken as a vote in favor of increasing the
authorized number of shares of Common Stock. The proxy sent out by the Company
to all shareholders shall provide that if no vote is received a consent to
action will be executed on behalf of those shares of Common Stock for which no
vote was received, in favor of increasing the authorized number of shares of
Common Stock of the Company. Company represents and warrants that under no
circumstances will it deny or prevent Warrantholder from exercising the Warrants
as permitted under the terms of the Subscription Agreement, the Warrants or the
Registration Rights Agreement.
Section 7. Warrant Price. From December 14, 1998 through 5:00 p.m. New
York City time on December 14, 2003, the price per Share (the "Warrant price")
at which Shares shall be purchasable upon the exercise of this Warrant shall be
equal to closing bid price on December 14, 1998 subject to adjustment pursuant
to Section 8 hereof.
Section 8. Adjustment of Warrant Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time after the
date hereof upon the happening of certain events, as follows:
8.1 Adjustments. The number of Shares purchasable upon the
exercise of this Warrant shall be subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend on Common Stock in
Common Stock or securities convertible into, exchangeable for or otherwise
entitling a holder thereof to receive Common Stock, (ii) declare a dividend
payable in cash on its Common Stock and at substantially the same time offer its
shareholders a right to purchase new Common Stock (or securities convertible
into, exchangeable for or other entitling a holder thereof to receive Common
Stock) from the proceeds of such dividend (all Common Stock so issued shall be
deemed to have been issued as a stock dividend), (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, (iv)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (v) issue by reclassification of its Common Stock any shares
of Common Stock of the Company, the number of shares of Common Stock issuable
upon exercise of the Warrants immediately prior thereto shall be adjusted so
that the holders of the Warrants shall be entitled to receive after the
happening of any of the events described above that number and kind of shares as
the holders would have received had such Warrants be converted immediately prior
to the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subdivision shall become effective immediately
after the close of business on the record date in the case of a stock dividend
and shall become effective immediately after the close of business on the
effective date in the case of a stock split, subdivision, combination or
reclassification.
(b) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends other than as described in
Section (8)(a)(ii)), then in such case, the number of shares of Common Stock
thereafter issuable upon exercise of the Warrants shall be determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of the Warrants, by a fraction, of which the numerator shall be the
closing bid price per share of Common Stock on the record date for such
distribution, and of which the denominator shall be the closing bid price of the
Common Stock less the then fair value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed per share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(c) Any adjustment in the number of shares of Common Stock issuable
hereunder otherwise required to be made by this Section 8 will not have to be
adjusted if such adjustment would not require an increase or decrease in one
percent (1%) or more in the number of shares of Common Stock issuable upon
exercise of the Warrant. No adjustment in the number of Shares purchasable upon
exercise of this Warrant will be made for the issuance of shares of capital
stock to directors, employees or independent contractors pursuant to the
Company's or any of its subsidiaries' stock option, stock ownership or other
benefit plans or arrangements or trusts related thereto or for issuance of any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under such plan.
(d) Whenever the number of shares of Common Stock issuable upon the
exercise of the Warrants is adjusted, as herein provided the Warrant Price shall
be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of shares of Common Stock issuable upon the exercise of each share of the
Warrants immediately prior to such adjustment, and of which the denominator
shall be the number of shares of Common Stock issuable immediately thereafter.
(e) The Company from time to time by action of its Board of Directors
may decrease the Warrant Price by any amount for any period of time if the
period is at least 20 days, the decrease is irrevocable during the period and
the Board of Directors of the Company in its sole discretion shall have made a
determination that such decrease would be in the best interest of the Company,
which determination shall be conclusive. Whenever the Warrant Price is decreased
pursuant to the preceding sentence, the Company shall mail to holders of record
of the Warrants a notice of the decrease at least 15 days prior to the date the
decreased Warrant Price takes effect, and such notice shall state the decreased
Warrant Price and the period it will be in effect.
8.2 Mergers. Etc. In the case of any (i) consolidation or merger of the
Company into any entity (other than a consolidation or merger that does not
result in any reclassification, exercise, exchange or cancellation of
outstanding shares of Common Stock of the Company), (ii) sale, transfer, lease
or conveyance of all or substantially all of the assets of the Company as an
entirety or substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
holder of Warrants then outstanding shall have the right thereafter to exercise
such Warrant only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of shares of Common
Stock of the Company into which such Warrants would have been converted
immediately prior to such consolidation, merger, sale, transfer, capital
reorganization or reclassification, assuming such holder of Common Stock of the
Company (A) is not an entity with which the Company consolidated or into which
the Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent entity"), or an affiliate of
a constituent entity, and (B) failed to exercise his or her rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by other than a constituent entity or an affiliate thereof and in
respect of which such rights or election shall not have been exercised
("non-electing share"), then for the purpose of this Section 8.2 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). If necessary, appropriate adjustment shall be made in the
application of the provision set forth herein with respect to the rights and
interests thereafter of the holder of Warrants, to the end that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of the Warrants. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, capital reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless prior to or
simultaneously with the consummation thereof the successor company or entity (if
other than the Company) resulting from such consolidation, merger, sale or
transfer assumes, by written instrument, the obligation to deliver to the holder
of Warrants such shares of stock, securities or assets as, in accordance with
the foregoing provision, such holder may be entitled to receive under this
Section 8.2.
8.3 Statement of Warrants. Irrespective of any
adjustments in the Warrant Price of the number or kind of shares purchasable
upon the exercise of this Warrant, this Warrant certificate or certificates
hereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant.
Section 9. Fractional Shares. Any fractional shares of Common Stock
issuable upon exercise of the Warrants shall be rounded to the nearest whole
share or, at the election of the Company, the Company shall pay the holder
thereof an amount in cash equal to the closing bid price thereof. Whether or not
fractional shares are issuable upon exercise shall be determined on the basis of
the total number of Warrants the holder is at the time exercising and the number
of shares of Common Stock issuable upon such exercise.
Section 10. No Rights as Stockholders: Notices to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees any rights as a stockholder of the Company,
including the right to vote, receive dividends, consent or receive notices as a
stockholder with respect to any meeting of stockholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
5:00 p.m., New York City time, on December 14, 2003, (the "Expiration Time") and
prior to the exercise of this Warrant, any of the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1; or
(b) a dissolution, liquidation or winding up of the Company or
any consolidation, merger or sale of its property, assets and business as
an entirety; then in any one or more of said events, the Company shall give
notice in writing of such event to the Warrantholder at least 10 days prior to
the date fixed as a record date or the date of closing the transfer books
for the determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights, or other rights or for the effective date of
any dissolution, liquidation of winding up or any merger, consolidation, or sale
of substantially all assets, but failure to mail or receive such notice or any
defect therein or in the mailing thereof shall not affect the validity of any
such action taken. Such notice shall specify such record date or the effective
date, as the case may be.
Section 11. Successors. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Warrantholder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder.
Section 12. Applicable Law. This Warrant shall be construed and
enforced in accordance with and the rights of the parties shall be governed by
the laws of the State of New York.
Section 13. Benefits of this Agreement. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Warrantholder any legal or equitable right, remedy or claim under this
Warrant, and this Warrant shall be for the sole and exclusive benefit of the
Company and the Warrantholder.
Section 14. Piggy-back Registration Rights. If at any time prior to the
expiration of the warrant the Company shall propose to prepare on its own behalf
or on behalf of any of its stockholders (other than Warrantholder) a
registration statement in connection with an underwritten public offering of any
equity securities of the Company, the Company shall give Warrantholder written
notice at least 20 days before the anticipated filing date of such registration
statement. Should Warrantholder desire to have any of the Shares included in
such registration statement Warrantholder shall so advise the Company in writing
no later than 15 days after the Company's notice is given, setting forth the
number or amount of Shares which Warrantholder requests to be included in the
registration statement, and the Company shall include the securities specified
in such request in such registration statement and keep such registration
statement in effect and maintain compliance with each federal and state law and
regulation as set forth herein. The Company may, at its option, require that the
amount of Shares offered for sale by Warrantholder pursuant to this Section 14
be decreased if, in the opinion of the Company's investment banking firm, such
reduction is necessary in order to permit the orderly distribution and sale of
the securities being offered. If the Company shall require such a reduction,
Warrantholder shall have the right to withdraw from the offering.
Section 15. Definitions.
"Common Stock" shall mean (i) Common Stock, $.01 par value per share,
of the Company and (ii) any other security purchasable upon the exercise of this
Warrant upon the happening of certain events.
IN WITNESS WHEREOF, the parties have caused this Warrant to be duly
executed, all as of the day and year first above written.
SWISSRAY INTERNATIONAL , INC.
By:________________________________
Ruedi G. Laupper its Chairman
and President
<PAGE>
SWISSRAY INTERNATIONAL, INC.
ELECTION TO EXERCISE
SWISSRAYINTERNATIONAL, INC.
c/o Gary B. Wolff, Esq.
747 Third Avenue - 25th Floor
New York, NY 10017
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder, _______shares
of Common Stock (the "Share") provided for therein, and requests that
certificates for the Shares be issued in the name of:*
Name:___________________________________________________________
Address:_________________________________________________________
Social Security No.________________________________________________
or Tax ID Number:_________________________________________________
and, if such number of Shares shall not be all of the Shares purchasable under
the Warrant, that a new Warrant certificate for the balance of the Shares
purchasable under the within Warrant be registered in the name of the
undersigned warrantholder or his Assignee* as indicated below and delivered to
the address stated below:
Dated:________, 19___
Name of Warrantholder of
Assignee (Please Print)_____________________________________________
Address:_________________________________________________________
Signature:________________________________________________________
Signature Guaranteed:______________________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The above signature must correspond with the name as written on
the face of this Warrant certificate in every particular, without alteration or
enlargement or any change whatever, unless this warrant has been assigned.
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant)*
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing
_________Attorney to transfer said Warrant on the books of the Company, with
full power of substitution in the premises.
Dated:______________, 19____
________________________________**
Signature of Registered Holder
Signature Guaranteed: ________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The signature of this assignment must correspond with the name
as it appears upon the face of the Warrant certificate in every particular,
without alteration or enlargement or any change whatever.
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $1,700,000
This offering consists of $1,700,00 of Convertible Debentures of
Swissray International, Inc. and Warrants to Purchase 58,500 shares
Of the Company's Common Stock at $1.00.
--------------------
SUBSCRIPTION AGREEMENT
-------------------
<PAGE>
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $1,700,000 The
Debentures will be transferable to the extent that any such transfer is
permitted by law. This offering is being made in accordance with the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D promulgated under the Act (the
"Regulation D Offering").
The Investor Questionnaire is designed to enable the Investor
to demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9: "Request for
Taxpayer Identification Number and Certification" for U.S. citizens or residents
of the U.S. for U.S. federal income tax purposes only. (Foreign investors should
consult their tax advisors regarding the need to complete Internal Revenue
Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer as provided below:
Immediately available funds should be sent via wire transfer to the escrow
account stated below and the completed subscription documents should be
forwarded to the Escrow Agent. Your subscription funds will be deposited into a
non-interest bearing escrow account of Joseph B. LaRocco, Esq., Escrow Agent, at
First Union Bank of Connecticut, Stamford, Connecticut. In the event of a
termination of the Regulation D Offering or the rejection of this subscription,
all subscription funds will be returned without interest. The wire instructions
are as follows:
First Union Bank of Connecticut
Executive Office
300 Main Street, P. O. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
Convertible Debentures (the "Debentures"). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the "Offering") of up to $1,700,000 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the "Regulation D Offering") in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and Rule 506 of Regulation D promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $________ of the Company's Debentures. The Debentures shall pay
interest in cash or in freely trading Common Stock of the Company, at the
Company's option, at the time of each conversion. Interest shall be as follows:
3% per each 30-day period, on a pro rata basis, for the first ninety (90) days
following the Closing; 3 1/2 % for each 30-day period, on a pro rata basis,
beginning from the ninety-first (91st) day after the Closing and ending on the
one hundred and twentieth (120th) day following the Closing Date; and 4% per
each 30-day period, on a pro rata basis, beginning from the one hundred and
twenty-first (121st) day following the Closing.
If paid in Common Stock, the number of shares of the Company's Common Stock to
be received shall be determined by dividing the dollar amount of the interest by
the then applicable Market Price, as of the interest payment date. "Market
Price" shall mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately preceding
the date of conversion (the "Conversion Price"). If the interest is to be paid
in cash, the Company shall make such payment within 5 business days of the date
of conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
date the funds are received by the Company or its designated attorney (the
"Closing Date").
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent's own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully
read the applicable form of Debenture included herein as Exhibit A and
the form of Registration Rights Agreement annexed hereto as Exhibit B
(the "Registration Rights Agreement"), and is familiar with and
understands the terms of the Offering. With respect to tax and other
economic considerations involved in his investment, the undersigned is
not relying on the Company. The undersigned has carefully considered
and has, to the extent the undersigned believes such discussion
necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in
the Company, by purchasing the Debentures, for the undersigned's
particular tax and financial situation and has determined that the
investment being made by the undersigned is a suitable investment for
the undersigned.
(b) The undersigned acknowledges that all documents, records,
and books pertaining to this investment including Form 10-KSB for the
fiscal year ended June 30, 1997 inclusive of 10-KSB/A1, 10-KSB/A2 and
10-KSB/A3 and Form 10-Q for the quarters ended September 30, 1997,
December 31, 1997 and March 31, 1998 inclusive of 10-Q/A1 for September
30, 1997 and December 31, 1997 (the "Disclosure Documents") have been
made available for inspection by the undersigned or the undersigned has
access to the Disclosure Documents.
(c) The undersigned has 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 and all such questions
have been answered to the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the
Debentures without registration under the Act or applicable state
securities laws or an exemption therefrom. The Debentures have not been
registered under the Act or under the securities laws of any states.
The Common Stock underlying the Debentures is to be registered by the
Company pursuant to the terms of the Registration Rights Agreement
attached hereto as Exhibit B and incorporated herein and made a part
hereof. Without limiting the right to convert the Debentures and sell
the Common Stock pursuant to the Registration Rights Agreement, the
undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not
with a view to resale or distribution except in compliance with the
Act. The undersigned has not offered or sold any portion of the
Debentures being acquired nor does the undersigned have any present
intention of dividing the Debentures with others or of selling,
distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined
event or circumstance in violation of the Act. Except as provided in
the Registration Rights Agreement, the Company has no obligation to
register the Common Stock issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire
amount of such investment. Further, the undersigned has carefully read
and considered the schedule entitled Pending Litigation matters
attached hereto as Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each
certificate representing the Debentures unless registred
pursuant to the Registration Rights Agreement, shall be
stamped or otherwise imprinted with a legend substantially in
the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE
ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF
THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Common Stock issued upon conversion shall
contain the following legend if converted prior to effectiveness of Registration
Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) Common Stock issued upon conversion and
subsequent to effective date of Registration Statement
(pursuant to which shares underlying conversion are
registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered
on behalf of a corporation, (i) such corporation has the full legal
right and power and all authority and approval required (a) to execute
and deliver, or authorize execution and delivery of, this Subscription
Agreement and all other instruments (including, without limitation, the
Registration Rights Agreement) executed and delivered by or on behalf
of such corporation in connection with the purchase of the Debentures
and (b) to purchase and hold the Debentures: (ii) the signature of the
party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the
specific purpose of acquiring the Debentures, unless each beneficial
owner of such entity is qualified as an accredited investor within the
meaning of Rule 501(a) of Regulation D and has submitted information
substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the
Company and each stockholder, executive, employee, representative,
affiliate, officer, director, agent (including Counsel) or control
person of the Company, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made
by the undersigned to the Company or omitted or alleged to have been
omitted by the undersigned, concerning the undersigned or the
undersigned's subscription for and purchase of the Debentures or the
undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in this
Subscription Agreement, the Questionnaire or any other document
submitted by the undersigned, against losses, liabilities and expenses
for which the Company, or any stockholder, executive, employee,
representative, affiliate, officer, director, agent (including Counsel)
or control person of the Company has not otherwise been reimbursed
(including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the
Company, or such officer, director stockholder, executive, employee,
agent (including Counsel), representative, affiliate or control person
in connection with such action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures
as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar
or meeting.
(j) The undersigned or the undersigned's representatives, as
the case may be, has such knowledge and experience in financial, tax
and business matters so as to enable the undersigned to utilize the
information made available to the undersigned in connection with the
Offering to evaluate the merits and risks of an investment in the
Debentures and to make an informed investment decision with respect
thereto.
(k) The Purchaser is purchasing the Debentures for its
own account for investment, and not with a view toward the resale or
distribution thereof. Purchaser is neither an underwriter of, nor a
dealer in, the Debentures or the Common Stock issuable upon conversion
thereof and is not participating in the distribution or resale of the
Debentures or the Common Stock issuable upon conversion thereof.
(l) There has never been represented, guaranteed, or warranted
to the undersigned by any broker, the Company, its officers, directors
or agents, or employees or any other person, expressly or by
implication (i) the percentage of profits and/or amount of or type of
consideration, profit or loss to be realized, if any, as a result of
the Company's operations; and (ii) that the past performance or
experience on the part of the management of the Company, or of any
other person, will in any way result in the overall profitable
operations of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued and enforceable in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. At least 200%
of the number of shares of Common Stock issuable upon conversion of all the
Debentures issued pursuant to this Offering have been duly and validly reserved
for issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares or stockholder approval
to authorize additional shares as described in the proxy statement for the
August 31, 1998 meeting has or will be obtained and, upon issuance shall be duly
and validly issued, fully paid, and non-assessable (the "Reserved Shares"). From
time to time, the Company shall keep such additional shares of Common Stock
reserved so as to allow for the conversion of all the Debentures issued pursuant
to this offering.
Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures outstanding would result in an insufficient number of
authorized shares of Common Stock being available to cover all the conversions,
then in such event, the Company will move to call and hold a shareholder's
meeting within 60 days of such event for the purpose of authorizing additional
shares of Common Stock to facilitate the conversions. In such an event the
Company shall recommend to all shareholders to vote their shares in favor of
increasing the authorized number of shares of Common Stock. Seller represents
and warrants that under no circumstances will it deny or prevent Purchaser's
right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has
been duly authorized, validly executed and delivered on behalf of Seller and is
a valid and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
c) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Debentures, and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws of
Seller, or any indenture, mortgage, deed of trust, or other material agreement
or instrument to which Seller is a party or by which it or any of its properties
or assets are bound, or any existing applicable law, rule, or regulation of the
United States or any State thereof or any applicable decree, judgment, or
order of any Federal or State court, Federal or State regulatory body,
administrative agency or other United States governmental body having
jurisdiction over Seller or any of its properties or assets.
(d) Company Compliance. The Company represents and warrants
that the Company and its subsidiaries are: (i) in full compliance, to the
extent applicable, with all reporting obligations under either Section 13(a) or
15(d) of the Securities Exchange Act of 1934; (ii) not in violation of any term
or provision of its Certificate of Incorporation or by-laws; (iii) not in
default in the performance or observance of any obligation, agreement or
condition contained in any bond, debenture (excepting for reservation of number
of shares required if all Debentures were to be converted), note or any other
evidence of indebtedness or in any mortgage, deed of trust, indenture or other
instrument or agreement to which they are a party, either singly or jointly,
by which it or any of its property is bound or subject. Furthermore, the Company
is not aware of any other facts, which it has not disclosed which could have a
material adverse effect on the business, condition, (financial or otherwise),
operations, earnings, performance, properties or prospects of the Company and
its subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in
Exhibit C, there is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental body now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its subsidiaries is or
may be a party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and
no law, statute, rule, regulation, order or ordinance has been enacted, adopted
or issued by any Governmental Body that prevents the issuance of the Debentures
or the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D. In
the past six months the Company raised $13,643,849 in Regulation S and
Regulation D offerings, including redemptions and rollovers.
------------------------------------------------------
(l) Current Authorized Shares. As of January 25, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately ___________
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
--------------------------
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's initial
filing on Form 10-KSB for the year ended June 30, 1997 (or the filing of
necessary amendments thereto so as to restate certain financial statements for
fiscal years ended June 30, 1997 and 1996 so as to properly record the
accounting treatment of certain beneficial conversion features and debt issuance
cost of convertible debentures issued during the year ended June 30, 1997 and
the auditing for the value of stock options granted during the years June 30,
1997 and 1996), which could make any of the disclosures contained therein (as
subsequently amended and restated) misleading The financial statements of the
Company included in the Disclosure Documents have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the audit
adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and changes in financial position for the periods then
ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Closing Date the Debentures being
purchased hereunder shall be delivered to Joseph B. LaRocco, Esq. as Escrow
Agent, who will simultaneously wire to the Company's counsel the funds being
held in escrow, less placement fees, if not already directly wired to Company
Counsel, at which time the Escrow Agent shall then have the Debentures delivered
to the Purchaser, per the Purchaser's instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(q) No Default. Except as may be set forth in the Company's report on
form 10-KSB for the fiscal year ending June 30, 1997, as initially filed and
subsequently amended, the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement or the
Debentures, other than the conversion provision thereof, will conflict with or
result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, (i) any material
indenture, mortgage, deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound,
(ii) any statute applicable to the Company or its property, (iii) the
Certificate of Incorporation or By-Laws of the Company, (iv) any decree ,
judgment, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its properties, or (v) the Company's
listing agreement for its Common Stock.
(r) Use of Proceeds. The Company represents that the net
proceeds of this offering will be primarily used for the purposes set forth on
page 4 of the term sheet under the caption "Closing Proceeds".
(s) The Company hereby represents that it shall be paying
consultant a fee of $100,000 from the gross proceeds of this Offering, which
fee shall be paid out of escrow by the Escrow Agent
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Purchaser's signed Notice of Conversion
followed by receipt of the original Debenture to be converted in whole or in
part (within 5 business days as indicated in 4(b) below), the Company shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debenture is convertible in
accordance with the provisions regarding conversion set forth in Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Conversion Procedures. The face amount of each Debenture
may be converted anytime following the Closing Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, the Debentures to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Purchaser's intention to convert those Debentures
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Purchaser has delivered to
the Company a facsimile or original of the signed Notice of Conversion, as long
as the original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile, the Company's designated attorney is
Gary B. Wolff, Esq., 747 Third Avenue, New York, NY 10017 (P) 212-644-6446 (f)
212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its designated attorney of a
facsimile or original of Purchaser's signed Notice of Conversion (see Exhibit D)
Seller shall instruct Seller's transfer agent to issue Stock Certificates
without restrictive legend or stop transfer instructions, if at that time the
Registration Statement has been deemed effective (or with proper restrictive
legend if the Registration Statement has not as yet been declared effective), in
the name of Purchaser (or its nominee) and in such denominations to be specified
at conversion representing the number of shares of Common Stock issuable upon
such conversion, as applicable. Seller warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely transferable on the books and
records of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its
option, to convert the face amount of each Debenture, plus accrued interest,
anytime following the Closing Date at 82% of the 10 day average closing bid
price, as reported by Bloomberg, LP for the 10 consecutive trading
days immediately preceding the applicable Conversion Date (the "Conversion
Price"). The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Purchaser has delivered to
the Company a facsimile or original of the signed Notice of Conversion, as long
as the original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up or down, as the case may be, to
the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser's conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser's original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 4(b), the Company shall deliver a
certificate in accordance with Section 4(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of
authorized but unissued shares of Common Stock, the provisions of this
Section 4(g) shall not apply but instead the provisions of Section 4(h)
shall apply. The Company shall make any payments incurred under this
Section 4(g) in immediately available funds within five (5) business
days from the Conversion Date if late. Nothing herein shall limit a
Purchaser's right to pursue actual damages or cancel the conversion for
the Company's failure to
issue and deliver Common Stock to the Holder within 8 business days after the
Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Purchasers of the entire
amount of Debentures then outstanding. If, at any time Purchaser submits a
Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the
Purchaser all of the shares of Common Stock which are available, and the Notice
of Conversion as to any Debentures requested to be converted but not converted
(the "Unconverted Debentures"), upon Purchaser's sole option, may be deemed null
and void. The Company shall provide notice of such Conversion Default ("Notice
of Conversion Default") to all existing Purchasers of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Purchaser shall give notice
to the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser's right to pursue actual damages for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) Right of First Refusal: The Purchaser is granted
the Right of First Refusal on any subsequent financing the Company may seek
during the next twelve months.
(j) Redemption: Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
Debentures during the two year period following the Closing Date.
