AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 8, 2000
REGISTRATION NO. 333-59829
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4 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 [3841] 16-0950197
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
SWISSRAY INTERNATIONAL, INC.
320 WEST 77TH STREET, SUITE 1A
NEW YORK, NEW YORK 10024
UNITED STATES: (917) 441-7841
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.
320 WEST 77TH STREET, SUITE 1A
NEW YORK, NEW YORK 10024
(917) 441-7841
(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
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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/
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. / /
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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
---------- --- --- ----------- ---
Common Stock ($.01 par
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VALUE PER SHARE) 7,200,709 7,200,709 $7.8125 $56,255,539 $16,595.38(4)(5)(6)
</TABLE>
(1) Includes (a) 1,728,621 shares for previously issued restrictive shares
pursuant to Convertible Debentures referred to under Registration Nos.
333-50069 and 333-59829, (b) 2,388,480 shares (inclusive of 247,414
shares as may be issued for interest earned) 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) 2,666,667 shares being
registered pursuant to certain "piggy-back" registration rights granted
to otherwise unaffiliated purchasers pursuant to terms of subscription
agreements and registration rights agreements (see Part II, Item 15
"Recent Sales of Unregistered Securities") will be offered for resale
by certain 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"), (e) 250,000 shares being registered which
underlie certain outstanding Warrants (unrelated to aforementioned
convertible debentures
<PAGE>
and/or promissory notes) and (f) an aggregate of 81,864 shares being
registered pursuant to certain "piggyback" registration rights granted
to two otherwise unaffiliated firms in exchange for services rendered
by such firms to the Company. Also registered hereunder (and included
in the 7,200,709 shares) are shares of Common Stock of the Registrant
referred to above are (i) those shares issuable in exchange for
interest earned under Convertible Debentures with interest calculated
through respective mandatory conversion dates and (ii) such additional
shares as may be issued under anti-dilution provisions 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 January 21,
2000, an average of $8.75.
(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 1,967,900 and under Registration No. 333-59829,10,532,503
shares and 85,077 shares pursuant to piggy-back registration rights for
which the registration fee of $9,628.93 was paid.
(5) Includes (a) 2,388,480 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
Nos. 333- 50069 and 333-59829 and (b) an additional aggregate of
5,390,224 shares as indicated in footnote 1(b) through (e) inclusive.
(6) Required filing fee already paid for greater number of shares sought to
be registered under prior amendment filed September 13, 1999.
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>
<TABLE>
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SWISSRAY INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K.
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
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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
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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> In Prospectus
<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 FEBRUARY __, 2000
PROSPECTUS
SWISSRAY INTERNATIONAL, INC.
7,200,709 Shares of Common Stock
This prospectus ("Prospectus") relates to the offer and sale of up to
7,200,709 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
2,388,480 shares of Common Stock which are issuable to certain persons (the
"Selling Holders") upon conversion of convertible debentures, issued in thirteen
(13) separate financings from June 1998 through December 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) 1,728,621
additional shares of Common Stock heretofore issued as restrictive shares to
certain Selling Holders upon conversion of convertible debentures issued in
March 1998, June 1998 and August 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 Nos. 333-50069 and 333-59829, (iii) 2,666,667 shares being
registered pursuant to certain "piggy-back" registrants rights granted to five
otherwise unaffiliated purchasers of Company Common Stock pursuant to terms of
Subscription and Registration Rights Agreements (see Part II, Item 15 "Recent
Sale of Unregistered Securities"), (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"), (v) 250,000 shares being registered which underlie certain
outstanding Warrants (unrelated to aforementioned convertible debentures and/or
promissory notes) and (vi) an aggregate of 81,864 shares being registered
pursuant to certain "piggy-back" registration rights granted to two otherwise
unaffiliated firms in exchange for services rendered by such firms to the
Company. The up to 7,200,709 shares of Common Stock offered hereby are herein
referred to as the "Securities." For further and more specific information
identifying when each of the debentures referred to herein were issued and
itemizing the number of shares being registered for each of such debentures,
reference is made to risk factor entitled "Significant Number of Shares Issued
..".
The number of shares being registered hereunder (exclusive of an
aggregate of 4,562,229 restrictive shares
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already issued as indicated in (ii), (iii), (iv) and (vi) of preceding
paragraph) when added to the 20,984,669 shares of common stock currently issued
and outstanding would increase total issued and outstanding shares to 23,373,149
and would represent approximately 10% of all outstanding shares of common stock.
The registration of such a large percentage of total outstanding securities may
have a material adverse effect on the market price of the Company's common
stock. Those shares being registered hereunder in accordance with aforementioned
convertible debentures are to be issued in accordance with private placements
and reliance upon exemption afforded under Regulation D and Section 4(6). The
Company's common stock is currently listed for trading on the Electronic
Over-the-Counter Bulletin Board ("OTC") and the closing bid price on January 21,
2000 was $8.75. See also "Market Price and Dividend Policy" hereinafter and in
particular footnote 1 thereto.
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., 320 WEST 77TH Street, Suite 1A, New York, New York
10024. The telephone number is 917-441-7841 and the fax number is 917-441-7842.
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. ACCORDINGLY, PROSPECTIVE INVESTORS
SHOULD BE PREPARED TO SUSTAIN THE LOSS OF THEIR ENTIRE INVESTMENT.
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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 ____________, 2000.
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. Information may be obtained on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of this
material can also be obtained at prescribed rates from
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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.
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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, Swissray Medical AG (formerly known as SR Medical Holding AG and
SR Medical AG) a Swiss corporation and its wholly owned subsidiary Swissray
(Deutschland) Rontgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company as well as through the Company's other wholly owned
subsidiaries, Swissray America, Inc., a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation and Swissray Information Solutions,
Inc. a Delaware corporation.
Swissray Medical AG (formerly SR Medical Holding AG and SR Medical AG
until renamed in June 1999 and February 1998) acquired all assets and
liabilities, effective July 1998, of its wholly owned subsidiaries, SR Medical
AG (known as Telray AG until renamed in February 1998), a Swiss corporation and
Telray Research and Development AG, a Swiss corporation. Swissray Medical AG
also absorbed all assets and liabilities of the Company's other wholly owned
subsidiary SR Management AG (formerly SR Finance AG), a Swiss corporation.
Effective as of July 1, 1999 Swissray Medical Systems, Inc., a Delaware
corporation (formerly Swissray America Corporation) and Empower Inc., a New York
corporation, have been merged into 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
ddRMulti-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
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- -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. Beginning in
1993, the Company began the development of direct digital X-ray technology for
medical diagnostic purposes.
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 and (iii) the payment by Parker of approximately
$376,000 to a banking institution in satisfaction of certain outstanding
indebtedness of Empower. Empower has been merged into Swissray America, Inc.
effective July 1, 1999. The Company is currently engaged in litigation with the
former CEO of Empower. For information regarding such litigation reference is
made to "Business - Legal Proceedings".
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 Healthcare, Inc. and Swissray Information Solutions, Inc.
. The Company was recently engaged in litigation with three individuals who
formerly owned SSG which litigation was settled on August 31, 1999. For
information regarding such litigation and subsequent settlement terms with
respect thereto, reference is made to "Business - Legal Proceedings".
The following organizational chart graphically indicates the Company,
its wholly owned subsidiaries and certain additional information regarding each
of such firms including principal locations.
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Organization Chart
SWISSRAY International, Inc.
New York
USA
Swissray Information
Swissray Medical AG Swissray America, Inc. Solutions, Inc.
Hochdorf Delaware Delaware
Switzerland USA USA
Swissray Healthcare, Inc. Swissray Rontentechnik
Delaware (Deutschland) GmbH
USA Wiesbaden
Germany
THE OFFERING
Common Stock Offered(1) Up to 7,200,709 shares of Common Stock.
Common Stock Outstanding
Before the Offering(2)(3) 20,984,669
Common Stock Outstanding
After the Offering(4) 23,373,149
Useof 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 10 hereof.
Electronic Over-the-Counter
Bulletin Board Symbol SRMI
(1) Includes an aggregate of up to 2,388,480 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 1,728,621
additional shares of Common Stock heretofore issued as restrictive
shares upon conversion of Convertible Debentures issued in March 1998,
June 1998 and August 1998, which latter shares relate to Registration
Nos. 333-50069 and 333-59829 in accordance with Rule 429 (b) of the
1933 Act. Also being registered hereunder in accordance with certain
"piggy-back" registration rights are (a) 85,077 restrictive shares
heretofore issued pursuant to terms of a convertible promissory note,
(b) 250,000 shares underlying certain outstanding Warrants (unrelated
to
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convertible debentures), (c) an aggregate of 2,666,667 restrictive
shares heretofore issued pursuant to terms of subscription and
registration rights agreements and (d) an aggregate of 81,864 shares
pursuant to certain "piggy-back" registration rights granted to two
otherwise unaffiliated firms in exchange for services rendered by such
firms to the Company.
(2) Does not include (i) those shares referred to in footnote 1 above, (ii)
161,000 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"), 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").
(3) As of the close of business on January 21, 2000 there were 20,984,669
shares issued and outstanding held by 505 stockholders of the
Registrant's Common Stock.
(4) While the Common Stock registered hereunder is being offered on a
delayed or continuous basis pursuant to Rule 415 under the Act, the
Registrant has quantified the number of shares that would be
outstanding if debentures were converted as of January 21, 2000 (while
taking into account interest earned through date of mandatory
conversion).
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SUMMARY FINANCIAL DATA
The summary information below represents financial information of the
Registrant for the (i) three month periods ended September 30, 1999 and
September 30, 1998, which information was derived from the unaudited
consolidated financial statements of the Registrant and (ii) fiscal years ended
June 30, 1997, June 30, 1998 and June 30, 1999, which information was derived
from the audited consolidated financial statements of the Registrant.