Notwithstanding the preceding sentence, the Company shall be required to and
herewith agrees to and shall apply at least 20% of the gross profits from the
sale of ddR Multi-Systems for the redemption of the Debentures. The Company will
continue to do so until such time that the Debentures or any unconverted portion
of the Debentures has been fully redeemed. Redemption payments would be applied
to the outstanding balance in the following manner: for example should the
company wish to redeem a portion after the first 30-day period they would owe 3%
x $1,000,000 = $30,000 plus some portion of the $1,000,000 principle, say
$100,000. This would mean that if the company paid $130,000 on the 30th day they
would still owe $900,000 on the 31st day.
The redemption terms shall be based on the interest
rate applicable to the Debentures as follows: 3% per each 30-day period, on a
pro rata basis, for the first ninety (90) days following closing; 3 1/2 % for
each 30-day period, on a pro rata basis, beginning from the
ninety-first (91st) day after closing and ending on the one hundred and
twentieth (120th) day following closing; and 4% per each 30-day period, on a pro
rata basis, beginning from the one hundred and twenty-first (121st) day
following the closing.
The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 5 business days following the date the Company notifies
the Purchaser by facsimile of the redemption. The Company shall give the
Purchaser at least 5 business day's notice of its intent to redeem.
(k) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption by the
Company or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company is being
merged, or (c) a public announcement that there is a change in control, shall
the Purchaser be entitled to convert any Debentures to the extent that, after
such conversion, the sum of (1) the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debentures), and (2) the number of shares of Common
Stock issuable upon the conversion of the Debentures with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Purchaser and its affiliates of more than 4.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Purchaser upon such conversion). 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
(the "1934 Act"), except as otherwise provided in clause (1) of such proviso.
The Purchaser further agrees that if the Purchaser transfers or assigns any of
the Debentures to a party who or which would not be considered such an
affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section as
if such transferee or assignee were a signatory to the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Closing Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Closing Date the Company shall
deliver to the Escrow Agent a signed Registration Rights Agreement in the form
attached hereto as Exhibit B. The Debentures being purchased hereunder shall be
delivered to Joseph B. LaRocco, Esq. as Escrow Agent, who will hold them in
escrow until funds have been wired to the Company or its Counsel at which time
the Escrow Agent shall then have the Debentures delivered to the Purchaser, per
the Purchaser's instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF ANY MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably
waives, to the fullest extent permitted by law, any objection which it may have
or hereafter may have to the laying of venue of any such litigation brought in
any such court referred to above and any claim that any such litigation has been
brought in any inconvenient forum. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Company hereby irrevocably waives such immunity in respect of its
obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New
York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE
CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions: the shareholder is a natural person whose
individual net worth* or joint net worth with his or her spouse exceeds
$1,000,000; or the shareholder is a natural person who had an individual
income* in excess of $200,000 in each of 1997 and 1998 and who reasonably
expects an individual income in excess of $200,000 in 1999; or Each of the
shareholders of the undersigned CORPORATION is able to certify that such
shareholder is a natural person who, together with his or her spouse,
has had a joint income in excess of $300,000 in each of 1997 and 1998 and who
reasonably expects a joint income in excess of $300,000 during 1999; and the
undersigned CORPORATION has its principal place of business in
___________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of the Investment Company Act of 1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration under Section 301 (c) or (d)
of the Small Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Debentures will be
solely for the CORPORATION'S own account and not for the account of
any other person or entity; and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification number as
set forth in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:__________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser's
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Amount of Debentures subscribed for Date
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1999
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
SRMIDJAN99.SUB Z/5
<PAGE>
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the "Company") according to the conditions set forth in the
Subscription Agreement dated January ____, 1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
Exhibit E
_______________, 1999
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the "Company"), in connection with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company's Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of _____
shares of Common Stock, ________ par value per share, ("Common Stock") and
______________ Preferred Stock, par value $________ per share; [describe classes
if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not
violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are
listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings
against the Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January ___, 1999, ("this
Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New York
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement, dated as of January ___, 1999, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor Convertible Debentures of the Company
(the "Debentures"), which will be convertible into shares of the common stock,
$.01 par value (the "Common Stock"), of the Company (the "Conversion Shares")
upon the terms and subject to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Closing Date" means the date funds are received by the
Company or its designated attorney pursuant to the Subscription
Agreement.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement
in accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion Shares and any
Warrants issued to the Investor by the Company.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to
Section 9 of this Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription
Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Closing Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the Warrants, $1,170,000 of Debentures,
plus accrued interest, in the total offering would be convertible. In the event
the Registration Statement is not filed within forty-five (45) calendar days
after the Closing Date, then in such event the Company shall pay the Investor 2%
of the face amount of each Debenture for each 30 day period, or portion thereof,
after forty-five (45) calendar days following the Closing Date that the
Registration Statement is not filed. The Investor is also granted additional
Piggy-back registration rights on any other Registration Statement filings made
by the Company. Such Registration Statement shall state that, in accordance with
the Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable to prevent dilution resulting from
Stock splits, or stock dividends). If at any time the number of shares of Common
Stock into which the Debenture(s) may be converted exceeds the aggregate number
of shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of written notice from any Investor, either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by the
SEC at that time, to register all shares of Common Stock into which the
Debenture(s) may be converted, or (ii) if such Registration Statement has been
declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on such form as is applicable to register the shares of
Common Stock into which the Debenture may be converted that exceed the aggregate
number of shares of Common Stock already registered. The above damages shall
continue until the obligation is fulfilled and shall be paid within 5 business
days after each 30 day period, or portion thereof, until the Registration
Statement is filed. Failure of the Company to make payment within said 5
business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the
Closing Date will cause the Initial Investor to suffer damages in an amount that
will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Agreement a provision for liquidated damages. The
parties acknowledge and agree that the liquidated damages provision set forth in
this section represents the parties' good faith effort to qualify such damages
and, as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within one hundred twenty (120) calendar
days following the Closing Date, then the Company shall pay the Initial Investor
2% of the purchase price paid by the Initial Investor for the Registrable
Securities pursuant to the Subscription Agreement for every thirty day period,
or portion thereof, following the one hundred twenty (120) calendar day period
until the Registration Statement is declared effective. Notwithstanding the
foregoing, the amounts payable by the Company pursuant to this provision shall
not be payable to the extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act timely by
the Initial Investor or its counsel. The above damages shall continue until the
obligation is fulfilled and shall be paid within 5 business days after each 30
day period, or portion thereof, until the Registration Statement is declared
effective. Failure of the Company to make payment within said 5 business days
shall be considered a default.
The Company acknowledges that its failure to have the Registration
Statement declared effective within said ninety (90) calendar day period, will
cause the Initial Investor to suffer damages in an amount that will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve the Company from its obligations to register the Common Stock and
deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
3. Obligation of the Company. In connection with the registration
of the Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Closing Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) one hundred twenty (120) days after
the Closing Date, and keep the Registration Statement effective at all times
until the earliest (the "Registration Period") of (i) the date that is two years
after the Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable
Securities for sale in such jurisdictions: provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (A)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (B) subject itself to general
taxation in any such jurisdiction, (C) file a general consent to service of
process in any such jurisdiction, (D) provide any undertakings that cause more
than nominal expense or burden to the Company or (E) make any change in its
articles of incorporation or by-laws or any then existing contracts, which in
each case the Board of Directors of the Company determines to be contrary to the
best interests of the Company and its stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE DEBENTURE DUE January , 1999
January , 2001
$
Number JAN-1999-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay
_________________________________ or registered assigns (the "Holder")
on January __, 2001, (the "Maturity Date"), the principal amount of
__________________________________________________ Dollars ($ _______
U.S., and to pay interest on the principal amount hereof, in such
amounts, at such times and on such terms and conditions as are
specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the time of each conversion until the principal
amount hereof is paid in full or has been converted, as follows: 3% per each
30-day period, on a pro rata basis, for the first ninety (90) days following the
Closing; 3 1/2 % for each 30-day period, on a pro rata basis, beginning from the
ninety-first (91st) day after the Closing and ending on the one hundred and
twentieth (120th) day following the Closing Date; and 4% per each 30-day period,
on a pro rata basis, beginning from the one hundred and twenty-first (121st) day
following the Closing. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months. Each payment shall be paid in cash or in freely trading
Common Stock of the
<PAGE>
Company, at the Company's option. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by dividing the
dollar amount of the interest by the then applicable Market Price as of the
interest payment date. "Market Price" shall mean 82% of the average of the 10
day closing bid prices, as reported by Bloomberg, LP for the ten (10)
consecutive trading days immediately preceding the date of conversion. If the
interest is to be paid in cash, the Company shall make such payment within 5
business days of the date of conversion. If the interest is to be paid in Common
Stock, said Common Stock shall be delivered to the Holder, or per Holder's
instructions, within 5 business days of the date of conversion. The Debentures
are subject to automatic conversion at the end of two years from the date of
issuance at which time all Debentures outstanding will be automatically
converted based upon the formula set forth in Section 3.2. The closing shall be
deemed to have occurred on the date the funds are received by the Company or its
Counsel (the "Closing Date").
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall
have the option of paying the interest on this Debenture in United States
dollars or in common stock upon conversion pursuant to Article 1 hereof. The
Company may draw a check for the payment of interest to the order of the Holder
of this Debenture and mail it to the Holder's address as shown on the Register
(as defined in Section 7.2 below). Interest and principal payments shall be
subject to withholding under applicable United States
Federal Internal Revenue Service Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at its option,
to convert it into shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at any time following the Closing Date and which is
before the close of business on the Maturity Date, except as set forth in
Section 3.1(c) below. The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains
outstanding on the second anniversary of the date hereof, the unconverted
portion of such Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 3.2.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Holder's signed Notice of Conversion and
the receipt of the original Debenture to be converted in whole or in part in the
manner set forth in 3.2(b) below, the Company shall instruct its transfer agent
to issue one or more Certificates representing that number of shares of Common
Stock into which the Debenture is convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller's transfer agent
or attorney shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture
may be converted anytime following the Closing Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, this Debenture to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Holder's intention to convert the Debenture
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Holder has delivered to the
Company or its designated attorney a facsimile or original of the signed Notice
of Conversion, as long as the original Debenture(s) to be converted are received
by the Company or its designated attorney within 5 business days thereafter.
Unless otherwise notified by the Company in writing via facsimile the Company's
designated attorney is Gary B.
Wolff, Esq., 474 Third Avenue, 25th Floor, New York, New York 10017, (P)
212-644-6446, (F) 212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its attorney of a facsimile or
original of Holder's signed Notice of Conversion Seller shall instruct Seller's
transfer agent to issue Stock Certificates without restrictive legend or stop
transfer instructions, if at that time the Registration Statement has been
deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Holder (or its
nominee) and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion, as
applicable. Seller warrants that no instructions, other than these instructions,
have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller,
except as may be set forth herein.
(d) (i) Conversion Rate. Holder is entitled, at its option to
convert the face amount of this Debenture, plus accrued interest, anytime
following the Closing Date, at 82% of the 10 day average closing bid price, as
reported by Bloomberg LP, for the ten (10) consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded up or down, as the case may
be, to the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Holder's conversion of all the Debentures, the Company raises money
under either Regulation D or Regulation S on terms that are more favorable than
those terms set forth in this Debenture, then in such event, the Holder at its
sole option shall be entitled to completely replace the terms of this Debenture
with the terms of the more beneficial Debenture as to that balance, including
accrued interest and any accumulated liquidated damages, remaining on Holder's
original investment. The Debentures are subject to a mandatory, 24 month
conversion feature at the end of which all Debentures outstanding will be
automatically converted, upon the terms set forth in this section ("Mandatory
Conversion Date").
(e) Nothing contained in this Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(b), the Company shall deliver a
certificate, in accordance with Section 3(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein "No. Business Days Late" is
defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.
The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the Conversion
Date if late. Nothing herein shall limit a Holder's right to pursue actual
damages or cancel the conversion for the Company's failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Holders of the entire
amount of Debentures then outstanding. If, at any time Holder submits a Notice
of Conversion and the Company does not have sufficient authorized but unissued
shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), upon Holder's sole option, may be deemed null and
void. The Company shall provide notice of such Conversion Default ("Notice of
Conversion Default") to all existing Holders of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Holder shall give notice to
the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Holder's option, payable as follows: (i) in
the event Holder elects to take such payment in cash, cash payments shall be
made to such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at the
conversion rate set forth in section 4(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture.
Nothing herein shall limit the Holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(i) The Company shall furnish to Holder such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
(j) Notwithstanding the provisions hereof or of the
Debenture(s), in no event except (i) with respect to a conversion pursuant to
redemption by the Company or (ii) if there is (a) a public announcement that 50%
or more of the Company is being acquired, (b) a public announcement that the
Company is being merged, or (c) a public announcement that there is a change in
control, shall the Holder be entitled to convert any Debentures to the extent
that, after such conversion, the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership
of the unconverted portion of the Debentures), and (2) the number of shares of
Common Stock issuable upon the conversion of the Debentures 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 outstanding shares of Common Stock (after taking into account the shares
to be issued to the Holder upon such conversion). 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 (the "1934 Act"), except as otherwise provided in clause (1) of
such proviso. The Holder further agrees that if the Holder transfers or assigns
any of the Debentures to a party who or which would not be considered such an
affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section as
if such transferee or assignee were a signatory to the Subscription Agreement.
(k) Redemption. Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on
the Debentures during the two year period following the Closing Date.
Notwithstanding the preceding sentence, the Company shall be required to and
herewith agrees to and shall apply at least 20% of the gross profits from
the sale of ddR Multi-Systems for the redemption of the Debentures. The
Company will continue to do so until such time that the Debentures or any
unconverted portion of the Debentures has been fully redeemed. Redemption
payments would be applied to the outstanding balance in the following
manner: for example should the company wish to redeem a portion after the
first 30-day period they would owe 3% x $1,000,000 = $30,000 plus some
portion of the $1,000,000 principle, say $100,000. This would mean that if
the company paid $130,000 on the 30th day they would still owe $900,000 on
the 31st day.
The redemption terms shall be based on the interest
rate applicable to the Debentures as follows: 3% per each 30-day period, on a
pro rata basis, for the first ninety (90) days following closing; 3 1/2 % for
each 30-day period, on a pro rata basis, beginning from the ninety-first (91st)
day after closing and ending on the one hundred and twentieth (120th) day
following closing; and 4% per each 30-day period, on a pro rata basis,
beginning from the one hundred and twenty-first (121st) day following the
closing.
The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 5 business days following the date the Company notifies
the Holder by facsimile of the redemption. The Company shall give the Holder at
least 5 business day's notice of its intent to redeem.
Section 3.3. Fractional Shares. The Company shall not issue
fractional shares of Common Stock, or scrip representing fractions of such
shares, upon the conversion of this Debenture. Instead, the Company shall
round up or down, as the case may be, to the nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder
shall pay any such tax which is due because the shares are issued in a name
other than its name.
Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in Section 3(a) of the Subscription Agreement dated September of 1998, to
permit the conversion of this Debenture subject to certain options granted to
the Company and referred to in Section 3(a) of the Subscription Agreement. All
shares of Common Stock which may be issued upon the conversion hereof shall upon
issuance be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the "Act") and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable upon
the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 business days thereafter, (c) the Company fails to comply with any of its
other agreements in this Debenture and such failure continues for the period and
after the notice specified below, (d) the Company pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a
voluntary case; (ii) consents to the entry of an order for relief against it in
an involuntary case; (iii) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially all of its property or
(iv) makes a general assignment for the benefit of its creditors or (v) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that: (A) is for relief against the Company in an involuntary case; (B) appoints
a Custodian of the Company or for all or substantially all of its property or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days, (e) the Company's Common Stock is no longer
listed on any recognized exchange including electronic over-the-counter bulletin
board. As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least 25% of the aggregate
principal amount of the Debentures outstanding notify the Company of such
default and the Company does not cure it within five (5) business days after the
receipt of such notice, which must specify the default, demand that it be
remedied and state that it is a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable. Upon such
declaration, the remaining principal amount shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are referred to
herein collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the "Register") showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this Debenture is
the person exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may
be registered on the books of the Company maintained for such purpose pursuant
to Section 7.2 above (i.e., the Register). Transfers shall be registered when
this Debenture is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the appropriate person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including tax laws and
state and federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the transferee as the record holder thereof shall be issued in lieu
hereof. When this Debenture is presented to the Company with a reasonable
request to exchange it for an equal principal amount of Debentures of other
denominations, the Company shall make such exchange and shall cancel this
Debenture and issue in lieu thereof Debentures having a total principal amount
equal to this Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices, with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in the payment of principal or conversion into
Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the
Company is required or allowed, such determination shall be made by a majority
of the Board of Directors of the Company and if it is made in good faith, it
shall be conclusive and binding upon the Company and the Holder of this
Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of New York applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of New York.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.
SWISSRAY INTERNATIONAL, INC.
By
Name: Ruedi G. Laupper
Title: Chairman and President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated _________________,
1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
- -------------------------------------------------------------------------------
(principal amount of Debenture, $5,000 or integral multiples of $5,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: Signed:
(Signature must conform in all
respects to name of Holder shown of face of Debenture)
Signature Guaranteed:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR
ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION,
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION
OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
STOCKHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION,
THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT
FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.
WARRANT TO PURCHASE 25,000 SHARES OF
COMMON STOCK OF SWISSRAY INTERNATIONAL, INC.
Exercisable Commencing January , 1999;
Void after January , 2004
THIS CERTIFIES that, for value received DOMINION CAPITAL FUND, LTD. or its
registered assigns (the "Warrantholder") is entitled, subject to the terms and
conditions set forth in this Warrant, to purchase from SWISSRAY INTERNATIONAL,
INC., a New York corporation (the "Company"), 14,625 fully paid, duly authorized
and nonassessable shares (the "Shares"), of Common Stock, $.0001 par value per
share, of the Company (the "Common Stock"), at any time commencing January __,
1999 and continuing up to 5:00 p.m. New York City time on January , 2004 at an
exercise price of $1.00 subject to adjustment pursuant to Section 8 hereof.
This Warrant is subject to the following provisions, terms and
conditions:
Section 1. Transferability.
1.1 Registration. The Warrants shall be issued only in registered
form and Shares issuable upon exercise of the Warrants shall have piggy back
registration rights and shall be registered by the Company pursuant to the terms
of a Registration Rights Agreement between the Company and Warrantholder.
1.2 Transfer. This Warrant shall be transferable only on the books of
the Company maintained at its principal executive offices upon surrender thereof
for registration of transfer duly endorsed by the Warrantholder or by its duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant or Warrants in
appropriate denominations to the person or persons entitled thereto.
1.3 Legend on Warrant Shares. Each certificate for Shares
initially issued upon exercise of a Warrant, unless at time of exercise such
Shares are registered under the Securities Act of 1933, as amended (the
"Securities Act"), shall bear the following legend:
------------------------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear the above
legend unless the Company receives an opinion of counsel acceptable to the
Company that registration or qualification of the securities represented thereby
under the laws referred to therein is not required.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates of like tenor entitling the
Warrantholder to purchase a like aggregate number of Shares as the certificate
or certificates surrendered then entitle such Warrantholder to purchase. Any
Warrantholder desiring to exchange a warrant certificate shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Terms of Warrants: Exercise of Warrants.
(a) Subject to the terms of this Warrant, the Warrantholder shall have
the right, at any time after January , 1999, but before 5:00 p.m., New York City
time on January , 2004 (the "Expiration Time"), to purchase from the Company up
to the number of Shares which the Warrantholder may at the time be entitled to
purchase pursuant to the terms of this Warrant, upon surrender to the Company at
its principal executive office, of the certificate evidencing this Warrant to be
exercised, together with the attached Election to Exercise form duly filled in
and signed, and upon payment to the Company of the Warrant Price (as defined in
and determined in accordance with the provisions of Section 7 and 8 hereof) for
the number of Shares with respect to which such Warrant is then exercised.
Payment of the aggregate Warrant Price shall be made in cash, wire transfer or
by cashier's check or any combination thereof.
(b) Subject to the terms of this Warrant, upon such surrender of this
Warrant and payment of such Warrant Price as aforesaid, the Company shall
promptly issue and cause to be delivered to the Warrantholder or to such person
or persons as the Warrantholder may designate in writing, a certificate or
certificates (in such name or names as the Warrantholder may designate in
writing) for the number of duly authorized, fully paid and non-assessable whole
Shares to be purchased upon the exercise of this Warrant, and shall deliver to
the Warrantholder Common Stock or cash, to the extent provided in Section 9
hereof, with respect to any fractional Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Shares as of the close of business on the date of the surrender
of this Warrant and payment of the Warrant Price, notwithstanding that the
certificates representing such Shares shall not actually have been delivered or
that the Share and Warrant transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the sole election of the Warrantholder,
either in full or from time to time in part and, in the event that any
certificate evidencing this Warrant (or any portion thereof) is exercised prior
to the Termination Date with respect to less than all of the Shares specified
therein at any time prior to the Termination Date, a new certificate of like
tenor evidencing the remaining portion of this Warrant shall be issued by the
Company, if so requested by the Warrantholder.
(c) Upon the Company's receipt of a facsimile or original of
Warrantholder's signed Election to Exercise, the Company shall instruct its
transfer agent to issue one or more stock Certificates representing that number
of shares of Common Stock which the Warrantholder is entitled to purchase in
accordance with the terms and conditions of this Warrant and the Election to
Exercise attached hereto. The Company's transfer agent or attorney shall act as
Registrar and shall maintain an appropriate ledger containing the necessary
information with respect to each Warrant.
(d) Such exercise shall be effectuated by surrendering to the Company,
or its attorney, the Warrants to be converted together with a facsimile or
original of the signed Election to Exercise which evidences Warrantholder's
intention to exercise those Warrants indicated. The date on which the Election
to Exercise is effective ("Exercise Date") shall be deemed to be the date on
which the Warrantholder has delivered to the Company a facsimile or original of
the signed Election to Exercise, as long as the original Warrants to be
exercised are received by the Company or its designated attorney within 5
business days thereafter. As long as the Warrants to be exercised are received
by the Company within five business days after it receives a facsimile or
original of the signed Election to Exercise, the Company shall deliver to the
Warrantholder, or per the Warrantholder's instructions, the shares of Common
Stock to an address in the U.S., without restrictive legend or stop transfer
instructions, within 5 business days of receipt of the Warrants to be converted.
(e) Nothing contained in this Warrant shall be deemed to establish or
require the payment of interest to the Warrantholder at a rate in excess of the
maximum rate permitted by governing law. In the event that the rate of interest
required to be paid exceeds the maximum rate permitted by governing law, the
rate of interest required to be paid thereunder shall be automatically reduced
to the maximum rate permitted under the governing law and such excess shall be
returned with reasonable promptness by the Warrantholder to the Company.
(f) It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Certificate of Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person in whose name
the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the exercise date. Upon surrender of any
Warrants that are to be converted in part, the Company shall issue to the
Warrantholder new Warrants equal to the unconverted amount, if so requested by
Warrantholder.
Nothing herein shall limit the Warrantholder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock.
(g) The Company shall furnish to Warrantholder such number of
prospectuses and other documents incidental to the registration of the Common
Stock underlying the Warrants, including any amendment of or supplements
thereto.
(h) Each person in whose name any certificate for shares of Common
Stock shall be issued shall for all purposes be deemed to have become the holder
of record of the Common Stock represented thereby on the date on which the
Warrant was surrendered and payment of the purchase price and any applicable
taxes was made, irrespective of date of issue or delivery of such certificate,
except that if the date of such surrender and payment is a date when the Shares
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such Shares on the next succeeding date on which such Share
transfer books are open. The Company shall not close such Share transfer books
at any one time for a period longer than seven days.
Section 4. Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the Shares;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable, (i) with respect to any secondary transfer of this
Warrant or the Shares or (ii) as a result of the issuance of the Shares to any
person other than the Warrantholder, and the Company shall not be required to
issue or deliver any certificate for any Shares unless and until the person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have produced evidence that such tax has been paid to the
appropriate taxing authority.