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Three Months Ended Year Ended
September 30, June 30,
--------------------- -----------------------------
1999 1998 1999 1998 1997
------- ------- ------- ------- -------
(in thosands, except per share data)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net sales ......................... 3,879 3,656 17,296 22,893 13,151
Cost of goods sold ................ 2,978 2,837 13,529 18,082 8,445
------- ------- ------- ------- -------
Gross profit ...................... 901 819 3,767 4,811 4,706
Selling, general and administrative 2,859 3,168 16,067 18,748 17,450
------- ------- ------- ------- -------
Operating loss .................... (1,958) (2,349) (12,300) (13,937) (12,744)
Other expense (income) ............ (26) 183 (40) 281 (319)
Interest expense .................. 1,821 654 4,639 8,590 762
------- ------- ------- ------- -------
Loss from continuing operations
before income taxes ............... (3,753) (3,186) (16,899) (22,808) (13,187)
Income tax provision (benefit) .... -- -- -- -- 110
------- ------- ------- ------- -------
Loss from continuing operations ... (3,753) (3,186) (16,899) (22,808) (13,297)
======= ======= ======= ======= =======
Loss from continuing operations
per common share ............. (0.25) (0.70) (2.59) (8.48) (8.41)
======= ======= ======= ======= =======
</TABLE>
September 30, 1999
Actual Proforma (1)(2)(3)
--------- --------------
BALANCE SHEET DATA:
Total assets 24,048 26,548
Long-term debt 16,098 15,447
Common stock subject to put 320 320
(1) Includes October,November, and December 1999 issuance of 1,666,667 shares
of common stock for $2,500,000.
(2) Conversion of August 11, 1999 promissory note to convertible debentures of
$1,484,000.
(2) The conversion of $2,135,000 of convertible debentures into common stock in
October 1999.
-9-
<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 Increasing Losses; Profitability Uncertain Working Capital Deficiency
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 four fiscal years commencing July 1, 1995 and
concluding June 30, 1999, the Company incurred additional net losses aggregating
$62,186,405 ($17,732,028 of which was attributable to year ended June 30, 1999
as compared to $22,503,109 which was attributable to year ended June 30, 1998).
The Company incurred a further net loss of $3,753,416 as of quarter ended
September 30, 1999. As of September 30, 1999 the Company had a working capital
deficiency of $2,481,974. 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 ddRMulti-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 (as
well as the absence of a significant increase in sales - during fiscal year
ended June 30, 1998 - as a result of the delay in the market introduction of
certain of the Company's products, which delays were for the purpose of assuring
product quality prior to introduction to industry). The likelihood of the
success of the Company must be considered in light of the problems, expenses,
difficulties, complications and past delays encountered in connection with the
development of any 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 further successful introduction of the ddRMulti-System, further 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 Continued Market Acceptance of the ddRMulti-System
The Company's future performance will depend to a substantial degree
upon the continued market introduction and acceptance of the ddRMulti-System.
The Company's marketing efforts to date have generated considerable awareness
about the ddRMulti-System among radiologists. From October 1997 through June 30,
1999, the Company sold twelve ddRMulti-Systems in the United States and Europe.
During the first six months of its current fiscal year the Company has already
contracted sales of 47 ddRMulti-Systems which represents an approximate 500%
increase in sales of such Systems over the entire preceding fiscal year (when
eight Systems were sold). The extent of, and rate at which, the market
introduction, acceptance and penetration can be achieved by the ddRMulti-System
are functions of many variables, including, but not limited to, obtaining the
necessary governmental approvals (see "Government Regulation" hereinafter),
price, effectiveness,
-10-
<PAGE>
acceptance by potential customers and manufacturing, training capacity and
marketing and sales efforts. There can be no assurance that the ddRMulti-System
will achieve or maintain acceptance in its target markets ^. Similar risks may
confront other products developed by the Company in the future. See "Business --
Products" and "-- Regulatory Matters."
Reliance on a Single Product
The Company has concentrated its efforts primarily on the development
of the ddRMulti-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 ddRMulti-System will be successfully commercialized
notwithstanding its recent successful introduction both within and without the
United States (as heretofore and hereinafter indicated) and the fact that more
Systems (47) have been sold during the first six months of the Company's current
fiscal year than were sold for the entire preceding fiscal year. 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 ddRMulti-System. See "Business -- Products" and "-- Competition."
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
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.
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 (notwithstanding availability of such
financings as recently as December 1999) 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.
Potential Adverse Effect Upon Stock Price as a Result of Registration of
Significant Number of Shares Issued as a Result of Equity and Debt Financings
Pursuant to Regulation S and Regulation D
From May 1995 through November 11, 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.
-11-
<PAGE>
<TABLE>
<CAPTION>
Type of Date of Closing Discount Number Of Proceeds Outstanding
FINANCING (7)(8) FINANCING BID PRICE FROM MARKET SHARES ISSUED(4) RECEIVED BALANCE
- ---------------- ------------ ------------ ----------- ---------------- -------------------- --------------
GROSS NET
----- ---
<S> <C> <C> <C> <C> <C> <C>
REG S- OFF-SHORE MAY 20, 1995 (5) 2,000,000 $4,250,000 $4,000,000 $ -0-
REG S- OFF-SHORE DEC. 10, 1995 (5) 1,000,000 $________ $4,500,000 $ -0-
Reg S- Convertible Sept. 11, 1996 $4.125 1,872,707 $3,800,000 $2,774,000 $ -0-
Reg S- Convertible Jan. 10, 1997 $3.00 2,395,709 $3,500,000 $3,085,000 $ -0-
Reg S - Off-Shore Mar. 5, 1997 $2.6875 1,000,000 $2,000,000 $1,925,000 $ -0-
Reg S - Prom. Note Apr. 28, 1997 $1.96875 800,00 $2,000,000 $1,822,500 $ -0-
Reg S- Convertible May 15, 1997 $2.40625 -- $2,000,000} $3,458,890} $ -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 $4,262,500 $ -0- (includes May
and June 1997)(6)
Reg D- Convertible Aug. 19, 1997 $2.6875 20% 3,643,053 $5,000,000 $4,318,750 $1,850,000 rolled
over
Reg D- Convertible Nov. 26, 1997 $1.84375 25% 4,397,081 $2,158,285 $2,158,285 $ -0-
Reg D- Convertible Dec. 11, 1997 $1.375 25% 7,735,099 $3,690,000 $3,000,000 $ -0-
Reg D- Convertible Mar. 16, 1998 $1.00 20% 7,075,138 $5,500,000 $4,915,000 $ -0-
REG D- CONVERTIBLE JUNE 15, 1998 $.578 20% (1)(3) $2,000,000 $1,760,000 $ -0-
REG D- CONVERTIBLE AUG. 31, 1998 $.281 18% (1)(3) $6,143,849 $5,832,849 $4,980,594
REG D- CONVERTIBLE OCT. 6, 1998 $.188 18% (1)(3) $2,940,000 $2,100,000 $2,940,000
REG D- CONVERTIBLE MAY 13, 1999 $.500 18% (1)(2)(3) $1,080,000 $1,080,000 $1,119,600
REG D- CONVERTIBLE JAN. 29, 1999 $.375 18% (1)(3) $1,170,000 $1,020,000 $1,170,000
REG D- CONVERTIBLE MAY 31, 1999 $.437 18% (1)(2)(3) $1,110,000 $1,110,000 $1,132,200
REG D- CONVERTIBLE MAY 14, 1999 $2.875 20% (1)(3) $ 500,000 $ 500,000 $ 500,000
MAY 21, 1999 $3.00 20% (1)(3) $ 200,000 $ 200,000 $ 200,000
JUNE 9, 1999 $2.625 20% (1)(3) $ 150,000 $ 150,000 $ 150,000
REG D- CONVERTIBLE JUNE 24, 1999 $.59375 18% (1)(2)(3) $ 550,000 $ $ 561,000
REG D- CONVERTIBLE AUG. 23, 1999 $3.750 20% (1)(2)(3) $1,100,000 $1,100,000 $1,148,400
Sale of Securities Sept. 7, 1999 $2.50 -- 1,000,000 $1,000,000 $1,000,000 $ -0-
SALE OF SECURITIES}(10) Oct. 19, 1999 $2.75 -- 500,000 $ 750,000 $ 750,000 $ -0-
Nov. 1, 1999 $3.312 -- 500,000 $ 750,000 $ 750,000 $ -0-
REG D-CONVERTIBLE NOV. 11, 1999 $2.625 20% 1,526,000 $1,400,000 $1,260,000 $1,526,000
SALE OF SECURITIES (10) DEC. 13, 1999 $7.40625 -- 666,667 $1,000,000 $1,000,000 $ -0-
</TABLE>
(1) Utilizing the January 21, 2000 bid price for the Company's common stock
($8.75) and assuming indicated discount from market, if all convertible
debentures were converted the number of shares required to be issued (inclusive
of 247,414 shares as may be issued for interest earned) would amount to
2,388,480 shares. However, since (as indicated in risk factor entitled
"Inability to Currently Determine Number of Shares .." appearing hereinafter)
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 significant decline in the bid price of the Company's common stock.
As of January 21, 2000 the Company has not been able to negotiate any debenture
agreements which contain any "floor" provisions.
(2) Such shares as may be issued result from conversion of promissory notes into
debentures when notes were not paid at or before their respective due dates.
Outstanding balance amounts indicated include interest earned on promissory
notes as of due date, which due date then became date of convertible debenture
issuance. See also "Description of Capital Stock - Convertible Promissory Notes
Subsequently Converted Into Debentures - December 1998, March 2, 1999, March 26,
1999, July 9, 1999 and August 11, 1999".