Section 5. Mutilated or Missing Warrant. In case the certificate or
certificates evidencing this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and of a bond of indemnity, if requested, also
satisfactory to the Company in form and amount, and issued at the applicant's
cost. Applicants for such substitute Warrant certificate shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
Section 6. Reservation of Shares. The Company has duly and validly
reserved, and shall at all times so long as this Warrant remains outstanding,
keep reserved, out of its authorized and unissued capital stock, sufficient
shares of Common Stock as shall be subject to purchase under this Warrant (the
"Reserved Shares"). The issuance, sale and delivery of the Warrants and Reserved
Shares have been duly authorized by all required corporate action on the part of
the Company and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and therein, will be
duly and validly issued, fully paid, and non-assessable and enforceable in
accordance with their terms, subject to the laws of bankruptcy and creditors'
rights generally. The Company shall pay all taxes in respect of the issue
thereof. As a condition precedent to the taking of any action that would result
in the effective purchase price per share of Common Stock upon the exercise of
this Warrant being less than the par value per share (if such shares of Common
Stock then have a par value), the Company will take such corporate action as
may, in the opinion of its counsel, be necessary in order that the Company may
comply with all its obligations under this Agreement with regard to the exercise
of this Warrant.
Prior to exercise of all the Warrants, if at anytime the conversion of
all the Shares and exercise of all the Warrants outstanding results in an
insufficient number of Reserved Shares being available to cover all the
conversions and exercises, then in such event, the Company will move to call and
hold a shareholder's meeting within 45 days of such event for the purpose of
authorizing additional Shares to facilitate the conversions. In such an event
the Company shall: (1) recommend to its current or future officers, directors
and other control people to vote their shares in favor of increasing the
authorized number of shares of Common Stock and (2) recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock. As for any shareholders who do not vote on the issue
of increasing the authorized number of shares of Common Stock, such failure to
vote shall automatically be taken as a vote in favor of increasing the
authorized number of shares of Common Stock. The proxy sent out by the Company
to all shareholders shall provide that if no vote is received a consent to
action will be executed on behalf of those shares of Common Stock for which no
vote was received, in favor of increasing the authorized number of shares of
Common Stock of the Company. Company represents and warrants that under no
circumstances will it deny or prevent Warrantholder from exercising the Warrants
as permitted under the terms of the Subscription Agreement, the Warrants or the
Registration Rights Agreement.
Section 7. Warrant Price. From January , 1999 through 5:00
p.m. New York City time on January , 2004, the price per Share (the "Warrant
price") at which Shares shall be purchasable upon the exercise of this Warrant
shall be $1.00 subject to adjustment pursuant to Section 8 hereof.
Section 8. Adjustment of Warrant Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time after the
date hereof upon the happening of certain events, as follows:
8.1 Adjustments. The number of Shares purchasable upon the
exercise of this Warrant shall be subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend on Common Stock in
Common Stock or securities convertible into, exchangeable for or otherwise
entitling a holder thereof to receive Common Stock, (ii) declare a dividend
payable in cash on its Common Stock and at substantially the same time offer its
shareholders a right to purchase new Common Stock (or securities convertible
into, exchangeable for or other entitling a holder thereof to receive Common
Stock) from the proceeds of such dividend (all Common Stock so issued shall be
deemed to have been issued as a stock dividend), (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, (iv)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (v) issue by reclassification of its Common Stock any shares
of Common Stock of the Company, the number of shares of Common Stock issuable
upon exercise of the Warrants immediately prior thereto shall be adjusted so
that the holders of the Warrants shall be entitled to receive after the
happening of any of the events described above that number and kind of shares as
the holders would have received had such Warrants be converted immediately prior
to the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subdivision shall become effective immediately
after the close of business on the record date in the case of a stock dividend
and shall become effective immediately after the close of business on the
effective date in the case of a stock split, subdivision, combination or
reclassification.
(b) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends other than as described in
Section (8)(a)(ii)), then in such case, the number of shares of Common Stock
thereafter issuable upon exercise of the Warrants shall be determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of the Warrants, by a fraction, of which the numerator shall be the
closing bid price per share of Common Stock on the record date for such
distribution, and of which the denominator shall be the closing bid price of the
Common Stock less the then fair value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed per share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(c) Any adjustment in the number of shares of Common Stock issuable
hereunder otherwise required to be made by this Section 8 will not have to be
adjusted if such adjustment would not require an increase or decrease in one
percent (1%) or more in the number of shares of Common Stock issuable upon
exercise of the Warrant. No adjustment in the number of Shares purchasable upon
exercise of this Warrant will be made for the issuance of shares of capital
stock to directors, employees or independent contractors pursuant to the
Company's or any of its subsidiaries' stock option, stock ownership or other
benefit plans or arrangements or trusts related thereto or for issuance of any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under such plan.
(d) Whenever the number of shares of Common Stock issuable upon the
exercise of the Warrants is adjusted, as herein provided the Warrant Price shall
be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of shares of Common Stock issuable upon the exercise of each share of the
Warrants immediately prior to such adjustment, and of which the denominator
shall be the number of shares of Common Stock issuable immediately thereafter.
(e) The Company from time to time by action of its Board of Directors
may decrease the Warrant Price by any amount for any period of time if the
period is at least 20 days, the decrease is irrevocable during the period and
the Board of Directors of the Company in its sole discretion shall have made a
determination that such decrease would be in the best interest of the Company,
which determination shall be conclusive. Whenever the Warrant Price is decreased
pursuant to the preceding sentence, the Company shall mail to holders of record
of the Warrants a notice of the decrease at least 15 days prior to the date the
decreased Warrant Price takes effect, and such notice shall state the decreased
Warrant Price and the period it will be in effect.
8.2 Mergers. Etc. In the case of any (i) consolidation or merger of the
Company into any entity (other than a consolidation or merger that does not
result in any reclassification, exercise, exchange or cancellation of
outstanding shares of Common Stock of the Company), (ii) sale, transfer, lease
or conveyance of all or substantially all of the assets of the Company as an
entirety or substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
holder of Warrants then outstanding shall have the right thereafter to exercise
such Warrant only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of shares of Common
Stock of the Company into which such Warrants would have been converted
immediately prior to such consolidation, merger, sale, transfer, capital
reorganization or reclassification, assuming such holder of Common Stock of the
Company (A) is not an entity with which the Company consolidated or into which
the Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent entity"), or an affiliate of
a constituent entity, and (B) failed to exercise his or her rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by other than a constituent entity or an affiliate thereof and in
respect of which such rights or election shall not have been exercised
("non-electing share"), then for the purpose of this Section 8.2 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). If necessary, appropriate adjustment shall be made in the
application of the provision set forth herein with respect to the rights and
interests thereafter of the holder of Warrants, to the end that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of the Warrants. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, capital reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless prior to or
simultaneously with the consummation thereof the successor company or entity (if
other than the Company) resulting from such consolidation, merger, sale or
transfer assumes, by written instrument, the obligation to deliver to the holder
of Warrants such shares of stock, securities or assets as, in accordance with
the foregoing provision, such holder may be entitled to receive under this
Section 8.2.
8.3 Statement of Warrants. Irrespective of any adjustments in
the Warrant Price of the number or kind of shares purchasable upon the exercise
of this Warrant, this Warrant certificate or certificates hereafter issued may
continue to express the same price and number and kind of shares as are stated
in this Warrant.
Section 9. Fractional Shares. Any fractional shares of Common Stock
issuable upon exercise of the Warrants shall be rounded to the nearest whole
share or, at the election of the Company, the Company shall pay the holder
thereof an amount in cash equal to the closing bid price thereof. Whether or not
fractional shares are issuable upon exercise shall be determined on the basis of
the total number of Warrants the holder is at the time exercising and the number
of shares of Common Stock issuable upon such exercise.
Section 10. No Rights as Stockholders: Notices to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees any rights as a stockholder of the Company,
including the right to vote, receive dividends, consent or receive notices as a
stockholder with respect to any meeting of stockholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
5:00 p.m., New York City time, on January , 2004, (the "Expiration Time") and
prior to the exercise of this Warrant, any of the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1; or
(b) a dissolution, liquidation or winding up of the Company or any
consolidation, merger or sale of its property, assets and business as an
entirety; then in any one or more of said events, the Company shall give notice
in writing of such event to the Warrantholder at least 10 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights, or other rights or for the effective date of
any dissolution, liquidation of winding up or any merger, consolidation, or sale
of substantially all assets, but failure to mail or receive such notice or any
defect therein or in the mailing thereof shall not affect the validity of any
such action taken. Such notice shall specify such record date or the effective
date, as the case may be.
Section 11. Successors. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Warrantholder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder.
Section 12. Applicable Law. This Warrant shall be construed and
enforced in accordance with and the rights of the parties shall be governed by
the laws of the State of New York.
Section 13. Benefits of this Agreement. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Warrantholder any legal or equitable right, remedy or claim under this
Warrant, and this Warrant shall be for the sole and exclusive benefit of the
Company and the Warrantholder.
Section 14. Piggy-back Registration Rights. If at any time prior to the
expiration of the warrant the Company shall propose to prepare on its own behalf
or on behalf of any of its stockholders (other than Warrantholder) a
registration statement in connection with an underwritten public offering of any
equity securities of the Company, the Company shall give Warrantholder written
notice at least 20 days before the anticipated filing date of such registration
statement. Should Warrantholder desire to have any of the Shares included in
such registration statement Warrantholder shall so advise the Company in writing
no later than 15 days after the Company's notice is given, setting forth the
number or amount of Shares which Warrantholder requests to be included in the
registration statement, and the Company shall include the securities specified
in such request in such registration statement and keep such registration
statement in effect and maintain compliance with each federal and state law and
regulation as set forth herein. The Company may, at its option, require that the
amount of Shares offered for sale by Warrantholder pursuant to this Section 14
be decreased if, in the opinion of the Company's investment banking firm, such
reduction is necessary in order to permit the orderly distribution and sale of
the securities being offered. If the Company shall require such a reduction,
Warrantholder shall have the right to withdraw from the offering.
Section 15. Definitions.
"Common Stock" shall mean (i) Common Stock, $.0001 par value per share,
of the Company and (ii) any other security purchasable upon the exercise of this
Warrant upon the happening of certain events.
IN WITNESS WHEREOF, the parties have caused this Warrant to be duly
executed, all as of the day and year first above written.
SWISSRAY INTERNATIONAL , INC.
By:________________________________
Ruedi G. Laupper its Chairman
and President
SRMIDJAN99.SUB Z/5
<PAGE>
SWISSRAY INTERNATIONAL, INC.
ELECTION TO EXERCISE
SWISSRAYINTERNATIONAL, INC.
c/o Gary B. Wolff, Esq.
747 Third Avenue - 25th Floor
New York, NY 10017
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder, _______shares
of Common Stock (the "Share") provided for therein, and requests that
certificates for the Shares be issued in the name of:*
Name:___________________________________________________________
Address:_________________________________________________________
Social Security No.________________________________________________
or Tax ID Number:_________________________________________________
and, if such number of Shares shall not be all of the Shares purchasable under
the Warrant, that a new Warrant certificate for the balance of the Shares
purchasable under the within Warrant be registered in the name of the
undersigned warrantholder or his Assignee* as indicated below and delivered to
the address stated below:
Dated:________, 19___
Name of Warrantholder of
Assignee (Please Print)_____________________________________________
Address:_________________________________________________________
Signature:________________________________________________________
Signature Guaranteed:______________________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The above signature must correspond with the name as written on
the face of this Warrant certificate in every particular, without alteration or
enlargement or any change whatever, unless this warrant has been assigned.
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant)*
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing
_________Attorney to transfer said Warrant on the books of the Company, with
full power of substitution in the premises.
Dated:______________, 19____
________________________________**
Signature of Registered Holder
Signature Guaranteed: ________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The signature of this assignment must correspond with the name
as it appears upon the face of the Warrant certificate in every particular,
without alteration or enlargement or any change whatever.
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
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 (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
PROMISSORY NOTE
$ Hochdorf, Switzerland
March 3, 1999
FOR VALUE RECEIVED, the undersigned, SWISSRAY INTERNATIONAL, INC., a
New York corporation, (the ?Company? or ?Borrower?), hereby promises to pay to
the order of SOVEREIGN PARTNERS LIMITED PARTNERSHIP (the ?Lender?), the
principal amount of $________ in lawful money of the United States of America in
same day or other immediately available funds, together with interest at the
rate hereinafter set forth, payable on or before May 31, 1999.
Interest on the principal balance of this Note from time to time
outstanding and unpaid shall be computed on the basis of a 360-day year for the
actual number of days elapsed at a simple interest rate per annum equal to eight
percent (8%) commencing on March 3, 1999.
Principal and all accrued interest, at the rate of eight percent (8%)
per annum, shall be payable without the necessity for demand or notice on May
31, 1999. All payments of principal and interest shall be paid by wire transfer
per the written instructions of Lender. As further consideration for this loan,
Borrower agrees to issue to Lender a Warrant to purchase ______ shares of the
Borrower?s common stock, par value $0.01 per share, exercisable (for a period of
5 years commencing with the date of closing) at 125% of the average five (5) day
closing bid price of the Company?s common stock for the five (5) trading days
immediately preceding March 3, 1999, but in no event less than $1.00 per
share.on day of closing for a period of five (5) years.
The Borrower, in Borrower?s sole discretion, may extend the term of
this Note for an additional sixty (60) day period at an additional 2% interest
rate per annum. Borrower must send written notice of its election to extend the
term of this Note. Said written notice must be sent by facsimile pursuant to
the notice provisions of this Note, on or before May 28, 1999. Borrower shall
not be entitled to extend the term of this Note beyond July 30, 1999.
In the event the Promissory Note is not paid in full on or before its
due date, then in such event the terms of the Contingent Subscription Agreement,
Debenture and Registration Rights Agreement, which are incorporated herein by
reference and made a part hereof, shall apply and control. The ?Due Date? of
this Note shall mean the later of May 31., 1999 or July 30, 1999, if the Company
exercise its right to extend the May 31, 1999, due date.
The obligations of Borrower under this Note are secured by a lien on
inventory and by a second mortgage on real estate owned by the Borrower and
located in Switzerland (the ?Security?). The Security is being provided as an
inducement for Lender to enter into this loan transaction and so as to secure
Lender position in prior financings in which Lender have been unable to convert
their debentures into shares of the Borrower?s common stock, in part, due to the
absence of an established trading market for a significant period of time. The
Security shall remain in effect throughout the term of this loan so long as any
portion of the Borrower?s indebtedness to Lender continues in effect and such
Security shall be reduced utilizing the following formula:
A. Reducing the Borrower?s indebtedness (evidenced by convertible debentures
aggregating $14,750,000*: when such $14,750,000* indebtedness is reduced to
$10,000,000 then (i) 25% of secured inventory shall be released from lien and
(ii) 25% of second mortgage on land and building shall similarly be released
from lien (*Inclusive of $1,080,000 represented by promissory notes and
contingently convertible into debentures);
B. For each further reduction of an additional $2,500,000 in Borrower?s
indebtedness from $10,000,000 to $5,000,000 releases from lien shall be
accomplished on a pro-rata basis in the same manner as indicated in A above,
i.e., each $2,500,000 reduction in indebtedness shall result in release of 25%
of each lien amount; and C. When indebtedness is reduced to $5,000,000 or less,
then the second mortgage on land and building shall be released in its entirety
and inventory collateral shall continue to be reduced on a pro-rata basis in the
same manner as indicated in paragraphs designated A. and B. above.
Borrower hereby waives presentment, protest, notice of protest and
notice of dishonor of this Note. The non-exercise by the Lender of any rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any other subsequent instance. The Borrower shall not create any class
of indebtedness that ranks senior to this Note.
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
The Borrower and any endorsers hereof, for themselves and their
respective representatives, successors and assigns (except as specifically
provided in the Loan Agreement) expressly waive presentment, demand, protest,
notice of dishonor, notice of non-payment, notice of maturity, notice of
protest, diligence in collection, and the benefit of any applicable exemptions,
including, but not limited to, exemptions claimed under insolvency laws.
SECURED CREDITORS. Borrower represents and warrants that it does not
have any outstanding security interests in the inventory or real estate other
than those set forth in Schedule A attached hereto and made a part hereof and it
shall not create or incur any indebtedness or obligation for borrowed money
except for indebtedness with respect to trade obligations and other normal
accruals in the ordinary course of business not yet due and payable, and shall
not grant any other security interests until payment and performance in full of
the obligations hereunder, unless Lender otherwise consents in writing which
consent shall not be unreasonably withheld. Borrower represents, warrants and
covenants that the Collateral and proceeds are not subject to any security
interest, lien, prior assignment, or other encumbrance of any nature whatsoever
except for the security interest created by this Note other than as indicated in
attached Schedule A.
AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that
from the date hereof until payment and performance in full of the obligations
hereunder, unless Lender otherwise consents in writing:
(a) Use of Proceeds. The proceeds disbursed under the Note shall be
used primarily for working capital.
(b) Borrower represents and warrants that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
validity or enforceability of this Note and there are no outstanding orders or
judgments of any court or governmental authority or awards of any arbitrator or
arbitration board against the Borrower excepting for such law suits or
proceedings as are indicated and summarized in Borrower?s Form 10K for fiscal
year ended June 30, 1998.
DEFAULT. If any of the following events occur (a ?default?), the terms of the
Contingent Subscription Agreement, Debenture and Registration Rights Agreement
which are incorporated herein by reference and made a part hereof, shall apply
and control:
(a) Borrower fails to pay when due any principal or interest under
this Note;
(b) Borrower fails to observe or perform any covenant or agreement
set forth in this Note or in any instrument, document or agreement concerning
the Collateral;
(c) Borrower makes a general assignment for the benefit of its
creditors, files or become the subject of a petition in bankruptcy, for an
arrangement with its creditors or for reorganization under any federal or state
bankruptcy or other insolvency law;
(d) Borrower files or becomes the subject of a petition for the
appointment of a receiver, custodian, trustee or liquidator of the party or of
all or substantially all of its assets under any federal or state bankruptcy or
other insolvency law;
(e) Borrower is voluntarily or involuntarily terminated or
dissolved;
(f) Borrower or any accommodation maker, endorser or guarantor enters
into any merger or consolidation, or sale, lease, liquidation or other
disposition of all or substantially all of its assets or any transaction outside
the ordinary course of its business or for less than fair consideration or
substantially equivalent value without Lender?s prior written consent;
(g) Any judgment is entered against Borrower or any attachment
upon or garnishment of any property of Borrower is issued which materially
effects Borrower?s ability to repay the Promissory Note; or
(h) Any representation or statement made herein or any other
written representation or statement made or furnished to Lender by Borrower was
materially incorrect or misleading at the time it was made or furnished.
LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
on or arising out of, under, or in connection with, this Promissory Note shall
be brought and maintained exclusively in the courts of Switzerland. The parties
hereby expressly and irrevocably submit to the jurisdiction of the state and
federal courts of Switzerland for the purpose of any such litigation as set
forth above and irrevocably agree to be bound by any final judgment rendered
thereby in connection with such litigation. The Borrower further irrevocably
consents to the service of process by registered mail, postage prepaid, or by
personal service within or without Switzerland. The Borrower hereby expressly
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may have or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in any inconvenient forum. To the extent that
the Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Lender and the Borrower hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
written statements or actions of the Lender or the Borrower. The Borrower
acknowledges and agrees that it has received full and sufficient consideration
for
7
<PAGE>
this provision and that this provision is a material inducement for the Lender
entering into this agreement.
MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
(b) Neither this Promissory Note nor any provision hereof shall be
waived, modified, changed, discharged, terminated, revoked or canceled, except
by an instrument in writing signed by the party effecting the same against whom
any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed:
(i) if to the Borrower, c/o Gary B. Wolff, Esq. 747 Third Avenue , 25th Floor,
NY, NY 10017 with a facsimile copy sent on the same date and (ii) if to Lender
c/o Joseph B. LaRocco, Esq. 49 Locust Avenue, Suite 107, New Canaan, CT 06840.
(d) This Promissory Note shall be enforced, governed and construed in
all respects in accordance with the laws of Switzerland, as such laws are
applied by Switzerland courts to agreements entered into, and to be performed
in, Switzerland by and between residents of Switzerland, and shall be binding
upon the undersigned, the undersigned's heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Lender, its
successors and assigns. If any provision of this Promissory Note is invalid or
unenforceable under any applicable statue or rule of law, then such provisions
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
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS IN CONNECTION WITH
WHICH THIS NOTE WAS EXECUTED AND DELIVERED AND WHICH ARE CONTEMPLATED BY THE
TERMS OF THE AGREEMENT ARE, IN ALL CASES, COMMERCIAL TRANSACTIONS; AND THE
BORROWER HEREBY EXPRESSLY WAIVES ANY AND ALL CONSTITUTIONAL RIGHTS IT MAY HAVE
AS NOW CONSTITUTED OR HEREAFTER AMENDED, WITH REGARD TO NOTICE, ANY JUDICIAL
PROCESS AND ANY AND ALL OTHER RIGHTS IT MAY HAVE, AND THE LENDER MAY INVOKE ANY
PREJUDGMENT REMEDY AVAILABLE TO IT OR ITS SUCCESSORS OR ASSIGNS.
SWISSRAY INTERNATIONAL, INC.
By_________________________________
Ruedi G. Laupper its Chairman
and President duly authorized
SCHEDULE A
In addition to the security interest created by this note, a prior
security interest has been created by virtue of notes dated December 11, 1998 in
accordance with which borrower received gross proceeds aggregating $1,080,000
one-half of which was received from Dominion Capital Fund, Ltd. and one-half of
which was received from Sovereign Partners Limited Partnership.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 3, 1999, (?this
Agreement?), is made by and between SWISSRAY INTERNATIONAL, INC. a New York
corporation (the ?Company?), and the person named on the signature page hereto
(the ?Initial Investor?).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Contingent
Subscription Agreement, dated as of March 3, 1999, between the Initial Investor
and the Company (the ?Subscription Agreement?), the Company has agreed to issue
and sell to the Initial Investor 5% Convertible Debentures of the Company (the
?Debentures?), which will be convertible into shares of the common stock, $.01
par value (the ?Common Stock?), of the Company and Warrants to purchase the
Common Stock (collectively the ?Conversion Shares?) upon the terms and subject
to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
?Securities Act?), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) ?Due Date? means the later of May 31, 1999, or July 31, 1999,
if the Company exercises its option to extend the May 31, 1999, due date on the
promissory note dated March 3, 1999.
(ii) ?Investor? means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) ?Register,? ?Registered? and ?Registration? refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis (?Rule 415?), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the ?SEC?).
(iv) ?Registrable Securities? means the Conversion Shares.
(v) ?Registration Statement? means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Due Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the Warrants would be exercised and the
$1,110,000 of Debentures, plus accrued interest, in the total offering would be
convertible. In the event the Registration Statement is not filed within
forty-five (45) calendar days after the Due Date, then in such event the Company
shall pay the Investor 2% of the face amount of each Debenture for each 30 day
period, or portion thereof, after forty-five (45) calendar days following the
Due Date that the Registration Statement is not filed. The Investor is also
granted Piggy-back registration rights on any other Registration Statement
filings made by the Company exclusive of Registration Statements on Form S-8 and
so long as permissible under the Securities Act. Such Registration Statement
shall state that, in accordance with the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
to prevent dilution resulting from Stock splits, or stock dividends. If at any
time the number of shares of Common Stock into which the Debenture(s) may be
converted exceeds the aggregate number of shares of Common Stock then
registered, the Company shall, within ten (10) business days after receipt of
written notice from any Investor, either (i) amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to register
all shares of Common Stock into which the Debenture(s) may be converted, or (ii)
if such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement on such form as is
applicable to register the shares of Common Stock into which the Debenture may
be converted that exceed the aggregate number of shares of Common Stock already
registered which new Registration Statement shall be filed within 45 days. The
above damages shall continue until the obligation is fulfilled and shall be paid
within 5 business days after each 30 day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said 5 business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the Due
Date will cause the Initial Investor to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate to
include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties? good faith effort to qualify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within one hundred twenty (120) calendar
days following the Due Date, then the Company shall pay the Initial Investor 2%
of the purchase price paid by the Initial Investor for the Registrable
Securities pursuant to the Subscription Agreement for every thirty day period,
or portion thereof, following the one hundred twenty (120) calendar day period
until the Registration Statement is declared effective. Notwithstanding the
foregoing, the amounts payable by the Company pursuant to this provision shall
not be payable to the extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act timely by
the Initial Investor or its counsel. The above damages shall continue until the
obligation is fulfilled and shall be paid within 5 business days after each 30
day period, or portion thereof, until the Registration Statement is declared
effective. Failure of the Company to make payment within said 5 business days
shall be considered a default.
The Company acknowledges that its failure to have the
Registration Statement declared effective within said one
hundred twenty (120) calendar day period following the Due
Date, will cause the Initial Investor to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this
Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties? good faith
effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated
damages shall not relieve the Company from its obligations to
register the Common Stock and deliver the Common Stock
pursuant to the terms of this Agreement, the Subscription
Agreement and the Debenture.