(3) With respect to the number of shares as may be issued regarding financings
from August 31, 1998
-12-
<PAGE>
to December 13, 1999, which number of shares is determined based upon indicated
discount from market on date of conversion. See chart appearing hereinafter
which quantifies the number of shares as may be issued based upon a reasonable
range of high and low prices.
(4) In accordance with the terms of the debentures and related agreements,
1,728,621 of these shares have been issued with restrictive legends and are
included in the number of shares being registered pursuant to this Registration
Statement. If the closing bid price for the Company's common stock had remained
the same as it was at the time that these debentures were entered into the
number of restrictive shares that would have been issued would have been
43,387,069 exclusive of interest as opposed to 1,746,033 issued shares.
(5) Date precedes initial NASDAQ listing when securities traded in "pink
sheets". Attempts to obtain closing bid prices on such dates from the National
Quotation Bureau as well as from broker-dealers have been unsuccessful. While
bid prices existed on the dates indicated such prices are not currently known
nor available to the Company. Transactions referred to were determined in
arms-length negotiations at the time of such financings.
(6) The July 31, 1997 transaction represents a renegotiated replacement,
inclusive of interest, of those prior two transactions which occurred on May 15,
1997 and June 15, 1997 ($2,000,000 each).
(7) In each instance where a Regulation D financing was concluded the Registrant
was required to file a Form D with the SEC indicating to what extent, if any,
net proceeds were utilized as and for payments to" officers, directors and
affiliates" of the Registrant as opposed to "payment to others". Each of the
Forms D indicate that net proceeds received were entirely allocated as "payments
to others" with a substantial majority (approximately 95%) of such funds being
allocated to working capital and with the balance being utilized to extinguish
outstanding indebtedness and for repurchase of Company securities.
(8) 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). The 4.9% limitation is only
contractual in nature and applies to holders, affiliates or non-affiliates, who
may acquire the debentures. The 4.9% limitation does not apply and, accordingly,
would not limit beneficial ownership in any manner in the event that (a) 50% or
more of the Company is acquired, (b) the Company is merged into another company
or (c) a change of control occurs.
(9) This transaction resulted in the sale of 1,000,000 restrictive shares of
Company common stock at $1.00 per share with the purchaser being given certain
"piggy-back" registration rights requiring the Company to register such shares.
(10) This transaction resulted in the sale of an aggregate of 1,666,667
restrictive shares of Company common stock at $1.50 per share with the
purchasers being given certain "piggy-back" registration rights requiring the
Company to register such shares.
These persons and/or firms owning convertible debentures may profit
from "shorting" (selling without ownership of underlying shares) the
Registrant's common stock by covering such short positions with registered
shares of Company common stock received upon debenture conversion.
There continues to exist the potential adverse effect on the market
price of the Company's securities as a result of the registering of the
significant number of additional shares being registered under this Registration
Statement.
-13-
<PAGE>
As indicated in the chart directly below the number of shares to be
issued upon conversion of debentures issued from August 31, 1998 through
December 13, 1999 is only determinable upon actual conversion date. Accordingly,
the chart appearing below quantifies the number of shares which would be issued
upon conversion based upon a reasonable range of high and low prices as if the
debentures indicated above were converted based upon such reasonable range of
prices.
Chart to show range of high and low prices.
Formula: $10. Less price on date of financing divided by 3
<TABLE>
<CAPTION>
Financing
DATE AMOUNT BID PRICE/SHARES BID PRICE/SHARES BID PRICE/SHARES BID PRICE/SHARES
<S> <C> <C> <C> <C> <C>
8-31-98 $4,980,594 $0.281/17,724,534 $3.24/1,537,220 $6.48/768,610 $10/498,059
10-6-98 $2,940,000 $0.188/15,638,298 $3.27/899,083 $6.54/449,541 $10/294,000
5-13-99 $1,119,600 $0.50/2,239,200 $3.17/353,186 $6.34/176,593 $10/111,960
1-29-99 $1,170,000 $0.375/3,120,000 $3.21/364,486 $6.42/182,243 $10/117,000
5-31-99 $1,132,200 $0.437/2,590,847 $3.19/354,922 $6.38/177,461 $10/113,220
5-14-99 $500,000 $2.875/173,913 $2.38/210,084 $4.75/105,263 $10/50,000
5-21-99 $200,000 $3.00/66,667 $2.33/85,837 $4.67/42,827 $10/20,000
6-24-99 $561,000 $0.593/946,037 $3.14/178,662 $6.28/89,331 $10/56,100
8-23-99 $1,148,400 $3.75/306,240 $2.08/552,115 $4.17/275,396 $10/114,840
11-11-99$1,526,000 $2.625/305,200 $2.46/620,325 $4.92/310,163 $10/152,600
</TABLE>
Past History of Debt (Debenture) Fund Raising to Retire Existing Indebtedness
On two separate occasions during 1997 and 1998 the Company raised
monies in private placements partially to pay off holders of debentures from
previous private placements as hereinafter indicated. In the first instance the
August 19, 1997 debenture financing which resulted in gross proceeds of
$5,000,000 which had an outstanding balance of $1,850,000 was rolled over into a
November 26, 1997 debenture financing. Such outstanding balances including
interest (from August 19, 1997 financing) was paid to The Isosceles Fund
Limited, Otato Limited Partnership and Thomson Kernaghan & Co. Ltd. in the sums
of $583,630, $145,969 and $1,428,686 respectively. Similarly the March 16, 1998
debenture financing which resulted in gross proceeds of $5,500,000 which had an
outstanding balance of $4,000,000 was partially rolled over into a August 31,
1998 debenture financing. $3,000,000 of such outstanding balances as rolled over
including interest (from the March 16, 1998 financing) was paid to Atlantis
Capital Fund, Ltd., Canadian Advantage Limited Partnership, Dominion Capital
Fund, Ltd. and Sovereign Partners LP in the sums of $191,642, $421,613,
$1,226,512 and $1,993,082 respectively.