3. Obligation of the Company. In connection with
the registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Due Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) one hundred twenty (120) days after
the Due Date, and keep the Registration Statement effective at all times until
the earliest (the ?Registration Period?) of (i) the date that is two years after
the Due Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System (?NASDAQ?) ?Small Capitalization? within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the ?Exchange
Act?), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company?s commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. (?NASD?) as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the ?Requested
Information?) if such Investor elects to have any of such Investor?s Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a ?Non-Responsive Investor?), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor?s acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor?s election to exclude all of such Investor?s Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor?s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor?s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an ?Indemnified Person?), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
?Claims?) to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law (the matters in the foregoing clauses
(i) through (iii) being, collectively, ?Violations?). The Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (i) apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (ii) with respect to any preliminary prospectus, inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; (iii) be
available to the extent such Claim is based on a failure of the Investor to
deliver or cause to be delivered the prospectus made available by the Company;
or (iv) apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Each Investor will indemnify the Company, its
officers, directors and agents (including Counsel) against any claims arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
(?Rule 144?), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
8
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $1,110,000
This offering consists of $1,110,000 of
Convertible Debentures of Swissray
International, Inc.
--------------------
CONTINGENT SUBSCRIPTION AGREEMENT
-------------------
<PAGE>
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the ?Company?)
are being offered in an aggregate amount not to exceed $1,110,000 The
Debentures will be transferable to the extent that any such transfer is
permitted by law. This offering is being made in accordance with the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the ?Act?) and Rule 506 of Regulation D promulgated under the Act (the
?Regulation D Offering?).
The Investor Questionnaire is designed to enable the Investor to
demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9: ?Request for
Taxpayer Identification Number and Certification? for U.S. citizens or residents
of the U.S. for U.S. federal income tax purposes only. (Foreign investors
should consult their tax advisors regarding the need to complete Internal
Revenue Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
If and to the extent that there are any discrepancies or differences
between the Term Sheet and the underlying documents consisting of the Promissory
Note, Contingent Subscription Agreement, Convertible Debenture, Registration
Rights Agreement and Warrants, the terms contained in the Term Sheet shall take
precedence over those contained in the underlying documents. For instance (but
by no means limited to) if the Term Sheet indicates interest at the rate of 8%
per annum and the underlying documents refer to interest at a different rate or
on a different basis, then those terms contained in the Term Sheet shall
control. In the event that the Term Sheet is silent as to any specific terms and
conditions, then in that event the terms and conditions in the underlying
documents (absent any contradictions in the aforesaid Term Sheet) shall control.
3
<PAGE>
CONTINGENT SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., (?Company? or ?Seller?) a New York corporation, and the undersigned
prospective purchaser (?Purchaser?) who is subscribing hereby for the Company?s
Convertible Debentures (the ?Debentures?). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the ?Offering?) of up to $1,110,000 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the ?Regulation D Offering?) in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the ?Act?), and Rule 506 of Regulation D promulgated under the Act
(?Regulation D?).
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $_____________ of the Company?s Debentures. The Purchaser entering into
this Contingent Subscription Agreement shall pay the purchase price for the
Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent. (Said amount shall be deemed to have been delivered
to the Company upon non-payment of the full amount of principal and interest due
on the Promissory Note dated March 2, 1999 between the Company and the
Purchaser. The fully executed Contingent Subscription Agreement, Registration
Rights Agreement and Debenture shall be held by the escrow agent and shall only
be delivered to the Purchaser upon non-payment of the full amount of principal
and interest due on the Promissory Note on its ?Due Date?. The ?Due Date? of the
Promissory Note assuming non-payment of the Promissory Note, shall mean the
later of May 31, 1999, or July 30, 1999 if the Company exercises its option to
extend the May 31, 1999 payoff date. The Debentures shall pay a 5% cumulative
interest payable annually, in cash or in freely trading Common Stock of the
Company, at the Company?s option, at the time of each conversion. If paid in
Common Stock, the number of shares of the Company?s Common Stock to be received
shall be determined by dividing the dollar amount of the dividend by the then
applicable Market Price, as of the interest payment date. ? Market Price? shall
mean 80% of the 10-day average closing bid price, as reported by Bloomberg, LP,
for the ten (10) consecutive trading days immediately preceding the date of
conversion (the ?Conversion Price?). If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser?s instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
Due Date, as that term is defined above.
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent?s own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully read the
applicable form of Debenture included herein as Exhibit A and the form of
Registration Rights Agreement annexed hereto as Exhibit B (the "Registration
Rights Agreement"), and is familiar with and understands the terms of the
Offering. With respect to tax and other economic considerations involved in his
investment, the undersigned is not relying on the Company. The undersigned has
carefully considered and has, to the extent the undersigned believes such
discussion necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in the
Company, by purchasing the Debentures, for the undersigned's particular tax and
financial situation and has determined that the investment being made by the
undersigned is a suitable investment for the undersigned.
(b) The undersigned acknowledges that all documents, records, and books
pertaining to this investment which the undersigned has requested includes Form
10-KSB for the fiscal year ended June 30, 1997 and 10K for fiscal year ended
June 30, 1998 inclusive of any and all amendments thereto and Form 10-Q for the
quarters ended December 31, 1997, March 31, 1998, September 30, 1998 and
December 31, 1998 inclusive of any and all amendments thereto (the ?Disclosure
Documents?) have been made available for inspection by the undersigned or the
undersigned has access to the Disclosure Documents.
(c) The undersigned has 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 and all such questions have been answered to
the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the Debentures
without registration under the Act or applicable state securities laws or an
exemption therefrom. The Debentures have not been registered under the Act or
under the securities laws of any states. The Common Stock underlying the
Debentures is to be registered by the Company pursuant to the terms of the
Registration Rights Agreement attached hereto as Exhibit B and incorporated
herein and made a part hereof. Without limiting the right to convert the
Debentures and sell the Common Stock pursuant to the Registration Rights
Agreement, the undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not with a view
to resale or distribution except in compliance with the Act. The undersigned has
not offered or sold any portion of the Debentures being acquired nor does the
undersigned have any present intention of dividing the Debentures with others or
of selling, distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period of time
or upon the occurrence or non-occurrence of any predetermined event or
circumstance in violation of the Act. Except as provided in the Registration
Rights Agreement, the Company has no obligation to register the Common Stock
issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire amount of
such investment. Further, the undersigned has carefully read and considered the
schedule entitled Pending Litigation matters attached hereto as
Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each certificate
representing the Debentures unless registered pursuant to the Registration
Rights Agreement, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE
ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) IF AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE ALSO SUBJECT
TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT CERTAIN SUBSCRIPTION
AGREEMENT AND REGISTRATION RIGHTS AGREEMENT BY AND BETWEEN THE HOLDER
HEREOF AND THE COMPANY, A COPY OF EACH IS ON FILE AT THE COMPANY?S
PRINCIPAL EXECUTIVE OFFICE.
(ii) The Common Stock issued upon conversion shall contain the
following legend if converted prior to effectiveness of Registration Statement:
?No sale, offer to sell or transfer of the securities represented by
this certificate shall be made unless a registration statement under the
Federal Securities Act of 1933, as amended, with respect to such securities
is then in effect or an exemption from the registration requirement of such
Act is then in fact applicable to such securities.?
(iii) Common Stock issued upon conversion and subsequent to
effective date of Registration Statement (pursuant to which shares underlying
conversion are registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered on behalf
of a corporation, (i) such corporation has the full legal right and power and
all authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, this Subscription Agreement and all other instruments
(including, without limitation, the Registration Rights Agreement) executed and
delivered by or on behalf of such corporation in connection with the purchase of
the Debentures and (b) to purchase and hold the Debentures: (ii) the signature
of the party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the specific
purpose of acquiring the Debentures, unless each beneficial owner of such entity
is qualified as an accredited investor within the meaning of Rule 501(a) of
Regulation D and has submitted information substantiating such individual
qualification.
(h) The undersigned shall indemnify and hold harmless the Company and
each stockholder, executive, employee, representative, affiliate, officer,
director, agent (including Counsel) or control person of the Company, who is or
may be a party or is or may be threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any actual or
alleged misrepresentation or misstatement of facts or omission to represent or
state facts made or alleged to have been made by the undersigned to the Company
or omitted or alleged to have been omitted by the undersigned, concerning the
undersigned or the undersigned's subscription for and purchase of the Debentures
or the undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the undersigned, against
losses, liabilities and expenses for which the Company, or any stockholder,
executive, employee, representative, affiliate, officer, director, agent
(including Counsel) or control person of the Company has not otherwise been
reimbursed (including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the Company, or
such officer, director stockholder, executive, employee, agent (including
Counsel), representative, affiliate or control person in connection with such
action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures as a
result of, or pursuant to, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or meeting.
(j) The undersigned or the undersigned's representatives, as the case
may be, has such knowledge and experience in financial, tax and business matters
so as to enable the undersigned to utilize the information made available to the
undersigned in connection with the Offering to evaluate the merits and risks of
an investment in the Debentures and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Debentures for its own account
for investment, and not with a view toward the resale or distribution thereof.
Purchaser is neither an underwriter of, nor a dealer in, the Debentures or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Debentures or the Common Stock issuable upon
conversion thereof.
(l) There has never been represented, guaranteed, or warranted to the
undersigned by any broker, the Company, its officers, directors or agents, or
employees or any other person, expressly or by implication (i) the percentage of
profits and/or amount of or type of consideration, profit or loss to be
realized, if any, as a result of the Company?s operations; and (ii) that the
past performance or experience on the part of the management of the Company, or
of any other person, will in any way result in the overall profitable operations
of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery of the
Debentures have been duly authorized by all required corporate action on the
part of Seller, and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and therein, will be
duly and validly issued and enforceable in accordance with their terms, subject
to the laws of bankruptcy and creditors? rights generally. At least 200% of the
number of shares of Common Stock issuable upon conversion of all the Debentures
issued pursuant to this Offering have been duly and validly reserved for
issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares and, upon issuance shall
be duly and validly issued, fully paid, and non-assessable (the ?Reserved
Shares?). From time to time, the Company shall keep such additional shares of
Common Stock reserved so as to allow for the conversion of all the Debentures
issued pursuant to this offering.
Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures outstanding would result in an insufficient number of
authorized shares of Common Stock being available to cover all the conversions,
then in such event, the Company will move to call and hold a shareholder?s
meeting within 60 days of such event, or such greater period of time if
statutorily required or reasonabilly necessary as regards standard brokerage
house and/or SEC requirements and/or procedures, for the purpose of authorizing
additional shares of Common Stock to facilitate the conversions. In such an
event the Company shall recommend to all shareholders to vote their shares in
favor of increasing the authorized number of shares of Common Stock. Seller
represents and warrants that under no circumstances will it deny or prevent
Purchaser?s right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors? rights generally.
(c) Non-contravention. The execution and delivery of this Agreement and
the consummation of the issuance of the Debentures, and the transactions
contemplated by this Agreement do not and will not conflict with or result in a
breach by Seller of any of the terms or provisions of, or constitute a default
under, the articles of incorporation or by-laws of Seller, or any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Seller is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule, or regulation of the United States or any
State thereof or any applicable decree, judgment, or order of any Federal or
State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over Seller or any of its
properties or assets.
(d) Company Compliance. The Company represents and warrants that the
Company and its subsidiaries are: (i) in full compliance, to the extent
applicable, with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; excepting that the Company acknowledges
that it did not timely file its Form 10-K for its fiscal year ended June 30,
1998, and its Form 10-Q for the fiscal quarter ended September 30, 1998, both of
which were subsequently filed on December 3, 1998, (ii) not in violation of any
term or provision of its Certificate of Incorporation or by-laws; (iii) not in
default in the performance or observance of any obligation, agreement or
condition contained in any bond, debenture (excepting for reservation of number
of shares required if all Debentures were to be converted and excepting for
registration of underlying shares as same relates to preexisting debentures),
note or any other evidence of indebtedness or in any mortgage, deed of trust,
indenture or other instrument or agreement to which they are a party, either
singly or jointly, by which it or any of its property is bound or subject.
Furthermore, the Company is not aware of any other facts, which it has not
disclosed which could have a material adverse effect on the business, condition,
(financial or otherwise), operations, earnings, performance, properties or
prospects of the Company and its subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in Exhibit C,
there is (i) no action, suit or proceeding before or by any court, arbitrator or
governmental body now pending or, to the knowledge of the Company, threatened or
contemplated to which the Company or any of its subsidiaries is or may be a
party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and no law,
statute, rule, regulation, order or ordinance has been enacted, adopted or
issued by any Governmental Body that prevents the issuance of the Debentures or
the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the ?Disclosure
Documents?, as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company?s legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D. In the
past nine months the Company raised $15,933,449 in Regulation S and Regulation
D offerings, including redemptions and rollovers.
(l) Current Authorized Shares. As of March 1,1999 there were
50,000,000 authorized shares of Common Stock of which approximately 5,051,722
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company?s filing on
Form 10-K and 10-K/A for the year ended June 30, 1998 and Form 10-Q for quarters
ended September 30, 1998 and December 31, 1998 which could make any of the
disclosures contained therein (as subsequently amended and/or restated)
misleading The financial statements of the Company included in the Disclosure
Documents have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the audit adjustments) the consolidated financial position
of the Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Due Date, assuming
non-payment of the Promissory Note, the Debentures being purchased hereunder
which are being held in escrow by Joseph B. LaRocco, Esq. as Escrow Agent, at
which time shall be delivered to the Purchaser, per the Purchasers instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(q) No Default. Except as may be set forth in the Company?s report on
form 10-K for the fiscal year ending June 30, 1998, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it or
its property is bound, and neither the execution of, nor the delivery by the
Company of, nor the performance by the Company of its obligations under, this
Agreement or the Debentures, other than the conversion provision thereof, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, (i) any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, (ii) any statute applicable to the Company or its property,
(iii) the Certificate of Incorporation or By-Laws of the Company, (iv) any
decree , judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or (v) the
Company?s listing agreement, if any, for its Common Stock.
(r) Use of Proceeds. The Company represents that the net
proceeds of this offering will be primarily used for working capital.
(s) The Company hereby represents that it shall be paying
consultant a fee of $70,000 from the gross proceeds of this Offering, which
fee shall be paid out of escrow by the Escrow Agent
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated attorney
of a facsimile or original of Purchaser?s signed Notice of Conversion followed
by receipt of the original Debenture to be converted in whole or in part (within
5 business days as indicated in 4(b) below), the Company shall instruct its
transfer agent to issue one or more Certificates representing that number of
shares of Common Stock into which the Debenture is convertible in accordance
with the provisions regarding conversion set forth in Exhibit D hereto. The
Seller?s transfer agent or attorney shall act as Registrar and shall maintain an
appropriate ledger containing the necessary information with respect to each
Debenture.
(b) Conversion Procedures. The face amount of each Debenture may be
converted anytime following the Due Date. Such conversion shall be effectuated
by surrendering to the Company, or its attorney, the Debentures to be converted
together with a facsimile or original of the signed Notice of Conversion which
evidences Purchaser?s intention to convert those Debentures indicated. The date
on which the Notice of Conversion is effective (?Conversion Date?) shall be
deemed to be the date on which the Purchaser has delivered to the Company a
facsimile or original of the signed Notice of Conversion, as long as the
original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile, the Company?s designated attorney is
Gary B. Wolff, Esq., 747 Third Avenue, New York, NY 10017 (P) 212-644-6446 (f)
212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon receipt by the Company or its designated attorney of a facsimile or
original of Purchaser?s signed Notice of Conversion (see Exhibit D) Seller shall
instruct Seller?s transfer agent to issue Stock Certificates without restrictive
legend or stop transfer instructions, if at that time the Registration Statement
has been deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Purchaser (or
its nominee) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such conversion,
as applicable. Seller warrants that no instructions, other than these
instructions, have been given or will be given to the transfer agent and that
the Common Stock shall otherwise be freely transferable on the books and records
of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its option, to
convert the face amount of each Debenture, plus accrued interest, anytime
following the Due Date, at 80% of the 10 day average closing bid price, as
reported by Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the ?Conversion Price?). No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded up or down, as the case may
be, to the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser?s conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser?s original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section (?Mandatory Conversion Date?).
(e) Nothing contained in this Subscription Agreement shall be deemed to
establish or require the payment of interest to the Purchaser at a rate in
excess of the maximum rate permitted by governing law. In the event that the
rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company?s responsibility to take all necessary
actions and to bear all such costs to issue the Certificate of Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person in whose name
the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the documentation
referred to above in Section 4(b), the Company shall deliver a certificate in
accordance with Section 4(c) for the number of shares of Common Stock issuable
upon the conversion. It shall be the Company?s responsibility to take all
necessary actions and to bear all such costs to issue the Common Stock as
provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein ?No. Business Days Late?
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties?
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of
authorized but unissued shares of Common Stock, the provisions of this
Section 4(g) shall not apply but instead the provisions of Section 4(h)
shall apply. The Company shall make any payments incurred under this
Section 4(g) in immediately available funds within five (5) business
days from the Conversion Date if late. Nothing herein shall limit a
Purchaser?s right to pursue actual damages or cancel the conversion for
the Company?s failure to issue and deliver Common Stock to the Holder
within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Purchasers of
the entire amount of Debentures then outstanding. If, at any time Purchaser
submits a Notice of Conversion and the Company does not have sufficient
authorized but unissued shares of Common Stock (or alternative shares of Common
Stock as may be contributed by stockholders) available to effect, in full, a
conversion of the Debentures (a ?Conversion Default?, the date of such default
being referred to herein as the ?Conversion Default Date?), the Company shall
issue to the Purchaser all of the shares of Common Stock which are available,
and the Notice of Conversion as to any Debentures requested to be converted but
not converted (the ? Unconverted Debentures?), upon Purchaser?s sole option, may
be deemed null and void. The Company shall provide notice of such Conversion
Default (?Notice of Conversion Default?) to all existing Purchasers of
outstanding Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Purchaser shall give notice to the Company by facsimile within five business
days of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default (?Conversion Default Payments?) in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the ?Authorization
Date?) that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
(?Authorization Notice?) to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser?s accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser?s option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties? good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser?s right to pursue actual damages for the Company?s failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) The Purchaser shall be entitled to convert any or all of the
Debentures, even though the Registration Statement covering those Debentures may
not have been declared effective at that time, in which case the Purchaser shall
receive legended Common Stock until the Registration Statement is declared
effective or in the written opinion of legal counsel the legend may be removed.
(j) Right of First Refusal: The Purchaser is granted the Right
of First Refusal on any subsequent financing the Company may seek during the
next twelve months.
(k) Redemption: Company reserves the right, at its sole option, to call
a mandatory redemption of any percentage of the balance on the Debentures during
the two year period following the Due Date. In the event the Company exercises
such right of redemption up to and including the last day of the fourth (4th)
month following the Due Date it shall pay the Purchaser, in U.S. currency One
Hundred Fifteen (115%) of the face amount of the Debentures to be redeemed, plus
accrued interest. In the event the Company exercises such right of redemption at
anytime during the fifth (5th) or sixth (6th) months following the Due Date it
shall pay the Purchaser, in U.S. currency One Hundred Twenty (120%) of the face
amount of the Debentures to be redeemed, plus accrued interest. In the event the
Company exercises such right of redemption at anytime after the last day of the
sixth (6th) month following the Due Date it shall pay the Purchaser, in U.S.
currency One Hundred Twenty-five (125%) of the face amount of the Debentures to
be redeemed, plus accrued interest. The date by which the Debentures must be
delivered to the Escrow Agent shall not be later than 5 business days following
the date the Company notifies the Purchaser by facsimile of the redemption. The
Company shall give the Purchaser at least 5 business day?s notice of its intent
to redeem.
(l) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption by the
Company or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company is being
merged, or (c) a change in control, shall the Purchaser be entitled to convert
any Debentures to the extent that, after such conversion, the sum of (1) the
number of shares of Common Stock beneficially owned by the Purchaser and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Debentures), and
(2) the number of shares of Common Stock issuable upon the conversion of the
Debentures with respect to which the determination of this proviso is being
made, would result in beneficial ownership by the Purchaser and its affiliates
of more than 4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion). 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 (the ?1934 Act?), except as otherwise provided
in clause (1) of such proviso. The Purchaser further agrees that if the
Purchaser transfers or assigns any of the Debentures to a party who or which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee?s or assignee?s specific agreement to be bound by the
provisions of this Section as if such transferee or assignee were a signatory to
the Subscription Agreement. Furthermore, the Company shall not permit such
conversions that would violate the provisions of this Section 5, unless amended
in writing upon mutual consent of the parties.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Due Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Due Date the Company shall deliver
to the Escrow Agent a signed Registration Rights Agreement in the form attached
hereto as Exhibit B. The Debentures being purchased hereunder shall be delivered
to Joseph B. LaRocco, Esq. as Escrow Agent, who will hold them in escrow and if
Promissory Note is not paid, credit outstanding principal and interest towards
Debentures at which time the Escrow Agent shall then have the Debentures
delivered to the Purchaser, per the Purchaser?s instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigneds
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the Offerings
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require. Wherever the term "Closing
Date" is used herein it shall have the same meaning as "Due Date".
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New
York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled ?Signature Page.?
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
4
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION?S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and ?blue sky? regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE
CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions:
the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds $1,000,000; or
the shareholder is a natural person who had an
individual income* in excess of $200,000 in each of 1997 and 1998 and who
reasonably expects an individual income in excess of $200,000 in 1999; or Each
of the shareholders of the undersigned CORPORATION is able to certify
that such shareholder is a natural person who, together with his or
her spouse, has had a joint income in excess of $300,000 in each of 1997 and
1998 and who reasonably expects a joint income in excess of $300,000 during
1999; and the undersigned CORPORATION has its principal place of business in
* For purposes of this Questionnaire, the term ?net worth? means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration under Section 301 (c) or (d) of the
Small Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION?S purchase of the Debentures will be
solely for the CORPORATION?S own account and not for the account of any other
person or entity; and
(b) that the CORPORATION?S name, address of principal place of
business, place of incorporation and taxpayer identification number as set forth
in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_________________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
5
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser?s
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Amount of Debentures subscribed for Date
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE ?ACT?), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1999
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
6
<PAGE>
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the ?Company?) according to the conditions set forth in the
Contingent Subscription Agreement dated _____________ ____, 1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
Exhibit E
_______________, 1999
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the ?Company?), in connection with the
proposed issuance and sale of convertible debentures (the ?Securities?) pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the ?Agreements?).
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company?s Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company?s Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements? terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of
_______ shares of Common Stock, ________ par value per share, (?Common Stock?)
and ______________ Preferred Stock, par value $________ per share; [describe
classes if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company?s transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company?s Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not violate
the applicable listing agreement between the Company and any securities exchange
or market on which the Company?s securities are listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 3, 1999, ("this
Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New York
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Contingent
Subscription Agreement, dated as of March 3, 1999, between the Initial Investor
and the Company (the "Subscription Agreement"), the Company has agreed to issue
and sell to the Initial Investor 5% Convertible Debentures of the Company (the
"Debentures"), which will be convertible into shares of the common stock, $.01
par value (the "Common Stock"), of the Company and Warrants to purchase the
Common Stock (collectively the "Conversion Shares") upon the terms and subject
to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Due Date" means the later of May 31, 1999, or July 31, 1999,
if the Company exercises its option to extend the May 31, 1999, due date
on the promissory note dated March 3, 1999.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Due Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the Warrants would be exercised and the
$11,110,000 of Debentures, plus accrued interest, in the total offering would be
convertible. In the event the Registration Statement is not filed within
forty-five (45) calendar days after the Due Date, then in such event the Company
shall pay the Investor 2% of the face amount of each Debenture for each 30 day
period, or portion thereof, after forty-five (45) calendar days following the
Due Date that the Registration Statement is not filed. The Investor is also
granted Piggy-back registration rights on any other Registration Statement
filings made by the Company exclusive of Registration Statements on Form S-8 and
so long as permissible under the Securities Act. Such Registration Statement
shall state that, in accordance with the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
to prevent dilution resulting from Stock splits, or stock dividends. If at any
time the number of shares of Common Stock into which the Debenture(s) may be
converted exceeds the aggregate number of shares of Common Stock then
registered, the Company shall, within ten (10) business days after receipt of
written notice from any Investor, either (i) amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to register
all shares of Common Stock into which the Debenture(s) may be converted, or (ii)
if such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement on such form as is
applicable to register the shares of Common Stock into which the Debenture may
be converted that exceed the aggregate number of shares of Common Stock already
registered which new Registration Statement shall be filed within 45 days. The
above damages shall continue until the obligation is fulfilled and shall be paid
within 5 business days after each 30 day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said 5 business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the Due
Date will cause the Initial Investor to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate to
include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to qualify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within one hundred twenty (120) calendar
days following the Due Date, then the Company shall pay the Initial Investor 2%
of the purchase price paid by the Initial Investor for the Registrable
Securities pursuant to the Subscription Agreement for every thirty day period,
or portion thereof, following the one hundred twenty (120) calendar day period
until the Registration Statement is declared effective. Notwithstanding the
foregoing, the amounts payable by the Company pursuant to this provision shall
not be payable to the extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act timely by
the Initial Investor or its counsel. The above damages shall continue until the
obligation is fulfilled and shall be paid within 5 business days after each 30
day period, or portion thereof, until the Registration Statement is declared
effective. Failure of the Company to make payment within said 5 business days
shall be considered a default.
The Company acknowledges that its failure to have the
Registration Statement declared effective within said one
hundred twenty (120) calendar day period following the Due
Date, will cause the Initial Investor to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this
Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith
effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated
damages shall not relieve the Company from its obligations to
register the Common Stock and deliver the Common Stock
pursuant to the terms of this Agreement, the Subscription
Agreement and the Debenture.
3. Obligation of the Company. In connection with
the registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Due Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) one hundred twenty (120) days after
the Due Date, and keep the Registration Statement effective at all times until
the earliest (the "Registration Period") of (i) the date that is two years after
the Due Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
ABERDEEN AVENUE, LLC
By: ____________________________________
Name:
Title:
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE DEBENTURE DUE , 1999
, 2001
$
Number LN-1999-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the ?Company?), hereby promises to pay SOVEREIGN PARTNERS
LIMITED PARTNERSHIP or registered assigns (the ?Holder?) on ___________
__, 2001, (the ?Maturity Date?), the principal amount of
_____________________________________________________ Dollars ($
____________) U.S., and to pay interest on the principal amount hereof,
in such amounts, at such times and on such terms and conditions as are
specified herein. The purchase price for this Debenture shall be deemed
to have been delivered to the Company upon non-payment of the full
amount of principal and interest due on the Promissory Note dated March
3, 1999 between the Company and the Holder. The fully executed
Contingent Subscription Agreement, Registration Rights Agreement and
this Debenture shall be held by the escrow agent and shall only be
delivered to the Holder upon non-payment of the full amount of
principal and interest due on the Promissory Note on its ?Due Date?.
The ?Due Date? of the Promissory Note shall mean the later of May 31,
1999, or July 30, 1999, if the Company exercises its option to extend
the May 31, 1999 due date.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of this
Debenture (the ?Debenture?) at the rate of Five Percent (5.0%) per year, payable
at the time of each conversion until the principal amount hereof is paid in full
or has been converted. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months. Each payment shall be paid in cash or in freely trading
Common Stock of the Company, at the Company?s option. If paid in Common Stock,
the number of shares of the Company?s Common Stock to be received shall be
determined by dividing the dollar amount of the interest by the then applicable
Market Price as of the interest payment date. ?Market Price? shall mean 80% of
the average of the 10 day closing bid prices, as reported by Bloomberg, LP for
the ten (10) consecutive trading days immediately preceding the date of
conversion. If the interest is to be paid in cash, the Company shall make such
payment within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the Holder, or
per Holder?s instructions, within 5 business days of the date of conversion. The
Debentures are subject to automatic conversion at the end of two years from the
date of issuance at which time all Debentures outstanding will be automatically
converted based upon the formula set forth in Section 3.2. The closing shall be
deemed to have occurred on the Due Date as that term is defined above.
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall
have the option of paying the interest on this Debenture in United States
dollars or in common stock upon conversion pursuant to Article 1 hereof. The
Company may draw a check for the payment of interest to the order of the Holder
of this Debenture and mail it to the Holder?s address as shown on the Register
(as defined in Section 7.2 below). Interest and principal payments shall be
subject to withholding under applicable United States
Federal Internal Revenue Service Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at its option,
to convert it into shares of common stock, par value $0.01 per share, of the
Company (?Common Stock?) at any time following the Due Date and which is before
the close of business on the Maturity Date, except as set
forth in Section 3.1(c) below. The number of shares of Common Stock issuable
upon the conversion of this Debenture is determined pursuant to Section 3.2 and
rounding the result to the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains
outstanding on the second anniversary of the date hereof, the unconverted
portion of such Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 3.2.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated attorney
of a facsimile or original of Holder?s signed Notice of Conversion and the
receipt of the original Debenture to be converted in whole or in part in the
manner set forth in 3.2(b) below, the Company shall instruct its transfer agent
to issue one or more Certificates representing that number of shares of Common
Stock into which the Debenture is convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller?s transfer agent
or attorney shall act as Registrar and
shall maintain an appropriate ledger containing the necessary information with
respect to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture may be
converted anytime following the Due Date. Such conversion shall be effectuated
by surrendering to the Company, or its attorney, this Debenture to be converted
together with a facsimile or original of the signed Notice of Conversion which
evidences Holder?s intention to convert the Debenture indicated. The date on
which the Notice of Conversion is effective (?Conversion Date?) shall be deemed
to be the date on which the Holder has delivered to the Company or its
designated attorney a facsimile or original of the signed Notice of Conversion,
as long as the original Debenture(s) to be converted are received by the Company
or its designated attorney within 5 business days thereafter. Unless otherwise
notified by the Company in writing via facsimile the Company?s designated
attorney is Gary B. Wolff, Esq., 747 Third Avenue, 25th Floor, New York, New
York 10017, (P) 212-644-6446, (F) 212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon receipt by the Company or its attorney of a facsimile or original of
Holder?s signed Notice of Conversion Seller shall instruct Seller?s transfer
agent to issue Stock Certificates without restrictive legend or stop transfer
instructions, if at that time the Registration Statement covering such shares
has been deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Holder (or its
nominee) and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion, as
applicable. Seller warrants that no instructions, other than these instructions,
have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller,
except as may be set forth herein.
(d) (i) Conversion Rate. Holder is entitled, at its option to convert
the face amount of this Debenture, plus accrued interest, anytime following the
Due Date, at 80% of the 10 day average closing bid price, as reported by
Bloomberg LP, for the ten (10) consecutive trading days immediately preceding
the applicable Conversion Date (the ?Conversion Price?). No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up or down, as the case may be, to
the nearest whole share.
(ii) Most Favored Financing. If after the Due Date, but prior
to the Holder?s conversion of all the Debentures, the Company raises money under
either Regulation D or Regulation S on terms that are more favorable than those
terms set forth in this Debenture, then in such event, the Holder at its sole
option shall be entitled to completely replace the terms of this Debenture with
the terms of the more beneficial Debenture as to that balance, including accrued
interest and any accumulated liquidated damages, remaining on Holder?s original
investment. The Debentures are subject to a mandatory, 24 month conversion
feature at the end of which all Debentures outstanding will be automatically
converted, upon the terms set forth in this section (?Mandatory Conversion
Date?).
(e) Nothing contained in this Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(f) It shall be the Company?s responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(b), the Company shall deliver a
certificate, in accordance with Section 3(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company?s responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein ?No. Business Days Late? is
defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties? good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall
apply.
The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the Conversion
Date if late. Nothing herein shall limit a Holder?s right to pursue actual
damages or cancel the conversion for the Company?s failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve and have available
all Common Stock necessary to meet conversion of the Debentures by all Holders
of the entire amount of Debentures then outstanding. If, at any time Holder
submits a Notice of Conversion and the Company does not have sufficient
authorized but unissued shares of Common Stock (or alternative shares of Common
Stock as may be contributed by Stockholders) available to effect, in full, a
conversion of the Debentures (a ?Conversion Default?, the date of such default
being referred to herein as the ?Conversion Default Date?), the Company shall
issue to the Holder all of the shares of Common Stock which are available, and
the Notice of Conversion as to any Debentures requested to be converted but not
converted (the ?Unconverted Debentures?), upon Holder?s sole option, may be
deemed null and void. The Company shall provide notice of such Conversion
Default (?Notice of Conversion Default?) to all existing Holders of outstanding
Debentures, by facsimile, within three (3) business day of such default (with
the original delivered by overnight or two day courier), and the Holder shall
give notice to the Company by facsimile within five business days of receipt of
the original Notice of Conversion Default (with the original delivered by
overnight or two day courier) of its election to either nullify or confirm the
Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default (?Conversion Default Payments?) in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the ?Authorization Date?)
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
(?Authorization Notice?) to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder?s accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Holder?s option, payable as follows: (i) in
the event Holder elects to take such payment in cash, cash payments shall be
made to such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at the
conversion rate set forth in section 4(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties? good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture.
Nothing herein shall limit the Holder?s right to pursue actual damages
for the Company?s failure to maintain a sufficient number of authorized shares
of Common Stock.
(i) The Company shall furnish to Holder such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
(j) The Holder is limited in the amount of this Debenture it may
convert and own. In no event except (i) with respect to a conversion pursuant to
redemption by the Company or (ii) if there is (a) a public announcement that 50%
or more of the Company is being acquired, (b) a public announcement that the
Company is being merged, or (c) a change in control, shall the Holder be
entitled to convert any Debentures to the extent that, after such conversion,
the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or any of the Company?s Warrants), and (2) the number of shares of
Common Stock issuable upon the conversion of the Debentures, or exercise of any
of the Company?s Warrants, 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 outstanding shares of Common Stock
(after taking into account the shares to be issued to the Holder upon such
conversion). 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 (the ?1934 Act?), except as
otherwise provided in clause (1) of such proviso. The Holder further agrees that
if the Holder transfers or assigns any of the Debentures to a party who or which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee?s or assignee?s specific agreement to be bound by the
provisions of this Section as if such transferee or assignee were a signatory to
the Subscription Agreement. Furthermore, the Company shall not permit such
conversions that would violate the provisions of this Section 3.2(j), unless
amended in writing upon mutual consent of the parties.
(k) Redemption. Company reserves the right, at its
sole option, to call a mandatory redemption of any percentage of the balance on
the Debentures during the two year period following the Due Date. In the event
the Company exercises such right of redemption up to and including the last day
of the fourth (4th) month following the Due Date it shall pay the Holder, in
U.S. currency One Hundred Fifteen (115%) of the face amount of the Debentures
to be redeemed, plus accrued interest. In the event the Company exercises
such right of redemption at anytime during the fifth (5th) or sixth (6th) months
following the Due Date it shall pay the Holder, in U.S. currency One Hundred
Twenty (120%) of the face amount of the Debentures to be redeemed, plus
accrued interest. In the event the Company exercises such right of redemption
at anytime after the last day of the sixth (6th) month following the Due Date
it shall pay the Holder, in U.S. currency One Hundred Twenty-five (125%) of
the face amount of the Debentures to be redeemed, plus accrued interest.
The date by which the Debentures must be delivered to the Escrow Agent shall not
be later than 5 business days following the date the Company notifies the
Holder by facsimile of the redemption. The Company shall give the Holder at
least 5 business day?s notice of its intent to redeem.
Section 3.3. Fractional Shares. The Company shall not issue
fractional shares of Common Stock, or scrip representing fractions of such
shares, upon the conversion of this Debenture. Instead, the Company shall round
up or down, as the case may be, to the nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder
shall pay any such tax which is due because the shares are issued in a name
other than its name.
Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in this Debenture. All shares of Common Stock which may be issued upon
the conversion hereof shall upon issuance be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the ?Act?) and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable
upon the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An ?Event of Default? occurs if (a) the
Company fails to comply with any of its agreements in this Debenture and such
failure continues for the period and after the notice specified below, (b) the
Company pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined): (i) commences a voluntary case; (ii) consents to the entry of an order
for relief against it in an involuntary case; (iii) consents to the appointment
of a Custodian (as hereinafter defined) of it or for all or substantially all of
its property or (iv) makes a general assignment for the benefit of its creditors
or (v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its property or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days. As used in this Section 6.1,
the term ?Bankruptcy Law? means Title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term ?Custodian?
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law. A default under clause (c) above is not an Event of Default
until the holders of at least 25% of the aggregate principal amount of the
Debentures outstanding notify the Company of such default and the Company does
not cure it within five (5) business days after the receipt of such notice,
which must specify the default, demand that it be remedied and state that it is
a ?Notice of Default?.
Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable. Upon such
declaration, the remaining principal amount shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are referred to
herein collectively as the ?Debentures?. The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the ?Register?) showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this Debenture is
the person exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may
be registered on the books of the Company maintained for such purpose pursuant
to Section 7.2 above (i.e., the Register). Transfers shall be registered when
this Debenture is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the appropriate person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including tax laws and
state and federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the transferee as the record holder thereof shall be issued in lieu
hereof. When this Debenture is presented to the Company with a reasonable
request to exchange it for an equal principal amount of Debentures of other
denominations, the Company shall make such exchange and shall cancel this
Debenture and issue in lieu thereof Debentures having a total principal amount
equal to this Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices, with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A ?business day? shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in the payment of principal or conversion into
Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of New York applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of New York.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.
SWISSRAY INTERNATIONAL, INC.
By
Name: Ruedi G. Laupper
Title: Chairman and President
9
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $_________________ of the Debentures into Shares of Common Stock
(the ?Shares?) of SWISSRAY INTERNATIONAL, INC. (the ?Company?) according to the
conditions set forth in the Contingent Subscription Agreement
dated _________________,1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
10
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
- ------------------------------------------------------------------------------
(principal amount of Debenture, $5,000 or integral multiples of $5,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: Signed:
(Signature must conform in all
respects to name of Holder shown of face of Debenture)
Signature Guaranteed:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER?S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
WARRANT TO PURCHASE _______SHARES OF
COMMON STOCK OF SWISSRAY INTERNATIONAL, INC.
Exercisable Commencing March 3, 1999;
Void after March 3, 2004
THIS CERTIFIES that, for value received SOVEREIGN PARTNERS LIMITED
PARTNERSHIP or its registered assigns (the ?Warrantholder?) is entitled, subject
to the terms and conditions set forth in this Warrant, to purchase from SWISSRAY
INTERNATIONAL, INC., a New York corporation (the ?Company?), ________ fully
paid, duly authorized and nonassessable shares (the ?Shares?), of Common Stock,
$.01 par value per share, of the Company (the ?Common Stock?), at any time
commencing March 3, 1999 and continuing up to 5:00 p.m. New York City time on
March 3, 2004 at an exercise price of 125% of the average five (5) day closing
bid price of the Company?s common stock immediately preceding the date of
issuance, but in no event at less than $1.00 per share, subject to adjustment
pursuant to Section 8 hereof.
This Warrant is subject to the following provisions, terms and
conditions:
Section 1. Transferability.
1.1 Registration. The Warrants shall be issued only in registered form
and Shares issuable upon exercise of the Warrants shall have piggy back
registration rights and shall be registered by the Company pursuant to the terms
of a Registration Rights Agreement between the Company and SOVEREIGN PARTNERS
LIMITED PARTNERSHIP.
1.2 Transfer. This Warrant shall be transferable only on the books of
the Company maintained at its principal executive offices upon surrender thereof
for registration of transfer duly endorsed by the Warrantholder or by its duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant or Warrants in
appropriate denominations to the person or persons entitled thereto.
1.3 Legend on Warrant Shares. Each certificate for Shares
initially issued upon exercise of a Warrant, unless at time of exercise such
Shares are registered under the Securities Act of 1933, as amended (the
?Securities Act?), shall bear the following legend:
------------------------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER?S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear the above
legend unless the Company receives an opinion of counsel acceptable to the
Company that registration or qualification of the securities represented thereby
under the laws referred to therein is not required.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates of like tenor entitling the
Warrantholder to purchase a like aggregate number of Shares as the certificate
or certificates surrendered then entitle such Warrantholder to purchase. Any
Warrantholder desiring to exchange a warrant certificate shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Terms of Warrants: Exercise of Warrants.
(a) Subject to the terms of this Warrant, the Warrantholder shall have
the right, at any time after March 3, 1999, but before 5:00 p.m., New York City
time on March 3, 2004 (the ?Expiration Time?), to purchase from the Company up
to the number of Shares which the Warrantholder may at the time be entitled to
purchase pursuant to the terms of this Warrant, upon surrender to the Company at
its principal executive office, of the certificate evidencing this Warrant to be
exercised, together with the attached Election to Exercise form duly filled in
and signed, and upon payment to the Company of the Warrant Price (as defined in
and determined in accordance with the provisions of Section 7 and 8 hereof) for
the number of Shares with respect to which such Warrant is then exercised.
Payment of the aggregate Warrant Price shall be made in cash, wire transfer or
by cashier?s check or any combination thereof.
(b) Subject to the terms of this Warrant, upon such surrender of this
Warrant and payment of such Warrant Price as aforesaid, the Company shall
promptly issue and cause to be delivered to the Warrantholder or to such person
or persons as the Warrantholder may designate in writing, a certificate or
certificates (in such name or names as the Warrantholder may designate in
writing) for the number of duly authorized, fully paid and non-assessable whole
Shares to be purchased upon the exercise of this Warrant, and shall deliver to
the Warrantholder Common Stock or cash, to the extent provided in Section 9
hereof, with respect to any fractional Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Shares as of the close of business on the date of the surrender
of this Warrant and payment of the Warrant Price, notwithstanding that the
certificates representing such Shares shall not actually have been delivered or
that the Share and Warrant transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the sole election of the Warrantholder,
either in full or from time to time in part and, in the event that any
certificate evidencing this Warrant (or any portion thereof) is exercised prior
to the Termination Date with respect to less than all of the Shares specified
therein at any time prior to the Termination Date, a new certificate of like
tenor evidencing the remaining portion of this Warrant shall be issued by the
Company, if so requested by the Warrantholder.
(c) Upon the Company?s receipt of a facsimile or original of
Warrantholder?s signed Election to Exercise, the Company shall instruct its
transfer agent to issue one or more stock Certificates representing that number
of shares of Common Stock which the Warrantholder is entitled to purchase in
accordance with the terms and conditions of this Warrant and the Election to
Exercise attached hereto. The Company?s transfer agent or attorney shall act as
Registrar and shall maintain an appropriate ledger containing the necessary
information with respect to each Warrant.
(d) Such exercise shall be effectuated by surrendering to the Company,
or its attorney, the Warrants to be converted together with a facsimile or
original of the signed Election to Exercise which evidences Warrantholder?s
intention to exercise those Warrants indicated. The date on which the Election
to Exercise is effective (?Exercise Date?) shall be deemed to be the date on
which the Warrantholder has delivered to the Company a facsimile or original of
the signed Election to Exercise, as long as the original Warrants to be
exercised are received by the Company or its designated attorney within 5
business days thereafter. As long as the Warrants to be exercised are received
by the Company within five business days after it receives a facsimile or
original of the signed Election to Exercise, the Company shall deliver to the
Warrantholder, or per the Warrantholder?s instructions, the shares of Common
Stock to an address in the U.S., without restrictive legend or stop transfer
instructions, within 5 business days of receipt of the Warrants to be converted.
(e) Nothing contained in this Warrant shall be deemed to establish or
require the payment of interest to the Warrantholder at a rate in excess of the
maximum rate permitted by governing law. In the event that the rate of interest
required to be paid exceeds the maximum rate permitted by governing law, the
rate of interest required to be paid thereunder shall be automatically reduced
to the maximum rate permitted under the governing law and such excess shall be
returned with reasonable promptness by the Warrantholder to the Company.
(f) It shall be the Company?s responsibility to take all necessary
actions and to bear all such costs to issue the Certificate of Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person in whose name
the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the exercise date. Upon surrender of any
Warrants that are to be converted in part, the Company shall issue to the
Warrantholder new Warrants equal to the unconverted amount, if so requested by
Warrantholder.
Nothing herein shall limit the Warrantholder?s right to pursue actual
damages for the Company?s failure to maintain a sufficient number of authorized
shares of Common Stock.
(g) The Company shall furnish to Warrantholder such number of
prospectuses and other documents incidental to the registration of the Common
Stock underlying the Warrants, including any amendment of or supplements
thereto.
(h) Each person in whose name any certificate for shares of Common
Stock shall be issued shall for all purposes be deemed to have become the holder
of record of the Common Stock represented thereby on the date on which the
Warrant was surrendered and payment of the purchase price and any applicable
taxes was made, irrespective of date of issue or delivery of such certificate,
except that if the date of such surrender and payment is a date when the Shares
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such Shares on the next succeeding date on which such Share
transfer books are open. The Company shall not close such Share transfer books
at any one time for a period longer than seven days.
(i) The Warrantholder is limited in the amount of this Warrant it may
exercise and own. In no event except (i) with respect to a conversion pursuant
to redemption by the Company or (ii) if there is (a) a public announcement that
50% or more of the Company is being acquired, (b) a public announcement that the
Company is being merged, or (c) a change in control, shall the Warrantholder be
entitled to exercise any amount of this Warrant in excess of that amount upon
exercise of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Warrantholder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of the Warrant, or any other convertible security of the
Company containing a similar 4.9% ownership restriction, and (2) the number of
shares of Common Stock issuable upon the exercise of the Warrant, or any other
convertible security of the Company containing a similar 4.9% ownership
restriction, with respect to which the determination of this provision is being
made, would result in beneficial ownership by the Warrantholder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock of the
Company. For purposes of this provision 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 Regulation 13 D-G thereunder,
except as otherwise provided in clause (1) of such provision. The Warrantholder
further agrees that if the Warrantholder transfers or assigns any of the
Warrants to a party who or which would not be considered such an affiliate, such
transfer or assignment shall be made subject to the transferee?s or assigness?s
specific agreement to be bound by the provisions of this Section. Furthermore,
the Company shall not process any exercise that would result in beneficial
ownership by the Warrantholder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock of the Company, unless this Section is
amended in writing upon the mutual consent of the parties.
Section 4. Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the Shares;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable, (i) with respect to any secondary transfer of this
Warrant or the Shares or (ii) as a result of the issuance of the Shares to any
person other than the Warrantholder, and the Company shall not be required to
issue or deliver any certificate for any Shares unless and until the person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have produced evidence that such tax has been paid to the
appropriate taxing authority.
Section 5. Mutilated or Missing Warrant. In case the certificate or
certificates evidencing this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and of a bond of indemnity, if requested, also
satisfactory to the Company in form and amount, and issued at the applicant?s
cost. Applicants for such substitute Warrant certificate shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
Section 6. Reservation of Shares. The Company has duly and validly
reserved, and shall at all times so long as this Warrant remains outstanding,
keep reserved, out of its authorized and unissued capital stock, sufficient
shares of Common Stock as shall be subject to purchase under this Warrant (the
?Reserved Shares?). The issuance, sale and delivery of the Warrants and Reserved
Shares have been duly authorized by all required corporate action on the part of
the Company and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and therein, will be
duly and validly issued, fully paid, and non-assessable and enforceable in
accordance with their terms, subject to the laws of bankruptcy and creditors?
rights generally. The Company shall pay all taxes in respect of the issue
thereof. As a condition precedent to the taking of any action that would result
in the effective purchase price per share of Common Stock upon the exercise of
this Warrant being less than the par value per share (if such shares of Common
Stock then have a par value), the Company will take such corporate action as
may, in the opinion of its counsel, be necessary in order that the Company may
comply with all its obligations under this Agreement with regard to the exercise
of this Warrant.
Prior to exercise of all the Warrants, if at anytime the conversion of
all the Shares and exercise of all the Warrants outstanding results in an
insufficient number of Reserved Shares being available to cover all the
conversions and exercises, then in such event, the Company will move to call and
hold a shareholder?s meeting within 45 days of such event for the purpose of
authorizing additional Shares to facilitate the conversions. In such an event
the Company shall: (1) recommend to its current or future officers, directors
and other control people to vote their shares in favor of increasing the
authorized number of shares of Common Stock and (2) recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock. As for any shareholders who do not vote on the issue
of increasing the authorized number of shares of Common Stock, such failure to
vote shall automatically be taken as a vote in favor of increasing the
authorized number of shares of Common Stock. The proxy sent out by the Company
to all shareholders shall provide that if no vote is received a consent to
action will be executed on behalf of those shares of Common Stock for which no
vote was received, in favor of increasing the authorized number of shares of
Common Stock of the Company. Company represents and warrants that under no
circumstances will it deny or prevent Warrantholder from exercising the Warrants
as permitted under the terms of the Subscription Agreement, the Warrants or the
Registration Rights Agreement.