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
-14-
<PAGE>
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 January 21, 2000 if all of the principal balance and interest earned on
outstanding unconverted convertible debentures, and warrants were converted
(based on calculation contained in this Registration Statement) the Registrant
would be required to issue 2,388,480 shares of its common stock thereby
increasing total outstanding from 20,984,669 to 23,373,149 and reducing
percentage of all current stockholders from 100% to approximately 90%.
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).
As and when conversion occurs regarding outstanding convertible
debentures referred to herein (and in prior risk factor entitled "Potential
Adverse Effect Upon Stock as a Result of Registration of Significant Number ..")
a number of new significant holders of Company common stock will necessarily
exist.
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."
Authority to Issue Preferred Stock With Terms That May Not Be Beneficial to
Common Stock Holders
In accordance with stockholder approval received at Annual Meeting of
Stockholders held July 23, 1999, the Company amended its certificate of
incorporation pursuant to which it now is authorized to issue up to 1,000,000
shares of preferred stock, par value $.01 per share.
The designations, preferences, conversions rights, cumulative,
relative, participating, optional or other rights including voting rights,
qualifications, limitations or restrictions thereof of the preferred stock has
not, as yet, been determined by the Board of Directors. Thus, the Board of
Directors is entitled to authorize the issuance of up to 1,000,000 shares of
preferred stock in one or more series with such limitations and restrictions as
may be determined in its sole discretion, with no further authorization by
security holders required for the issuance thereof.
The issuance of preferred stock could adversely affect the voting power
and other rights of the holders of common stock. Preferred stock may be issued
quickly with terms calculated to discourage, make more difficult, delay or
prevent a change in control of the Company or make removal of management more
difficult. As a result, the Board of Directors' ability to issue preferred stock
may discourage the potential hostility of an acquirer, possibly resulting in
beneficial negotiations.
-15-
<PAGE>
Negotiating with an unfriendly acquirer may result in, amongst other things,
terms more favorable to the Company and its stockholders. Conversely, the
issuance of preferred stock may adversely affect the market price of, and the
voting and other rights of the holders of the Common Stock. The Company
presently has no plans to issue preferred stock.
See also "Description of Capital Stock - Preferred Stock".
Issuance of Significant Percentage of Securities Pursuant to Consulting
Agreement With Corresponding Dilution to Current Stockholders
In March of 1999 the Registrant issued an aggregate of 3,800,000 shares
of restrictive fully vested, and non-forfeitable common stock pursuant to two
separate consulting agreements and in lieu of cash payment. At the time of such
issuance these shares represented approximately 32% of all outstanding shares
and currently represent approximately 18% of all outstanding securities.
Accordingly, upon issuance of such 3,800,000 shares, current stockholders
percentage of ownership (100%) decreased (by 32%) to 68% of all then issued and
outstanding shares. The Registrant has no current plans to continue this
practice. For further information regarding terms and conditions relating to
such consulting agreements, reference is herewith made to "Business - Recent
Developments".
Company's President Controls in Excess of One-Third of all Voting Securities
Ruedi G. Laupper, the Company's President, owns of record and
beneficially (and/or through corporations over which he exercises control; see
Footnote 3 to "Principal Stockholders") approximatelly 13% of all issued and
outstanding shares of Company common stock. Additionally, in accordance with the
terms and conditions of a March 29, 1999 Consulting Agreement with Liviakis
Financial Communications, Inc. ("LFC"), pursuant to which LFC was issued and
owns 3,000,000 fully vested, and non-forfeitable shares of Company common stock,
the Company's President has sole voting rights with respect to such 3,000,000
shares without any limitation thereon so long as same are owned by LFC. LFC in
turn may not sell any of such shares for a period of one year subsequent to
commencement of ownership and then only in accordance and subject to volume
limitations imposed in accordance with the applicable provisions of Rule 144
under the Securities Act of 1933. By virtue of the above the Company's President
has voting control over approximately 28% of all Company common stock.