Section 7. Warrant Price. From March 3, 1999 through 5:00 p.m. New York
City time on March 3, 2004, the price per Share (the ?Warrant price?) at which
Shares shall be purchasable upon the exercise of this Warrant shall be 125% of
the average 5 day closing bid price of the Company?s common stock immediately
preceding the date of closing, but in no event at less than $1.00 per share
(subject to adjustment pursuant to Section 8 hereof).
Section 8. Adjustment of Warrant Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time after the
date hereof upon the happening of certain events, as
follows:
8.1 Adjustments. The number of Shares purchasable upon the
exercise of this Warrant shall be subject to adjustments as follows:
-----------
(a) In case the Company shall (i) pay a dividend on Common Stock in
Common Stock or securities convertible into, exchangeable for or otherwise
entitling a holder thereof to receive Common Stock, (ii) declare a dividend
payable in cash on its Common Stock and at substantially the same time offer its
shareholders a right to purchase new Common Stock (or securities convertible
into, exchangeable for or other entitling a holder thereof to receive Common
Stock) from the proceeds of such dividend (all Common Stock so issued shall be
deemed to have been issued as a stock dividend), (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, (iv)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (v) issue by reclassification of its Common Stock any shares
of Common Stock of the Company, the number of shares of Common Stock issuable
upon exercise of the Warrants immediately prior thereto shall be adjusted so
that the holders of the Warrants shall be entitled to receive after the
happening of any of the events described above that number and kind of shares as
the holders would have received had such Warrants be converted immediately prior
to the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subdivision shall become effective immediately
after the close of business on the record date in the case of a stock dividend
and shall become effective immediately after the close of business on the
effective date in the case of a stock split, subdivision, combination or
reclassification.
(b) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends other than as described in
Section (8)(a)(ii)), then in such case, the number of shares of Common Stock
thereafter issuable upon exercise of the Warrants shall be determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of the Warrants, by a fraction, of which the numerator shall be the
closing bid price per share of Common Stock on the record date for such
distribution, and of which the denominator shall be the closing bid price of the
Common Stock less the then fair value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed per share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(c) Any adjustment in the number of shares of Common Stock issuable
hereunder otherwise required to be made by this Section 8 will not have to be
adjusted if such adjustment would not require an increase or decrease in one
percent (1%) or more in the number of shares of Common Stock issuable upon
exercise of the Warrant. No adjustment in the number of Shares purchasable upon
exercise of this Warrant will be made for the issuance of shares of capital
stock to directors, employees or independent contractors pursuant to the
Company?s or any of its subsidiaries? stock option, stock ownership or other
benefit plans or arrangements or trusts related thereto or for issuance of any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under such plan.
(d) Whenever the number of shares of Common Stock issuable upon the
exercise of the Warrants is adjusted, as herein provided the Warrant Price shall
be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of shares of Common Stock issuable upon the exercise of each share of the
Warrants immediately prior to such adjustment, and of which the denominator
shall be the number of shares of Common Stock issuable immediately thereafter.
(e) The Company from time to time by action of its Board of Directors
may decrease the Warrant Price by any amount for any period of time if the
period is at least 20 days, the decrease is irrevocable during the period and
the Board of Directors of the Company in its sole discretion shall have made a
determination that such decrease would be in the best interest of the Company,
which determination shall be conclusive. Whenever the Warrant Price is decreased
pursuant to the preceding sentence, the Company shall mail to holders of record
of the Warrants a notice of the decrease at least 15 days prior to the date the
decreased Warrant Price takes effect, and such notice shall state the decreased
Warrant Price and the period it will be in effect.
8.2 Mergers. Etc. In the case of any (i) consolidation or merger of the
Company into any entity (other than a consolidation or merger that does not
result in any reclassification, exercise, exchange or cancellation of
outstanding shares of Common Stock of the Company), (ii) sale, transfer, lease
or conveyance of all or substantially all of the assets of the Company as an
entirety or substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
holder of Warrants then outstanding shall have the right thereafter to exercise
such Warrant only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of shares of Common
Stock of the Company into which such Warrants would have been converted
immediately prior to such consolidation, merger, sale, transfer, capital
reorganization or reclassification, assuming such holder of Common Stock of the
Company (A) is not an entity with which the Company consolidated or into which
the Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be (?constituent entity?), or an affiliate of
a constituent entity, and (B) failed to exercise his or her rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by other than a constituent entity or an affiliate thereof and in
respect of which such rights or election shall not have been exercised
(?non-electing share?), then for the purpose of this Section 8.2 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). If necessary, appropriate adjustment shall be made in the
application of the provision set forth herein with respect to the rights and
interests thereafter of the holder of Warrants, to the end that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of the Warrants. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, capital reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless prior to or
simultaneously with the consummation thereof the successor company or entity (if
other than the Company) resulting from such consolidation, merger, sale or
transfer assumes, by written instrument, the obligation to deliver to the holder
of Warrants such shares of stock, securities or assets as, in accordance with
the foregoing provision, such holder may be entitled to receive under this
Section 8.2.
8.3 Statement of Warrants. Irrespective of any
adjustments in the Warrant Price of the number or kind of shares purchasable
upon the exercise of this Warrant, this Warrant certificate or certificates
hereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant.
Section 9. Fractional Shares. Any fractional shares of Common Stock
issuable upon exercise of the Warrants shall be rounded to the nearest whole
share or, at the election of the Company, the Company shall pay the holder
thereof an amount in cash equal to the closing bid price thereof. Whether or not
fractional shares are issuable upon exercise shall be determined on the basis of
the total number of Warrants the holder is at the time exercising and the number
of shares of Common Stock issuable upon such exercise.
Section 10. No Rights as Stockholders: Notices to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees any rights as a stockholder of the Company,
including the right to vote, receive dividends, consent or receive notices as a
stockholder with respect to any meeting of stockholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
5:00 p.m., New York City time, on March 3, 2004, (the ?Expiration Time?) and
prior to the exercise of this Warrant, any of the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1; or
(b) a dissolution, liquidation or winding up of the Company or any
consolidation, merger or sale of its property, assets and business as an
entirety; then in any one or more of said events, the Company shall give notice
in writing of such event to the Warrantholder at least 10 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights, or other rights or for the effective
date of any dissolution, liquidation of winding up or any merger,
consolidation, or sale of substantially all assets, but failure to mail or
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any such action taken. Such notice shall specify such
record date or the effective date, as the case may be.
Section 11. Successors. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Warrantholder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder.
Section 12. Applicable Law. This Warrant shall be construed and
enforced in accordance with and the rights of the parties shall be governed by
the laws of the State of New York.
Section 13. Benefits of this Agreement. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Warrantholder any legal or equitable right, remedy or claim under this
Warrant, and this Warrant shall be for the sole and exclusive
benefit of the Company and the Warrantholder.
Section 14. Piggy-back Registration Rights. If at any time prior to the
expiration of the warrant the Company shall propose to prepare on its own behalf
or on behalf of any of its stockholders (other than Warrantholder) a
registration statement in connection with an underwritten public offering of any
equity securities of the Company, the Company shall give Warrantholder written
notice at least 20 days before the anticipated filing date of such registration
statement. Should Warrantholder desire to have any of the Shares included in
such registration statement Warrantholder shall so advise the Company in writing
no later than 15 days after the Company?s notice is given, setting forth the
number or amount of Shares which Warrantholder requests to be included in the
registration statement, and the Company shall include the securities specified
in such request in such registration statement and keep such registration
statement in effect and maintain compliance with each federal and state law and
regulation as set forth herein. The Company may, at its option, require that the
amount of Shares offered for sale by Warrantholder pursuant to this Section 14
be decreased if, in the opinion of the Company?s investment banking firm, such
reduction is necessary in order to permit the orderly distribution and sale of
the securities being offered. If the Company shall require such a reduction,
Warrantholder shall have the right to withdraw from the offering.
Section 15. Definitions.
?Common Stock? shall mean (i) Common Stock, $.01 par value per share,
of the Company and (ii) any other security purchasable upon the exercise of this
Warrant upon the happening of certain events.
IN WITNESS WHEREOF, the parties have caused this Warrant to be duly
executed, all as of the day and year first above written.
SWISSRAY INTERNATIONAL , INC.
By:________________________________
Ruedi G. Laupper its Chairman
and President
<PAGE>
SWISSRAY INTERNATIONAL, INC.
ELECTION TO EXERCISE
SWISSRAYINTERNATIONAL, INC.
c/o Gary B. Wolff, Esq.
747 Third Avenue ? 25th Floor
New York, NY 10017
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder, _______shares
of Common Stock (the ?Share?) provided for therein, and requests that
certificates for the Shares be issued in the name of:*
Name:___________________________________________________________
Address:_________________________________________________________
Social Security No.________________________________________________
or Tax ID Number:_________________________________________________
and, if such number of Shares shall not be all of the Shares purchasable under
the Warrant, that a new Warrant certificate for the balance of the Shares
purchasable under the within Warrant be registered in the name of the
undersigned warrantholder or his Assignee* as indicated below and delivered to
the address stated below:
Dated:________, 19___
Name of Warrantholder of
Assignee (Please Print)_____________________________________________
Address:_________________________________________________________
Signature:________________________________________________________
Signature Guaranteed:______________________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The above signature must correspond with the name as written on
the face of this Warrant certificate in every particular, without alteration or
enlargement or any change whatever, unless this warrant has been assigned.
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant)*
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing
_________Attorney to transfer said Warrant on the books of the Company, with
full power of substitution in the premises.
Dated:______________, 19____
________________________________**
Signature of Registered Holder
Signature Guaranteed: ________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The signature of this assignment must correspond with the name
as it appears upon the face of the Warrant certificate in every particular,
without alteration or enlargement or any change whatever.
11
PROMISSORY NOTE
$ Hochdorf, Switzerland
March 25, 1999
FOR VALUE RECEIVED, the undersigned, SWISSRAY INTERNATIONAL, INC., a
New York corporation, (the "Company" or "Borrower"), hereby promises to pay to
the order of SOVEREIGN PARTNERS LIMITED PARTNERSHIP (the "Lender"), the
principal amount of $________ in lawful money of the United States of America in
same day or other immediately available funds, together with interest at the
rate hereinafter set forth, payable on or before June 25, 1999.
.
Interest on the principal balance of this Note from time to time
outstanding and unpaid shall be computed on the basis of a 360-day year for the
actual number of days elapsed at a simple interest rate per annum equal to eight
percent (8%) commencing on March 25, 1999.
Principal and all accrued interest, at the rate of eight percent (8%)
per annum, shall be payable without the necessity for demand or notice on June
25, 1999. All payments of principal and interest shall be paid by wire transfer
per the written instructions of Lender. As further consideration for this loan,
Borrower agrees to issue to Lender a Warrant to purchase ______ shares of the
Borrower's common stock, par value $0.01 per share, exercisable (for a period of
5 years commencing with the date of closing) at 125% of the average five (5) day
closing bid price of the Company's common stock for the five (5) trading days
immediately preceding March 25, 1999, but in no event less than $1.00 per share
on day of closing for a period of five (5) years.
The Borrower, in Borrower's sole discretion, may extend the term of
this Note for an additional sixty (60) day period at an additional 2% interest
rate per annum. Borrower must send written notice of its election to extend the
term of this Note. Said written notice must be sent by facsimile pursuant to
the notice provisions of this Note, on or before June 25, 1999. Borrower shall
not be entitled to extend the term of this Note beyond August 24, 1999.
In the event the Promissory Note is not paid in full on or
before its due date, then in such event the terms of the Contingent Subscription
Agreement, Debenture and Registration Rights Agreement, which are incorporated
herein by reference and made a part hereof, shall apply and control. The "Due
Date" of the Promissory Note shall mean the later of June 25, 1999, or August
24, 1999, if the Company exercises its option to extend the June 25, 1999 Due
Date.
The obligations of Borrower under this Note are secured by a lien on
inventory and by a second mortgage on real estate owned by the Borrower and
located in Switzerland (the "Security"). The Security is being provided as an
inducement for Lender to enter into this loan transaction and so as to secure
Lender position in prior financings in which Lender have been unable to convert
their debentures into shares of the Borrower's common stock, in part, due to the
absence of an established trading market for a significant period of time. The
Security shall remain in effect throughout the term of this loan so long as any
portion of the Borrower's indebtedness to Lender continues in effect and such
Security shall be reduced utilizing the following formula:
A. Reducing the Borrower's indebtedness (evidenced by convertible debentures
aggregating $14,750,000*: when such $14,750,000* indebtedness is reduced to
$10,000,000 then (i) 25% of secured inventory shall be released from lien and
(ii) 25% of second mortgage on land and building shall similarly be released
from lien (*Inclusive of $1,080,000 represented by promissory notes and
contingently convertible into debentures);
B. For each further reduction of an additional $2,500,000 in Borrower's
indebtedness from $10,000,000 to $5,000,000 releases from lien shall be
accomplished on a pro-rata basis in the same manner as indicated in A above,
i.e., each $2,500,000 reduction in indebtedness shall result in release of 25%
of each lien amount; and C. When indebtedness is reduced to $5,000,000 or less,
then the second mortgage on land and building shall be released in its entirety
and inventory collateral shall continue to be reduced on a pro-rata basis in the
same manner as indicated in paragraphs designated A. and B. above.
Borrower hereby waives presentment, protest, notice of protest and
notice of dishonor of this Note. The non-exercise by the Lender of any rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any other subsequent instance. The Borrower shall not create any class
of indebtedness that ranks senior to this Note.
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
The Borrower and any endorsers hereof, for themselves and their
respective representatives, successors and assigns (except as specifically
provided in the Loan Agreement) expressly waive presentment, demand, protest,
notice of dishonor, notice of non-payment, notice of maturity, notice of
protest, diligence in collection, and the benefit of any applicable exemptions,
including, but not limited to, exemptions claimed under insolvency laws.
SECURED CREDITORS. Borrower represents and warrants that it does not
have any outstanding security interests in the inventory or real estate other
than those set forth in Schedule A attached hereto and made a part hereof and it
shall not create or incur any indebtedness or obligation for borrowed money
except for indebtedness with respect to trade obligations and other normal
accruals in the ordinary course of business not yet due and payable, and shall
not grant any other security interests until payment and performance in full of
the obligations hereunder, unless Lender otherwise consents in writing which
consent shall not be unreasonably withheld. Borrower represents, warrants and
covenants that the Collateral and proceeds are not subject to any security
interest, lien, prior assignment, or other encumbrance of any nature whatsoever
except for the security interest created by this Note other than as indicated in
attached Schedule A.
AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that
from the date hereof until payment and performance in full of the obligations
hereunder, unless Lender otherwise consents in writing:
(a) Use of Proceeds. The proceeds disbursed under the Note shall be
used primarily for working capital.
(b) Borrower represents and warrants that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
validity or enforceability of this Note and there are no outstanding orders or
judgments of any court or governmental authority or awards of any arbitrator or
arbitration board against the Borrower excepting for such law suits or
proceedings as are indicated and summarized in Borrower's Form 10K for fiscal
year ended June 30, 1998.
DEFAULT. If any of the following events occur (a "default"), the terms of the
Contingent Subscription Agreement, Debenture and Registration Rights Agreement
which are incorporated herein by reference and made a part hereof, shall apply
and control:
(a) Borrower fails to pay when due any principal or interest under
this Note;
(b) Borrower fails to observe or perform any covenant or agreement
set forth in this Note or in any instrument, document or agreement concerning
the Collateral;
(c) Borrower makes a general assignment for the benefit of its
creditors, files or become the subject of a petition in bankruptcy, for an
arrangement with its creditors or for reorganization under any federal or state
bankruptcy or other insolvency law;
(d) Borrower files or becomes the subject of a petition for the
appointment of a receiver, custodian, trustee or liquidator of the party or of
all or substantially all of its assets under any federal or state bankruptcy or
other insolvency law;
(e) Borrower is voluntarily or involuntarily terminated or
dissolved;
(f) Borrower or any accommodation maker, endorser or guarantor enters
into any merger or consolidation, or sale, lease, liquidation or other
disposition of all or substantially all of its assets or any transaction outside
the ordinary course of its business or for less than fair consideration or
substantially equivalent value without Lender's prior written consent;
(g) Any judgment is entered against Borrower or any attachment
upon or garnishment of any property of Borrower is issued which materially
effects Borrower's ability to repay the Promissory Note; or
(h) Any representation or statement made herein or any other
written representation or statement made or furnished to Lender by Borrower was
materially incorrect or misleading at the time it was made or furnished.
LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
on or arising out of, under, or in connection with, this Promissory Note shall
be brought and maintained exclusively in the courts of Switzerland. The parties
hereby expressly and irrevocably submit to the jurisdiction of the state and
federal courts of Switzerland for the purpose of any such litigation as set
forth above and irrevocably agree to be bound by any final judgment rendered
thereby in connection with such litigation. The Borrower further irrevocably
consents to the service of process by registered mail, postage prepaid, or by
personal service within or without Switzerland. The Borrower hereby expressly
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may have or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in any inconvenient forum. To the extent that
the Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Lender and the Borrower hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
written statements or actions of the Lender or the Borrower. The Borrower
acknowledges and agrees that it has received full and sufficient consideration
for this provision and that this provision is a material inducement for the
Lender entering into this agreement.
MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
(b) Neither this Promissory Note nor any provision hereof shall be
waived, modified, changed, discharged, terminated, revoked or canceled, except
by an instrument in writing signed by the party effecting the same against whom
any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed:
(i) if to the Borrower, c/o Gary B. Wolff, Esq. 747 Third Avenue , 25th
Floor, NY, NY 10017 with a facsimile copy sent on the same date and (ii) if to
Lender c/o Joseph B. LaRocco, Esq. 49 Locust Avenue, Suite 107, New Canaan, CT
06840.
(d) This Promissory Note shall be enforced, governed and construed in
all respects in accordance with the laws of Switzerland, as such laws are
applied by Switzerland courts to agreements entered into, and to be performed
in, Switzerland by and between residents of Switzerland, and shall be binding
upon the undersigned, the undersigned's heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Lender, its
successors and assigns. If any provision of this Promissory Note is invalid or
unenforceable under any applicable statue or rule of law, then such provisions
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
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS IN CONNECTION WITH
WHICH THIS NOTE WAS EXECUTED AND DELIVERED AND WHICH ARE CONTEMPLATED BY THE
TERMS OF THE AGREEMENT ARE, IN ALL CASES, COMMERCIAL TRANSACTIONS; AND THE
BORROWER HEREBY EXPRESSLY WAIVES ANY AND ALL CONSTITUTIONAL RIGHTS IT MAY HAVE
AS NOW CONSTITUTED OR HEREAFTER AMENDED, WITH REGARD TO NOTICE, ANY JUDICIAL
PROCESS AND ANY AND ALL OTHER RIGHTS IT MAY HAVE, AND THE LENDER MAY INVOKE ANY
PREJUDGMENT REMEDY AVAILABLE TO IT OR ITS SUCCESSORS OR ASSIGNS.
SWISSRAY INTERNATIONAL, INC.
By_________________________________
Ruedi G. Laupper its Chairman
and President duly authorized
SCHEDULE A
In addition to the security interest created by this note, a prior
security interest has been created by virtue of notes dated December 11, 1998 in
accordance with which borrower received gross proceeds aggregating $1,080,000
one-half of which was received from Dominion Capital Fund, Ltd. and one-half of
which was received from Sovereign Partners Limited Partnership.
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $550,000
This offering consists of $550,000 of
Convertible Debentures of Swissray
International, Inc.
--------------------
CONTINGENT SUBSCRIPTION AGREEMENT
-------------------
<PAGE>
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $550,000 The Debentures
will be transferable to the extent that any such transfer is permitted by law.
This offering is being made in accordance with the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and
Rule 506 of Regulation D promulgated under the Act (the "Regulation D
Offering").
The Investor Questionnaire is designed to enable the Investor
to demonstrate the minimum legal requirements under federal and state
securities laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9: "Request for
Taxpayer Identification Number and Certification" for U.S. citizens or residents
of the U.S. for U.S. federal income tax purposes only. (Foreign investors
should consult their tax advisors regarding the need to complete Internal
Revenue Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
If and to the extent that there are any discrepancies or differences
between the Term Sheet and the underlying documents consisting of the Promissory
Note, Contingent Subscription Agreement, Convertible Debenture, Registration
Rights Agreement and Warrants, the terms contained in the Term Sheet shall take
precedence over those contained in the underlying documents. For instance (but
by no means limited to) if the Term Sheet indicates interest at the rate of 8%
per annum and the underlying documents refer to interest at a different rate or
on a different basis, then those terms contained in the Term Sheet shall
control. In the event that the Term Sheet is silent as to any specific terms and
conditions, then in that event the terms and conditions in the underlying
documents (absent any contradictions in the aforesaid Term Sheet) shall control.
<PAGE>
CONTINGENT SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
Convertible Debentures (the "Debentures"). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the "Offering") of up to $550,000 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the "Regulation D Offering") in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and Rule 506 of Regulation D promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $_____________ of the Company's Debentures. The Purchaser entering into
this Contingent Subscription Agreement shall pay the purchase price for the
Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent. (Said amount shall be deemed to have been delivered
to the Company upon non-payment of the full amount of principal and interest due
on the Promissory Note dated March 25, 1999 between the Company and the
Purchaser. The fully executed Contingent Subscription Agreement, Registration
Rights Agreement and Debenture shall be held by the escrow agent and shall only
be delivered to the Purchaser upon non-payment of the full amount of principal
and interest due on the Promissory Note on its "Due Date". The "Due Date" of the
Promissory Note assuming non-payment of the Promissory Note, shall mean the
later of June 25, 1999, or August 24, 1999 if the Company exercises its option
to extend the June 25, 1999 payoff date. The Debentures shall pay a 5%
cumulative interest payable annually, in cash or in freely trading Common Stock
of the Company, at the Company's option, at the time of each conversion. If paid
in Common Stock, the number of shares of the Company's Common Stock to be
received shall be determined by dividing the dollar amount of the dividend by
the then applicable Market Price, as of the interest payment date. " Market
Price" shall mean 80% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately preceding
the date of conversion (the "Conversion Price"). If the interest is to be paid
in cash, the Company shall make such payment within 5 business days of the date
of conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
Due Date, as that term is defined above.
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent's own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully read the
applicable form of Debenture included herein as Exhibit A and the form of
Registration Rights Agreement annexed hereto as Exhibit B (the "Registration
Rights Agreement"), and is familiar with and understands the terms of the
Offering. With respect to tax and other economic considerations involved in his
investment, the undersigned is not relying on the Company. The undersigned has
carefully considered and has, to the extent the undersigned believes such
discussion necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in the
Company, by purchasing the Debentures, for the undersigned's particular tax and
financial situation and has determined that the investment being made by the
undersigned is a suitable investment for the undersigned.
(b) The undersigned acknowledges that all documents, records, and books
pertaining to this investment which the undersigned has requested includes Form
10-KSB for the fiscal year ended June 30, 1997 and 10K for fiscal year ended
June 30, 1998 inclusive of any and all amendments thereto and Form 10-Q for the
quarters ended December 31, 1997, March 31, 1998, September 30, 1998 and
December 31, 1998 inclusive of any and all amendments thereto (the "Disclosure
Documents") have been made available for inspection by the undersigned or the
undersigned has access to the Disclosure Documents.
(c) The undersigned has 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 and all such questions have been answered to
the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the Debentures
without registration under the Act or applicable state securities laws or an
exemption therefrom. The Debentures have not been registered under the Act or
under the securities laws of any states. The Common Stock underlying the
Debentures is to be registered by the Company pursuant to the terms of the
Registration Rights Agreement attached hereto as Exhibit B and incorporated
herein and made a part hereof. Without limiting the right to convert the
Debentures and sell the Common Stock pursuant to the Registration Rights
Agreement, the undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not with a view
to resale or distribution except in compliance with the Act. The undersigned has
not offered or sold any portion of the Debentures being acquired nor does the
undersigned have any present intention of dividing the Debentures with others or
of selling, distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period of time
or upon the occurrence or non-occurrence of any predetermined event or
circumstance in violation of the Act. Except as provided in the Registration
Rights Agreement, the Company has no obligation to register the Common Stock
issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire amount of
such investment. Further, the undersigned has carefully read and considered the
schedule entitled Pending Litigation matters attached hereto as Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each
certificate representing the Debentures unless registered pursuant to the
Registration Rights Agreement, shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE
ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF
THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Common Stock issued upon conversion shall
contain the following legend if converted prior to effectiveness of Registration
Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) Common Stock issued upon conversion and
subsequent to effective date of Registration Statement (pursuant to which shares
underlying conversion are registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered on behalf
of a corporation, (i) such corporation has the full legal right and power and
all authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, this Subscription Agreement and all other instruments
(including, without limitation, the Registration Rights Agreement) executed and
delivered by or on behalf of such corporation in connection with the purchase of
the Debentures and (b) to purchase and hold the Debentures: (ii) the signature
of the party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the specific
purpose of acquiring the Debentures, unless each beneficial owner of such entity
is qualified as an accredited investor within the meaning of Rule 501(a) of
Regulation D and has submitted information substantiating such individual
qualification.