^Issuance in June of 1999 of Substantial Number of Shares to Company's President
In June of 1999 the Company issued 2,000,000 fully vested, and
non-forfeitable shares of its common stock to its President in exchange for
extinguishment of certain bonus rights contained in his employment agreement
(see "Management - Employment Agreement") thereby increasing his percentage of
ownership from 3% to 17%. Such increase in percentage of interest created a
corresponding decrease in percentage of ownership of all other stockholders
thereby diluting their percentage of interest. ^
In addition to the above, 482,590 shares of restrictive common stock
were issued to the Company's President who surrendered his shares for less than
three months and then received a
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<PAGE>
number of shares equal to 30% more than the number of shares he surrendered to
meet convertible debenture provisions and avoid default. Such surrender was
necessitated due to the fact that the Company was required to issue shares upon
debenture conversion but the Company did not have authorized and unissued shares
to meet its obligations and avoid default absent its President surrendering his
shares (and absent increase in its authorized shares which required stockholder
approval, which approval was subsequently obtained in October 1997).
Recent Issuance in October, 1999 of 875,000 Shares to Certain Officers and
Directors
In accordance with Board of Directors resolution adopted on October 19,
1999, an aggregate of 875,000 shares of restrictive common stock were issued to
five of the Company's officers and directors as partial consideration for
services as per agreement.
NAME POSITION NO. OF SHARES
Ruedi G. Laupper Chairman, President & 275,000
Principal Executive
Officer (1)
Josef Laupper Secretary, Treasurer 150,000
& a Director (1)
Michael Laupper Chief Financial Officer, 150,000
Controller (1)
Ueli Laupper Vice President & a 250,000
Director (1)
Erwin Zimmerli Director (1) 50,000
(1) It is possible that one or more officers or directors of the Company
may, in the future, receive material amounts of common stock as opposed
to regular monetary compensation and, accordingly, the potential for
further stockholder dilution exists.
Significant Portion of Company Assets Are Intangible Assets
As of September 30, 1999, and for the three months then ended, the
Company's licensing agreement, patents and goodwill (aggregating approximately
$4,700,000) are all intangibles and account for approximately 19.7% of all
Company assets. Amortization of such intangibles amounts to approximately
$205,000 or approximately 7.2% of total operating expenses. The Company
evaluates the recoverability of unamortized intangible assets 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.
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 the
Company's current largest customer (Philips) who accounted for 54% of
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<PAGE>
Company sales during fiscal year ended June 30, 1999 (as compared to the second
largest customer who only accounted for 1% of Company sales during fiscal year
ended June 30, 1999) or a reduction of the volume purchased by such customer
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 considers the
relationship with its largest customers to be satisfactory. The Company expects
that as sales of its ddR-Multi-System continues to increase, the Company's
revenue will be less dependent on one or a few large customers. See Notes to the
Consolidated Financial Statements of June 30, 1999, 1998 and 1997 and "Business
- -- Sales and Marketing."
Risk of Currency Fluctuations, If Not Adequately Hedged Can Adversely Effect
Company Financial Condition
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."
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
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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.
Company International Operations Subject to Foreign Legal Regulatory
Requirements
The Company does business in the United States, Switzerland and Germany
which accounted for approximately 23%, 73% and 4% respectively of total sales
for the fiscal year ended June 30, 1999. In addition to the currency risks
discussed above, the Company's international operations are subject to the risk
of (a) new and different legal and regulatory requirements in local
jurisdictions, (b) tariffs and trade barriers, (c) potential difficulties in
staffing and managing local operations, (d) credit risk of local customers and
distributors, (e) potential inability to obtain regulatory approvals, (f)
different requirements as to product standards, (g) potential difficulties in
protecting intellectual property, (h) risk of nationalization of private
enterprises, (i) potential imposition of restrictions on investments or transfer
of funds and (j) potentially adverse tax consequences ^. 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 had 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.
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.
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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
noncompetitive 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 patent as
well as the U.S. patent 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.
Company Activities Subject to Government Regulation and Approvals
General
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
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or hinder a product's timely entry into the marketplace.