(h) The undersigned shall indemnify and hold harmless the Company and
each stockholder, executive, employee, representative, affiliate, officer,
director, agent (including Counsel) or control person of the Company, who is or
may be a party or is or may be threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any actual or
alleged misrepresentation or misstatement of facts or omission to represent or
state facts made or alleged to have been made by the undersigned to the Company
or omitted or alleged to have been omitted by the undersigned, concerning the
undersigned or the undersigned's subscription for and purchase of the Debentures
or the undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the undersigned, against
losses, liabilities and expenses for which the Company, or any stockholder,
executive, employee, representative, affiliate, officer, director, agent
(including Counsel) or control person of the Company has not otherwise been
reimbursed (including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the Company, or
such officer, director stockholder, executive, employee, agent (including
Counsel), representative, affiliate or control person in connection with such
action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures as a
result of, or pursuant to, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or meeting.
(j) The undersigned or the undersigned's representatives, as the case
may be, has such knowledge and experience in financial, tax and business matters
so as to enable the undersigned to utilize the information made available to the
undersigned in connection with the Offering to evaluate the merits and risks of
an investment in the Debentures and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Debentures for its own account
for investment, and not with a view toward the resale or distribution thereof.
Purchaser is neither an underwriter of, nor a dealer in, the Debentures or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Debentures or the Common Stock issuable upon
conversion thereof.
(l) There has never been represented, guaranteed, or warranted to the
undersigned by any broker, the Company, its officers, directors or agents, or
employees or any other person, expressly or by implication (i) the percentage of
profits and/or amount of or type of consideration, profit or loss to be
realized, if any, as a result of the Company's operations; and (ii) that the
past performance or experience on the part of the management of the Company, or
of any other person, will in any way result in the overall profitable operations
of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery of the
Debentures have been duly authorized by all required corporate action on the
part of Seller, and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and therein, will be
duly and validly issued and enforceable in accordance with their terms, subject
to the laws of bankruptcy and creditors' rights generally. At least 200% of the
number of shares of Common Stock issuable upon conversion of all the Debentures
issued pursuant to this Offering have been duly and validly reserved for
issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares and, upon issuance shall
be duly and validly issued, fully paid, and non-assessable (the "Reserved
Shares"). From time to time, the Company shall keep such additional shares of
Common Stock reserved so as to allow for the conversion of all the Debentures
issued pursuant to this offering.
Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures outstanding would result in an insufficient number of
authorized shares of Common Stock being available to cover all the conversions,
then in such event, the Company will move to call and hold a shareholder's
meeting within 60 days of such event, or such greater period of time if
statutorily required or reasonabilly necessary as regards standard brokerage
house and/or SEC requirements and/or procedures, for the purpose of authorizing
additional shares of Common Stock to facilitate the conversions. In such an
event the Company shall recommend to all shareholders to vote their shares in
favor of increasing the authorized number of shares of Common Stock. Seller
represents and warrants that under no circumstances will it deny or prevent
Purchaser's right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(c) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Debentures, and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Seller is a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule, or regulation of the United States
or any State thereof or any applicable decree, judgment, or order of any Federal
or State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over Seller or any of its
properties or assets.
(d) Company Compliance. The Company represents and warrants that the
Company and its subsidiaries are: (i) in full compliance, to the extent
applicable, with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; excepting that the Company acknowledges
that it did not timely file its Form 10-K for its fiscal year ended June 30,
1998, and its Form 10-Q for the fiscal quarter ended September 30, 1998, both of
which were subsequently filed on December 3, 1998, (ii) not in violation of any
term or provision of its Certificate of Incorporation or by-laws; (iii) not in
default in the performance or observance of any obligation, agreement or
condition contained in any bond, debenture (excepting for reservation of number
of shares required if all Debentures were to be converted and excepting for
registration of underlying shares as same relates to preexisting debentures),
note or any other evidence of indebtedness or in any mortgage, deed of trust,
indenture or other instrument or agreement to which they are a party, either
singly or jointly, by which it or any of its property is bound or subject.
Furthermore, the Company is not aware of any other facts, which it has not
disclosed which could have a material adverse effect on the business, condition,
(financial or otherwise), operations, earnings, performance, properties or
prospects of the Company and its subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in Exhibit C,
there is (i) no action, suit or proceeding before or by any court, arbitrator or
governmental body now pending or, to the knowledge of the Company, threatened or
contemplated to which the Company or any of its subsidiaries is or may be a
party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and no law,
statute, rule, regulation, order or ordinance has been enacted, adopted or
issued by any Governmental Body that prevents the issuance of the Debentures or
the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D. In
the past nine months the Company raised $17,043,449 in Regulation S and
Regulation D offerings, including redemptions and rollovers.
(l) Current Authorized Shares. As of March 22, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 5,051,722
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's filing on
Form 10-K and 10-K/A for the year ended June 30, 1998 and Form 10-Q for quarters
ended September 30, 1998 and December 31, 1998 which could make any of the
disclosures contained therein (as subsequently amended and/or restated)
misleading The financial statements of the Company included in the Disclosure
Documents have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the audit adjustments) the consolidated financial position
of the Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Due Date, assuming
non-payment of the Promissory Note, the Debentures being purchased hereunder
which are being held in escrow by Joseph B. LaRocco, Esq. as Escrow Agent, at
which time shall be delivered to the Purchaser, per the Purchaser's
instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(q) No Default. Except as may be set forth in the Company's report on
form 10-K for the fiscal year ending June 30, 1998, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it or
its property is bound, and neither the execution of, nor the delivery by the
Company of, nor the performance by the Company of its obligations under, this
Agreement or the Debentures, other than the conversion provision thereof, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, (i) any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, (ii) any statute applicable to the Company or its property,
(iii) the Certificate of Incorporation or By-Laws of the Company, (iv) any
decree , judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or (v) the
Company's listing agreement, if any, for its Common Stock.
(r) Use of Proceeds. The Company represents that the net
proceeds of this offering will be primarily used for working capital.
(s) The Company hereby represents that it shall be paying
consultant a fee of $40,000 from the gross proceeds of this Offering, which
fee shall be paid out of escrow by the Escrow Agent
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated attorney
of a facsimile or original of Purchaser's signed Notice of Conversion followed
by receipt of the original Debenture to be converted in whole or in part (within
5 business days as indicated in 4(b) below), the Company shall instruct its
transfer agent to issue one or more Certificates representing that number of
shares of Common Stock into which the Debenture is convertible in accordance
with the provisions regarding conversion set forth in Exhibit D hereto. The
Seller's transfer agent or attorney shall act as Registrar and shall maintain an
appropriate ledger containing the necessary information with respect to each
Debenture.
(b) Conversion Procedures. The face amount of each Debenture may be
converted anytime following the Due Date. Such conversion shall be effectuated
by surrendering to the Company, or its attorney, the Debentures to be converted
together with a facsimile or original of the signed Notice of Conversion which
evidences Purchaser's intention to convert those Debentures indicated. The date
on which the Notice of Conversion is effective ("Conversion Date") shall be
deemed to be the date on which the Purchaser has delivered to the Company a
facsimile or original of the signed Notice of Conversion, as long as the
original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile, the Company's designated attorney is
Gary B. Wolff, Esq., 747 Third Avenue, New York, NY 10017 (P) 212-644-6446 (f)
212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon receipt by the Company or its designated attorney of a facsimile or
original of Purchaser's signed Notice of Conversion (see Exhibit D) Seller shall
instruct Seller's transfer agent to issue Stock Certificates without restrictive
legend or stop transfer instructions, if at that time the Registration Statement
has been deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Purchaser (or
its nominee) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such conversion,
as applicable. Seller warrants that no instructions, other than these
instructions, have been given or will be given to the transfer agent and that
the Common Stock shall otherwise be freely transferable on the books and records
of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its option, to
convert the face amount of each Debenture, plus accrued interest, anytime
following the Due Date, at 80% of the 10 day average closing bid price, as
reported by Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded up or down, as the case may
be, to the nearest whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser's conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser's original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Subscription Agreement shall be deemed to
establish or require the payment of interest to the Purchaser at a rate in
excess of the maximum rate permitted by governing law. In the event that the
rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Certificate of Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person in whose name
the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the documentation
referred to above in Section 4(b), the Company shall deliver a certificate in
accordance with Section 4(c) for the number of shares of Common Stock issuable
upon the conversion. It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Common Stock as
provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of
authorized but unissued shares of Common Stock, the provisions of this
Section 4(g) shall not apply but instead the provisions of Section 4(h)
shall apply. The Company shall make any payments incurred under this
Section 4(g) in immediately available funds within five (5) business
days from the Conversion Date if late. Nothing herein shall limit a
Purchaser's right to pursue actual damages or cancel the conversion for
the Company's failure to
issue and deliver Common Stock to the Holder within 8 business days after the
Conversion Date.
(h) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Purchasers of
the entire amount of Debentures then outstanding. If, at any time Purchaser
submits a Notice of Conversion and the Company does not have sufficient
authorized but unissued shares of Common Stock (or alternative shares of Common
Stock as may be contributed by stockholders) available to effect, in full, a
conversion of the Debentures (a "Conversion Default", the date of such default
being referred to herein as the "Conversion Default Date"), the Company shall
issue to the Purchaser all of the shares of Common Stock which are available,
and the Notice of Conversion as to any Debentures requested to be converted but
not converted (the " Unconverted Debentures"), upon Purchaser's sole option, may
be deemed null and void. The Company shall provide notice of such Conversion
Default ("Notice of Conversion Default") to all existing Purchasers of
outstanding Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Purchaser shall give notice to the Company by facsimile within five business
days of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser's right to pursue actual damages for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) The Purchaser shall be entitled to convert any or all of the
Debentures, even though the Registration Statement covering those Debentures may
not have been declared effective at that time, in which case the Purchaser shall
receive legended Common Stock until the Registration Statement is declared
effective or in the written opinion of legal counsel the legend may be removed.
(j) Right of First Refusal: The Purchaser is granted the Right
of First Refusal on any subsequent financing the Company may seek during the
next twelve months.
(k) Redemption: Company reserves the right, at its sole option, to call
a mandatory redemption of any percentage of the balance on the Debentures during
the two year period following the Due Date. In the event the Company exercises
such right of redemption up to and including the last day of the fourth (4th)
month following the Due Date it shall pay the Purchaser, in U.S. currency One
Hundred Fifteen (115%) of the face amount of the Debentures to be redeemed, plus
accrued interest. In the event the Company exercises such right of redemption at
anytime during the fifth (5th) or sixth (6th) months following the Due Date it
shall pay the Purchaser, in U.S. currency One Hundred Twenty (120%) of the face
amount of the Debentures to be redeemed, plus accrued interest. In the event the
Company exercises such right of redemption at anytime after the last day of the
sixth (6th) month following the Due Date it shall pay the Purchaser, in U.S.
currency One Hundred Twenty-five (125%) of the face amount of the Debentures to
be redeemed, plus accrued interest. The date by which the Debentures must be
delivered to the Escrow Agent shall not be later than 5 business days following
the date the Company notifies the Purchaser by facsimile of the redemption. The
Company shall give the Purchaser at least 5 business day's notice of its intent
to redeem.
(l) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption by the
Company or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company is being
merged, or (c) a change in control, shall the Purchaser be entitled to convert
any Debentures to the extent that, after such conversion, the sum of (1) the
number of shares of Common Stock beneficially owned by the Purchaser and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Debentures), and
(2) the number of shares of Common Stock issuable upon the conversion of the
Debentures with respect to which the determination of this proviso is being
made, would result in beneficial ownership by the Purchaser and its affiliates
of more than 4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion). 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 (the "1934 Act"), except as otherwise provided
in clause (1) of such proviso. The Purchaser further agrees that if the
Purchaser transfers or assigns any of the Debentures to a party who or which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section as if such transferee or assignee were a signatory to
the Subscription Agreement. Furthermore, the Company shall not permit such
conversions that would violate the provisions of this Section 5, unless amended
in writing upon mutual consent of the parties.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Due Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Due Date the Company shall deliver
to the Escrow Agent a signed Registration Rights Agreement in the form attached
hereto as Exhibit B. The Debentures being purchased hereunder shall be delivered
to Joseph B. LaRocco, Esq. as Escrow Agent, who will hold them in escrow and if
Promissory Note is not paid, credit outstanding principal and interest towards
Debentures at which time the Escrow Agent shall then have the Debentures
delivered to the Purchaser, per the Purchaser's instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require. Wherever the term "Closing
Date" is used herein it shall have the same meaning as "Due
Date".
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New
York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions:
the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds $1,000,000; or the
shareholder is a natural person who had an individual income* in excess
of $200,000 in each of 1997 and 1998 and who reasonably expects an individual
income in excess of $200,000 in 1999; or Each of the shareholders of the
undersigned CORPORATION is able to certify that such shareholder is a
natural person who, together with his or her spouse, has had a joint income
in excess of $300,000 in each of 1997 and 1998 and who reasonably expects a
joint income in excess of $300,000 during 1999; and the undersigned
CORPORATION has its principal place of business in ________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration under Section 301 (c) or (d) of the
Small Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Debentures will be
solely for the CORPORATION'S own account and not for the account of any other
person or entity; and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification number as set forth
in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_________________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser's
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Amount of Debentures subscribed for Date
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1999
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
<PAGE>
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the "Company") according to the conditions set forth in the
Contingent Subscription Agreement dated _____________ ____,
1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
Exhibit E
_______________, 1999
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the "Company"), in connection with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company's Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of _____
shares of Common Stock, ________ par value per share, ("Common Stock") and
______________ Preferred Stock, par value $________ per share; [describe classes
if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not violate
the applicable listing agreement between the Company and any securities exchange
or market on which the Company's securities are listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 25, 1999, ("this
Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New York
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Contingent
Subscription Agreement, dated as of March 25, 1999, between the Initial Investor
and the Company (the "Subscription Agreement"), the Company has agreed to issue
and sell to the Initial Investor 5% Convertible Debentures of the Company (the
"Debentures"), which will be convertible into shares of the common stock, $.01
par value (the "Common Stock"), of the Company and Warrants to purchase the
Common Stock (collectively the "Conversion Shares") upon the terms and subject
to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Due Date" means the later of June 25, 1999, or August 24,
1999, if the Company exercises its option to extend the June 25, 1999, due date
on the promissory note dated March 25, 1999.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) calendar days after the Due Date, a
Registration Statement covering a sufficient number of shares of Common Stock
for the Initial Investors into which the Warrants would be exercised and the
$550,000 of Debentures, plus accrued interest, in the total offering would be
convertible. In the event the Registration Statement is not filed within
forty-five (45) calendar days after the Due Date, then in such event the Company
shall pay the Investor 2% of the face amount of each Debenture for each 30 day
period, or portion thereof, after forty-five (45) calendar days following the
Due Date that the Registration Statement is not filed. The Investor is also
granted Piggy-back registration rights on any other Registration Statement
filings made by the Company exclusive of Registration Statements on Form S-8 and
so long as permissible under the Securities Act. Such Registration Statement
shall state that, in accordance with the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
to prevent dilution resulting from Stock splits, or stock dividends. If at any
time the number of shares of Common Stock into which the Debenture(s) may be
converted exceeds the aggregate number of shares of Common Stock then
registered, the Company shall, within ten (10) business days after receipt of
written notice from any Investor, either (i) amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to register
all shares of Common Stock into which the Debenture(s) may be converted, or (ii)
if such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement on such form as is
applicable to register the shares of Common Stock into which the Debenture may
be converted that exceed the aggregate number of shares of Common Stock already
registered which new Registration Statement shall be filed within 45 days. The
above damages shall continue until the obligation is fulfilled and shall be paid
within 5 business days after each 30 day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said 5 business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than forty-five (45) calendar days after the Due
Date will cause the Initial Investor to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate to
include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to qualify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) Payment by the Company. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within one hundred twenty (120) calendar
days following the Due Date, then the Company shall pay the Initial Investor 2%
of the purchase price paid by the Initial Investor for the Registrable
Securities pursuant to the Subscription Agreement for every thirty day period,
or portion thereof, following the one hundred twenty (120) calendar day period
until the Registration Statement is declared effective. Notwithstanding the
foregoing, the amounts payable by the Company pursuant to this provision shall
not be payable to the extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act timely by
the Initial Investor or its counsel. The above damages shall continue until the
obligation is fulfilled and shall be paid within 5 business days after each 30
day period, or portion thereof, until the Registration Statement is declared
effective. Failure of the Company to make payment within said 5 business days
shall be considered a default.
The Company acknowledges that its failure to have the
Registration Statement declared effective within said one
hundred twenty (120) calendar day period following the Due
Date, will cause the Initial Investor to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this
Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith
effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated
damages shall not relieve the Company from its obligations to
register the Common Stock and deliver the Common Stock
pursuant to the terms of this Agreement, the Subscription
Agreement and the Debenture.
3. Obligation of the Company. In connection with
the registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days
of the Due Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective the earlier of (i) five business days
after notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) one hundred twenty (120) days after
the Due Date, and keep the Registration Statement effective at all times until
the earliest (the "Registration Period") of (i) the date that is two years after
the Due Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such registrable securities;
(h) Provide a transfer agent for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 200 East 32nd Street, Suite 34B, New York, New
York 10016 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue,
25th Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
ABERDEEN AVENUE, LLC
By: ____________________________________
Name:
Title:
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE DEBENTURE DUE , 1999
, 2001
$
Number LN-1999-
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay ABERDEEN AVENUE,
LLC or registered assigns (the "Holder") on ___________ __, 2001, (the
"Maturity Date"), the principal amount of _________________________
Dollars ($ ____________) U.S., and to pay interest on the principal
amount hereof, in such amounts, at such times and on such terms and
conditions as are specified herein. The purchase price for this
Debenture shall be deemed to have been delivered to the Company upon
non-payment of the full amount of principal and interest due on the
Promissory Note dated March 25, 1999 between the Company and the
Holder. The fully executed Contingent Subscription Agreement,
Registration Rights Agreement and this Debenture shall be held by the
escrow agent and shall only be delivered to the Holder upon non-payment
of the full amount of principal and interest due on the Promissory Note
on its "Due Date". The "Due Date" of the Promissory Note shall mean the
later of June 25, 1999, or August 24, 1999, if the Company exercises
its option to extend the June 25, 1999 due date.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the rate of Five Percent (5.0%) per year, payable
at the time of each conversion until the principal amount hereof is paid in full
or has been converted. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months. Each payment shall be paid in cash or in freely trading
Common Stock of the Company, at the Company's option. If paid in Common Stock,
the number of shares of the Company's Common Stock to be received shall be
determined by dividing the dollar amount of the interest by the then applicable
Market Price as of the interest payment date. "Market Price" shall mean 80% of
the average of the 10 day closing bid prices, as reported by Bloomberg, LP for
the ten (10) consecutive trading days immediately preceding the date of
conversion. If the interest is to be paid in cash, the Company shall make such
payment within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the Holder, or
per Holder's instructions, within 5 business days of the date of conversion. The
Debentures are subject to automatic conversion at the end of two years from the
date of issuance at which time all Debentures outstanding will be automatically
converted based upon the formula set forth in Section 3.2. The closing shall be
deemed to have occurred on the Due Date as that term is defined above.
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall
have the option of paying the interest on this Debenture in United States
dollars or in common stock upon conversion pursuant to Article 1 hereof. The
Company may draw a check for the payment of interest to the order of the Holder
of this Debenture and mail it to the Holder's address as shown on the Register
(as defined in Section 7.2 below). Interest and principal payments shall be
subject to withholding under applicable United States
Federal Internal Revenue Service Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at its option,
to convert it into shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at any time following the Due Date and which is before
the close of business on the Maturity Date, except as set forth in Section 3.1(
c) below. The number of shares of Common Stock issuable upon the conversion of
this Debenture is determined pursuant to Section 3.2 and rounding the result to
the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains
outstanding on the second anniversary of the date hereof, the unconverted
portion of such Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 3.2.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated attorney
of a facsimile or original of Holder's signed Notice of Conversion and the
receipt of the original Debenture to be converted in whole or in part in the
manner set forth in 3.2(b) below, the Company shall instruct its transfer agent
to issue one or more Certificates representing that number of shares of Common
Stock into which the Debenture is convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller's transfer agent
or attorney shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture may be
converted anytime following the Due Date. Such conversion shall be effectuated
by surrendering to the Company, or its attorney, this Debenture to be converted
together with a facsimile or original of the signed Notice of Conversion which
evidences Holder's intention to convert the Debenture indicated. The date on
which the Notice of Conversion is effective ("Conversion Date") shall be deemed
to be the date on which the Holder has delivered to the Company or its
designated attorney a facsimile or original of the signed Notice of Conversion,
as long as the original Debenture(s) to be converted are received by the Company
or its designated attorney within 5 business days thereafter. Unless otherwise
notified by the Company in writing via facsimile the Company's designated
attorney is Gary B. Wolff, Esq., 747 Third Avenue, 25th Floor, New York, New
York 10017, (P) 212-644-6446, (F) 212-644-6498.
(c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon receipt by the Company or its attorney of a facsimile or original of
Holder's signed Notice of Conversion Seller shall instruct Seller's transfer
agent to issue Stock Certificates without restrictive legend or stop transfer
instructions, if at that time the Registration Statement covering such shares
has been deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective), in the name of Holder (or its
nominee) and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion, as
applicable. Seller warrants that no instructions, other than these instructions,
have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller,
except as may be set forth herein.
(d) (i) Conversion Rate. Holder is entitled, at its option to convert
the face amount of this Debenture, plus accrued interest, anytime following the
Due Date, at 80% of the 10 day average closing bid price, as reported by
Bloomberg LP, for the ten (10) consecutive trading days immediately preceding
the applicable Conversion Date (the "Conversion Price"). No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up or down, as the case may be, to
the nearest whole share.
(ii) Most Favored Financing. If after the Due Date, but prior
to the Holder's conversion of all the Debentures, the Company raises money under
either Regulation D or Regulation S on terms that are more favorable than those
terms set forth in this Debenture, then in such event, the Holder at its sole
option shall be entitled to completely replace the terms of this Debenture with
the terms of the more beneficial Debenture as to that balance, including accrued
interest and any accumulated liquidated damages, remaining on Holder's original
investment. The Debentures are subject to a mandatory, 24 month conversion
feature at the end of which all Debentures outstanding will be automatically
converted, upon the terms set forth in this section ("Mandatory Conversion
Date").
(e) Nothing contained in this Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(b), the Company shall deliver a
certificate, in accordance with Section 3(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein "No. Business Days Late" is
defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- ---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.
The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the Conversion
Date if late. Nothing herein shall limit a Holder's right to pursue actual
damages or cancel the conversion for the Company's failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve and have available
all Common Stock necessary to meet conversion of the Debentures by all Holders
of the entire amount of Debentures then outstanding. If, at any time Holder
submits a Notice of Conversion and the Company does not have sufficient
authorized but unissued shares of Common Stock (or alternative shares of Common
Stock as may be contributed by Stockholders) available to effect, in full, a
conversion of the Debentures (a "Conversion Default", the date of such default
being referred to herein as the "Conversion Default Date"), the Company shall
issue to the Holder all of the shares of Common Stock which are available, and
the Notice of Conversion as to any Debentures requested to be converted but not
converted (the "Unconverted Debentures"), upon Holder's sole option, may be
deemed null and void. The Company shall provide notice of such Conversion
Default ("Notice of Conversion Default") to all existing Holders of outstanding
Debentures, by facsimile, within three (3) business day of such default (with
the original delivered by overnight or two day courier), and the Holder shall
give notice to the Company by facsimile within five business days of receipt of
the original Notice of Conversion Default (with the original delivered by
overnight or two day courier) of its election to either nullify or confirm the
Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Holder's option, payable as follows: (i) in
the event Holder elects to take such payment in cash, cash payments shall be
made to such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at the
conversion rate set forth in section 4(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture.
Nothing herein shall limit the Holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(i) The Company shall furnish to Holder such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
(j) The Holder is limited in the amount of this Debenture it may
convert and own. In no event except (i) with respect to a conversion pursuant to
redemption by the Company or (ii) if there is (a) a public announcement that 50%
or more of the Company is being acquired, (b) a public announcement that the
Company is being merged, or (c) a change in control, shall the Holder be
entitled to convert any Debentures to the extent that, after such conversion,
the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or any of the Company's Warrants), and (2) the number of shares of
Common Stock issuable upon the conversion of the Debentures, or exercise of any
of the Company's Warrants, 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 outstanding shares of Common Stock
(after taking into account the shares to be issued to the Holder upon such
conversion). 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 (the "1934 Act"), except as
otherwise provided in clause (1) of such proviso. The Holder further agrees that
if the Holder transfers or assigns any of the Debentures to a party who or which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section as if such transferee or assignee were a signatory to
the Subscription Agreement. Furthermore, the Company shall not permit such
conversions that would violate the provisions of this Section 3.2(j), unless
amended in writing upon mutual consent of the parties.
(k) Redemption. Company reserves the right,
at its sole option, to call a mandatory redemption of any percentage of the
balance on the Debentures during the two year period following the Due Date.
In the event the Company exercises such right of redemption up to and including
the last day of the fourth (4th) month following the Due Date it shall pay the
Holder, in U.S. currency One Hundred Fifteen (115%) of the face amount of the
Debentures to be redeemed, plus accrued interest. In the event the Company
exercises such right of redemption at anytime during the fifth (5th) or sixth
(6th) months following the Due Date it shall pay the Holder, in U.S.
currency One Hundred Twenty (120%) of the face amount of the Debentures to be
redeemed, plus accrued interest. In the event the Company exercises such right
of redemption at anytime after the last day of the sixth (6th) month following
the Due Date it shall pay the Holder, in U.S. currency One Hundred Twenty-five
(125%) of the face amount of the Debentures to be redeemed, plus accrued
interest. The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 5 business days following the date the Company notifies
the Holder by facsimile of the redemption. The Company shall give the Holder at
least 5 business day's notice of its intent to redeem.
Section 3.3. Fractional Shares. The Company shall not issue
fractional shares of Common Stock, or scrip representing fractions of such
shares, upon the conversion of this Debenture. Instead, the Company shall
round up or down, as the case may be, to the nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder
shall pay any such tax which is due because the shares are issued in a name
other than its name.
Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in this Debenture. All shares of Common Stock which may be issued upon
the conversion hereof shall upon issuance be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the "Act") and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable upon
the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default" occurs if (a) the
Company fails to comply with any of its agreements in this Debenture and such
failure continues for the period and after the notice specified below, (b) the
Company pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined): (i) commences a voluntary case; (ii) consents to the entry of an order
for relief against it in an involuntary case; (iii) consents to the appointment
of a Custodian (as hereinafter defined) of it or for all or substantially all of
its property or (iv) makes a general assignment for the benefit of its creditors
or (v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its property or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days. As used in this Section 6.1,
the term "Bankruptcy Law" means Title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law. A default under clause (c) above is not an Event of Default
until the holders of at least 25% of the aggregate principal amount of the
Debentures outstanding notify the Company of such default and the Company does
not cure it within five (5) business days after the receipt of such notice,
which must specify the default, demand that it be remedied and state that it is
a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable. Upon such
declaration, the remaining principal amount shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are referred to
herein collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the "Register") showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this Debenture is
the person exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may
be registered on the books of the Company maintained for such purpose pursuant
to Section 7.2 above (i.e., the Register). Transfers shall be registered when
this Debenture is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the appropriate person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including tax laws and
state and federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the transferee as the record holder thereof shall be issued in lieu
hereof. When this Debenture is presented to the Company with a reasonable
request to exchange it for an equal principal amount of Debentures of other
denominations, the Company shall make such exchange and shall cancel this
Debenture and issue in lieu thereof Debentures having a total principal amount
equal to this Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices, with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in the payment of principal or conversion into
Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of New York applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of New York.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.
SWISSRAY INTERNATIONAL, INC.
By
Name: Ruedi G. Laupper
Title: Chairman and President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Contingent Subscription Agreement dated
_________________,1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
- --------------------------------------------------------------------------------
(principal amount of Debenture, $5,000 or integral multiples of $5,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: Signed:
(Signature must conform in all respects to name of Holder shown of face of
Debenture)
Signature Guaranteed:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
WARRANT TO PURCHASE 27,500 SHARES OF
COMMON STOCK OF SWISSRAY INTERNATIONAL, INC.
Exercisable Commencing March 26, 1999;
Void after March 26, 2004
THIS CERTIFIES that, for value received ABERDEEN AVENUE, LLC or its
registered assigns (the "Warrantholder") is entitled, subject to the terms and
conditions set forth in this Warrant, to purchase from SWISSRAY INTERNATIONAL,
INC., a New York corporation (the "Company"), 27,500 fully paid, duly authorized
and nonassessable shares (the "Shares"), of Common Stock, $.01 par value per
share, of the Company (the "Common Stock"), at any time commencing March 26,
1999 and continuing up to 5:00 p.m. New York City time on March 26, 2004 at an
exercise price of $1.00 subject (the "Warrant Price") to adjustment pursuant to
Section 8 hereof.
This Warrant is subject to the following provisions, terms and
conditions:
Section 1. Transferability.
1.1 Registration. The Warrants shall be issued only in registered form
and Shares issuable upon exercise of the Warrants shall have piggy back
registration rights and shall be registered by the Company pursuant to the terms
of a Registration Rights Agreement between the Company and ABERDEEN AVENUE, LLC.
1.2 Transfer. This Warrant shall be transferable only on the books of
the Company maintained at its principal executive offices upon surrender thereof
for registration of transfer duly endorsed by the Warrantholder or by its duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant or Warrants in
appropriate denominations to the person or persons entitled thereto.
1.3 Legend on Warrant Shares. Each certificate for Shares
initially issued
<PAGE>
upon exercise of a Warrant, unless at time of exercise such Shares are
registered under the Securities Act of 1933, as amended (the "Securities Act"),
shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear the above
legend unless the Company receives an opinion of counsel acceptable to the
Company that registration or qualification of the securities represented thereby
under the laws referred to therein is not required.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates of like tenor entitling the
Warrantholder to purchase a like aggregate number of Shares as the certificate
or certificates surrendered then entitle such Warrantholder to purchase. Any
Warrantholder desiring to exchange a warrant certificate shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Terms of Warrants: Exercise of Warrants.
(a) Subject to the terms of this Warrant, the Warrantholder shall have
the right, at any time after March 26, 1999, but before 5:00 p.m., New York City
time on March 26, 2004 (the "Expiration Time"), to purchase from the Company up
to the number of Shares which the Warrantholder may at the time be entitled to
purchase pursuant to the terms of this Warrant, upon surrender to the Company at
its principal executive office, of the certificate evidencing this Warrant to be
exercised, together with the attached Election to Exercise form duly filled in
and signed, and upon payment to the Company of the Warrant Price (as defined in
and determined in accordance with the provisions of Section 7 and 8 hereof) for
the number of Shares with respect to which such Warrant is then exercised.
Payment of the aggregate Warrant Price shall be made in cash, wire transfer or
by cashier's check or any combination thereof.
(b) Subject to the terms of this Warrant, upon such surrender of this
Warrant and payment of such Warrant Price as aforesaid, the Company shall
promptly issue and cause to be delivered to the Warrantholder or to such person
or persons as the Warrantholder may designate in writing, a certificate or
certificates (in such name or names as the Warrantholder may designate in
writing) for the number of duly authorized, fully paid and non-assessable whole
Shares to be purchased upon the exercise of this Warrant, and shall deliver to
the Warrantholder Common Stock or cash, to the extent provided in Section 9
hereof, with respect to any fractional Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Shares as of the close of business on the date of the surrender
of this Warrant and payment of the Warrant Price, notwithstanding that the
certificates representing such Shares shall not actually have been delivered or
that the Share and Warrant transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the sole election of the Warrantholder,
either in full or from time to time in part and, in the event that any
certificate evidencing this Warrant (or any portion thereof) is exercised prior
to the Termination Date with respect to less than all of the Shares specified
therein at any time prior to the Termination Date, a new certificate of like
tenor evidencing the remaining portion of this Warrant shall be issued by the
Company, if so requested by the Warrantholder.
(c) Upon the Company's receipt of a facsimile or original of
Warrantholder's signed Election to Exercise, the Company shall instruct its
transfer agent to issue one or more stock Certificates representing that number
of shares of Common Stock which the Warrantholder is entitled to purchase in
accordance with the terms and conditions of this Warrant and the Election to
Exercise attached hereto. The Company's transfer agent or attorney shall act as
Registrar and shall maintain an appropriate ledger containing the necessary
information with respect to each Warrant.
(d) Such exercise shall be effectuated by surrendering to the Company,
or its attorney, the Warrants to be converted together with a facsimile or
original of the signed Election to Exercise which evidences Warrantholder's
intention to exercise those Warrants indicated. The date on which the Election
to Exercise is effective ("Exercise Date") shall be deemed to be the date on
which the Warrantholder has delivered to the Company a facsimile or original of
the signed Election to Exercise, as long as the original Warrants to be
exercised are received by the Company or its designated attorney within 5
business days thereafter. As long as the Warrants to be exercised are received
by the Company within five business days after it receives a facsimile or
original of the signed Election to Exercise, the Company shall deliver to the
Warrantholder, or per the Warrantholder's instructions, the shares of Common
Stock to an address in the U.S., without restrictive legend or stop transfer
instructions, within 5 business days of receipt of the Warrants to be converted.
(e) Nothing contained in this Warrant shall be deemed to establish or
require the payment of interest to the Warrantholder at a rate in excess of the
maximum rate permitted by governing law. In the event that the rate of interest
required to be paid exceeds the maximum rate permitted by governing law, the
rate of interest required to be paid thereunder shall be automatically reduced
to the maximum rate permitted under the governing law and such excess shall be
returned with reasonable promptness by the Warrantholder to the Company.
(f) It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Certificate of Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person in whose name
the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the exercise date. Upon surrender of any
Warrants that are to be converted in part, the Company shall issue to the
Warrantholder new Warrants equal to the unconverted amount, if so requested by
Warrantholder.
Nothing herein shall limit the Warrantholder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock.
(g) The Company shall furnish to Warrantholder such number of
prospectuses and other documents incidental to the registration of the Common
Stock underlying the Warrants, including any amendment of or supplements
thereto.
(h) Each person in whose name any certificate for shares of Common
Stock shall be issued shall for all purposes be deemed to have become the holder
of record of the Common Stock represented thereby on the date on which the
Warrant was surrendered and payment of the purchase price and any applicable
taxes was made, irrespective of date of issue or delivery of such certificate,
except that if the date of such surrender and payment is a date when the Shares
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such Shares on the next succeeding date on which such Share
transfer books are open. The Company shall not close such Share transfer books
at any one time for a period longer than seven days.
Section 4. Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the Shares;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable, (i) with respect to any secondary transfer of this
Warrant or the Shares or (ii) as a result of the issuance of the Shares to any
person other than the Warrantholder, and the Company shall not be required to
issue or deliver any certificate for any Shares unless and until the person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have produced evidence that such tax has been paid to the
appropriate taxing authority.
Section 5. Mutilated or Missing Warrant. In case the certificate or
certificates evidencing this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and of a bond of indemnity, if requested, also
satisfactory to the Company in form and amount, and issued at the applicant's
cost. Applicants for such substitute Warrant certificate shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
Section 6. Reservation of Shares. The Company has duly and validly
reserved, and shall at all times so long as this Warrant remains outstanding,
keep reserved, out of its authorized and unissued capital stock, sufficient
shares of Common Stock as shall be subject to purchase under this Warrant (the
"Reserved Shares"). The issuance, sale and delivery of the Warrants and Reserved
Shares have been duly authorized by all required corporate action on the part of
the Company and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and therein, will be
duly and validly issued, fully paid, and non-assessable and enforceable in
accordance with their terms, subject to the laws of bankruptcy and creditors'
rights generally. The Company shall pay all taxes in respect of the issue
thereof. As a condition precedent to the taking of any action that would result
in the effective purchase price per share of Common Stock upon the exercise of
this Warrant being less than the par value per share (if such shares of Common
Stock then have a par value), the Company will take such corporate action as
may, in the opinion of its counsel, be necessary in order that the Company may
comply with all its obligations under this Agreement with regard to the exercise
of this Warrant.
Prior to exercise of all the Warrants, if at anytime the conversion of
all the Shares and exercise of all the Warrants outstanding results in an
insufficient number of Reserved Shares being available to cover all the
conversions and exercises, then in such event, the Company will move to call and
hold a shareholder's meeting within 45 days of such event for the purpose of
authorizing additional Shares to facilitate the conversions. In such an event
the Company shall: (1) recommend to its current or future officers, directors
and other control people to vote their shares in favor of increasing the
authorized number of shares of Common Stock and (2) recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock. As for any shareholders who do not vote on the issue
of increasing the authorized number of shares of Common Stock, such failure to
vote shall automatically be taken as a vote in favor of increasing the
authorized number of shares of Common Stock. The proxy sent out by the Company
to all shareholders shall provide that if no vote is received a consent to
action will be executed on behalf of those shares of Common Stock for which no
vote was received, in favor of increasing the authorized number of shares of
Common Stock of the Company. Company represents and warrants that under no
circumstances will it deny or prevent Warrantholder from exercising the Warrants
as permitted under the terms of the Subscription Agreement, the Warrants or the
Registration Rights Agreement.
Section 7. Warrant Price. From March 26, 1999 through 5:00 p.m
New York City time on March 26, 2004, the Warrant Price shall be subject to
adjustment pursuant to Section 8 hereof.
Section 8. Adjustment of Warrant Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time after the
date hereof upon the happening of certain events, as follows:
8.1 Adjustments. The number of Shares purchasable upon the
exercise of this Warrant shall be subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend on Common Stock in
Common Stock or securities convertible into, exchangeable for or otherwise
entitling a holder thereof to receive Common Stock, (ii) declare a dividend
payable in cash on its Common Stock and at substantially the same time offer its
shareholders a right to purchase new Common Stock (or securities convertible
into, exchangeable for or other entitling a holder thereof to receive Common
Stock) from the proceeds of such dividend (all Common Stock so issued shall be
deemed to have been issued as a stock dividend), (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, (iv)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (v) issue by reclassification of its Common Stock any shares
of Common Stock of the Company, the number of shares of Common Stock issuable
upon exercise of the Warrants immediately prior thereto shall be adjusted so
that the holders of the Warrants shall be entitled to receive after the
happening of any of the events described above that number and kind of shares as
the holders would have received had such Warrants be converted immediately prior
to the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subdivision shall become effective immediately
after the close of business on the record date in the case of a stock dividend
and shall become effective immediately after the close of business on the
effective date in the case of a stock split, subdivision, combination or
reclassification.
(b) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends other than as described in
Section (8)(a)(ii)), then in such case, the number of shares of Common Stock
thereafter issuable upon exercise of the Warrants shall be determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of the Warrants, by a fraction, of which the numerator shall be the
closing bid price per share of Common Stock on the record date for such
distribution, and of which the denominator shall be the closing bid price of the
Common Stock less the then fair value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed per share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(c) Any adjustment in the number of shares of Common Stock issuable
hereunder otherwise required to be made by this Section 8 will not have to be
adjusted if such adjustment would not require an increase or decrease in one
percent (1%) or more in the number of shares of Common Stock issuable upon
exercise of the Warrant. No adjustment in the number of Shares purchasable upon
exercise of this Warrant will be made for the issuance of shares of capital
stock to directors, employees or independent contractors pursuant to the
Company's or any of its subsidiaries' stock option, stock ownership or other
benefit plans or arrangements or trusts related thereto or for issuance of any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under such plan.
(d) Whenever the number of shares of Common Stock issuable upon the
exercise of the Warrants is adjusted, as herein provided the Warrant Price shall
be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of shares of Common Stock issuable upon the exercise of each share of the
Warrants immediately prior to such adjustment, and of which the denominator
shall be the number of shares of Common Stock issuable immediately thereafter.
(e) The Company from time to time by action of its Board of Directors
may decrease the Warrant Price by any amount for any period of time if the
period is at least 20 days, the decrease is irrevocable during the period and
the Board of Directors of the Company in its sole discretion shall have made a
determination that such decrease would be in the best interest of the Company,
which determination shall be conclusive. Whenever the Warrant Price is decreased
pursuant to the preceding sentence, the Company shall mail to holders of record
of the Warrants a notice of the decrease at least 15 days prior to the date the
decreased Warrant Price takes effect, and such notice shall state the decreased
Warrant Price and the period it will be in effect.
8.2 Mergers. Etc. In the case of any (i) consolidation or merger of the
Company into any entity (other than a consolidation or merger that does not
result in any reclassification, exercise, exchange or cancellation of
outstanding shares of Common Stock of the Company), (ii) sale, transfer, lease
or conveyance of all or substantially all of the assets of the Company as an
entirety or substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
holder of Warrants then outstanding shall have the right thereafter to exercise
such Warrant only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of shares of Common
Stock of the Company into which such Warrants would have been converted
immediately prior to such consolidation, merger, sale, transfer, capital
reorganization or reclassification, assuming such holder of Common Stock of the
Company (A) is not an entity with which the Company consolidated or into which
the Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent entity"), or an affiliate of
a constituent entity, and (B) failed to exercise his or her rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by other than a constituent entity or an affiliate thereof and in
respect of which such rights or election shall not have been exercised
("non-electing share"), then for the purpose of this Section 8.2 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). If necessary, appropriate adjustment shall be made in the
application of the provision set forth herein with respect to the rights and
interests thereafter of the holder of Warrants, to the end that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of the Warrants. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, capital reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless prior to or
simultaneously with the consummation thereof the successor company or entity (if
other than the Company) resulting from such consolidation, merger, sale or
transfer assumes, by written instrument, the obligation to deliver to the holder
of Warrants such shares of stock, securities or assets as, in accordance with
the foregoing provision, such holder may be entitled to receive under this
Section 8.2.
8.3 Statement of Warrants. Irrespective of any
adjustments in the Warrant Price of the number or kind of shares purchasable
upon the exercise of this Warrant, this Warrant certificate or certificates
hereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant.
Section 9. Fractional Shares. Any fractional shares of Common Stock
issuable upon exercise of the Warrants shall be rounded to the nearest whole
share or, at the election of the Company, the Company shall pay the holder
thereof an amount in cash equal to the closing bid price thereof. Whether or not
fractional shares are issuable upon exercise shall be determined on the basis of
the total number of Warrants the holder is at the time exercising and the number
of shares of Common Stock issuable upon such exercise.
Section 10. No Rights as Stockholders: Notices to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees any rights as a stockholder of the Company,
including the right to vote, receive dividends, consent or receive notices as a
stockholder with respect to any meeting of stockholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
5:00 p.m., New York City time, on March 26, 2004, (the "Expiration Time") and
prior to the exercise of this Warrant, any of the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1; or
(b) a dissolution, liquidation or winding up of the Company or any
consolidation, merger or sale of its property, assets and business as an
entirety; then in any one or more of said events, the Company shall give notice
in writing of such event to the Warrantholder at least 10 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights, or other rights or for the effective
date of any dissolution, liquidation of winding up or any merger,
consolidation, or sale of substantially all assets, but failure to mail or
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any such action taken. Such notice shall specify such
record date or the effective date, as the case may be.
Section 11. Successors. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Warrantholder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder.
Section 12. Applicable Law. This Warrant shall be construed and
enforced in accordance with and the rights of the parties shall be governed by
the laws of the State of New York.
Section 13. Benefits of this Agreement. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Warrantholder any legal or equitable right, remedy or claim under this
Warrant, and this Warrant shall be for the sole and exclusive
benefit of the Company and the Warrantholder.
Section 14. Piggy-back Registration Rights. If at any time prior to the
expiration of the warrant the Company shall propose to prepare on its own behalf
or on behalf of any of its stockholders (other than Warrantholder) a
registration statement in connection with an underwritten public offering of any
equity securities of the Company, the Company shall give Warrantholder written
notice at least 20 days before the anticipated filing date of such registration
statement. Should Warrantholder desire to have any of the Shares included in
such registration statement Warrantholder shall so advise the Company in writing
no later than 15 days after the Company's notice is given, setting forth the
number or amount of Shares which Warrantholder requests to be included in the
registration statement, and the Company shall include the securities specified
in such request in such registration statement and keep such registration
statement in effect and maintain compliance with each federal and state law and
regulation as set forth herein. The Company may, at its option, require that the
amount of Shares offered for sale by Warrantholder pursuant to this Section 14
be decreased if, in the opinion of the Company's investment banking firm, such
reduction is necessary in order to permit the orderly distribution and sale of
the securities being offered. If the Company shall require such a reduction,
Warrantholder shall have the right to withdraw from the offering.
Section 15. Definitions.
"Common Stock" shall mean (i) Common Stock, $.01 par value per share,
of the Company and (ii) any other security purchasable upon the exercise of this
Warrant upon the happening of certain events.
IN WITNESS WHEREOF, the parties have caused this Warrant to be duly
executed, all as of the day and year first above written.
SWISSRAY INTERNATIONAL , INC.
By:________________________________
Ruedi G. Laupper its Chairman
and President
<PAGE>
SWISSRAY INTERNATIONAL, INC.
ELECTION TO EXERCISE
SWISSRAYINTERNATIONAL, INC.
c/o Gary B. Wolff, Esq.
747 Third Avenue - 25th Floor
New York, NY 10017
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder, _______shares
of Common Stock (the "Share") provided for therein, and requests that
certificates for the Shares be issued in the name of:*
Name:___________________________________________________________
Address:_________________________________________________________
Social Security No.________________________________________________
or Tax ID Number:_________________________________________________
and, if such number of Shares shall not be all of the Shares purchasable under
the Warrant, that a new Warrant certificate for the balance of the Shares
purchasable under the within Warrant be registered in the name of the
undersigned warrantholder or his Assignee* as indicated below and delivered to
the address stated below:
Dated:________, 19___
Name of Warrantholder of
Assignee (Please Print)_____________________________________________
Address:_________________________________________________________
Signature:________________________________________________________
Signature Guaranteed:______________________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The above signature must correspond with the name as written on
the face of this Warrant certificate in every particular, without alteration or
enlargement or any change whatever, unless this warrant has been assigned.
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant)*
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing
_________Attorney to transfer said Warrant on the books of the Company, with
full power of substitution in the premises.
Dated:______________, 19____
________________________________**
Signature of Registered Holder
Signature Guaranteed: ________________________________
Signature of Guarantor
- --------------------
* The Warrant contains restrictions on sale, assignment or transfer.
** Note: The signature of this assignment must correspond with the name
as it appears upon the face of the Warrant certificate in every particular,
without alteration or enlargement or any change whatever.
ON LETTERHEAD
Exhibit 23.1(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of both our reports (1) dated September 16, 1997,
except for notes 1, 17,20,22, 23, 25, 27, 29, 30 and 31, as to which date is
March 6, 1998 on our audits of the financial statement of Swissray
International, Inc. for the years ended June 30, 1997 and 1996 (2) dated
September 8, 1995, except for note 24, as to which the date is September 20,
1995 on our audits of the financial statement of Swissray International, Inc.
for the six months ended June 30, 1995 and the years ended December 31, 1994 and
1993 in Swissray International, Inc.'s Form S-1 filed April 27, 1999.
/Bederson & Company LLP/
BEDERSON & COMPANY LLP
West Orange, New Jersey
April 27, 1999 1999
ON LETTERHEAD
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated Noverber 20, 1998 of our audit
of the financial statement of Swissray International, Inc. for the year ended
June 30, 1998 in Swissray International, Inc.'s Amendment No. 1 to Form S-1
filed April 27, 1999.
/S/FELDMAN SHERB EHRLICH & CO., P.C.
FELDMAN SHERB EHRLICH & CO., P.C.
New York, New York
April 27, 1999
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<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
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(Replace this text with the legend)
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<NAME> SWISSRAY INTERNATIONAL, INC.
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<PERIOD-TYPE> 3-MOS
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<PERIOD-START> JUL-01-1998
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