On November 21, 1997, the AddOn Bucky(R), 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 ddRMulti-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:
USA 510(k) market clearance
UL/CSA (ENTELA)
- electrical and x-ray safety
- national regulations of Ministry of Health
- Quality System 21 CFR Part 820 and Part 820.72
(inspection) - identification (general labeling) 21
CFR Part 801.4 and 801.6
Canada CSA, ENTELA
- electrical and x-ray safety
- national regulations of Ministry of Health
Czech Republic - national regulations of Ministry of Health
EU (United Europe) (EWG 93/42 Appendix II class II B)
- CE MDD 0124 market clearance incl. electrical and
x-ray safety - national regulations of Ministry of
Health (RoV Rontgenverordnung) - national system ISO
9001 / EN 46001 (Medical)
Switzerland - national regulalions of Ministry of Health (BAG)
Market clearance
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- quality system ISO 9001 / EN 46001 (Medical)
Sales to Highly Regulated Health Care Industry With Potential For Cost Reduction
Pressures Upon Company
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
payers. 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 ddRMulti-System
The Company has limited experience with the manufacture and assembly of
the ddRMulti-System in the volumes that will be necessary for the Company to
generate significant revenues from the sale of the ddRMulti-System. The Company
may encounter difficulties in scaling up its production or in hiring and
training additional personnel to manufacture the ddRMulti-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 ddRMulti-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". To date no material interruptions have occurred.
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The percentage of Company revenues derived from products which included
components then only currently available from a single source supplier amounted
to 13.6% as of June 30, 1999 of which 13.6% related to the single source
supplier of certain camera electronics while 13.6% related to the single source
supplier of optics (both items are included in the same product). The agreement
with the single source supplier of certain camera electronics ^ terminated
December 31, 1999 due to the fact that its manufacturing plant where the camera
electronics had been manufactured ^ permanently closed on such date and Company
management was not satisfied with proposals submitted to it by such supplier
regarding the latter's intentions of establishing a new manufacturing plant.
Company agreement with its new supplier of camera electronics provides for
availability of such camera electronics to the Company commencing January 1,
2000. The Company currently has 144 CCD cameras in stock which will be used for
the next 36 ddRSystems, which can be used for deliveries over the next three
months. New camera systems have been ordered for use in an additional 50
ddRMulti-Systems with an expected delivery date of such cameras in March 2000.
On January 13, 2000 the Company entered into agreement with its CCD camera
supplier whereby the Company has purchased the production facility (including
necessary tools, equipment, diagrams and related knowhow) for approximately
250,000 Swiss Francs (US$161,290) and it is management's intention to have a
sufficient number of CCD cameras on hand (four per system) to cover in excess of
those immediately required to cover orders. Through in-house production of key
camera components the Company has eliminated its reliance upon its former
supplier, looks forward to reduction in camera costs through aforesaid in-house
production and does not expect any material business interruptions to occur
regarding CCD camera availability in a timely manner nor does it anticipate that
such in-house production will have any affect upon quality of its
ddRMulti-Systems. The agreement with the single source supplier of optics
expires in July 2002 and is subject to renegotiations which are expected to
occur assuming contract fulfillment continues to be concluded in a timely and
satisfactory manner with price and payment terms being comparable to those
currently being utilized and meeting Company capacity requirements. The
percentage of revenues from this single source supplier of optics amounted to
approximately 13.6% at fiscal year ended June 30, 1999. While management has no
current expectation or need to replace this supplier it does not envision
encountering any material difficulties in replacing such supplier (with a
different optics manufacturer having the ability to timely deliver comparable
optic quality) if necessary in the event of any unforeseen circumstances which
may require replacement. This agreement may not be terminated by either party
without cause.
Inability to Currently Determine Number of Shares Which May be Issued Upon
Debenture Conversion; Potential For New Significant Stockholders and Potential
Significant Percentage Dilution to Existing Stockholders Which Would Result From
Significant Increase in Outstanding Shares
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
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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 and, accordingly, a decline in common stock price will necessarily
result in the requirement to issue additional shares due to there being no
"floor" or "minimum" conversion price in their existing convertible debenture
agreements. Additionally, debenture conversion may result in a larger number of
new significant stockholders to the Company. The Company has continued to issue
convertible securities without a minimum price thereby continuing to subject
itself to the risks indicated herein, especially with respect to potential
decline in common stock price. With respect to the number of shares as may be
issued regarding financings from August 31, 1998 to December 13, 1999, which
number of shares is determined based upon indicated discount from market on date
of conversion. See chart appearing at end of risk factor entitled "Potential
Adverse Effect Upon Stock Price .." which chart quantifies the number of shares
as may be issued based upon a reasonable range of high and low prices.
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).
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 has
been volatile and has fluctuated significantly and may continue to 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. In fact since
October 26, 1998 Nasdaq delisting (referred to below) when the Company's common
stock traded at $.188, the bid price for the Company's common stock has
fluctuated from a low of $.125 to a high of $10.00 on January 10, 2000.
Delisting Due To Non-Compliance With Certain NASDAQ Standards
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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 Company filed such Form 10-K on December 3, 1998. ^
Since delisting the Company has had an ongoing appeal with the Nasdaq
Listing Qualifications Panel ("Panel") and the Nasdaq Listing and Hearing and
Review Council ("Council"). The Panel has rejected the Company's appeal and the
matter is now pending before the Council with Nasdaq having advised that the
Council will likely issue its decision after its meeting in May 2000. For
further information with respect to the above, reference is herewith made to
"Continued Nasdaq Delisting".
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.
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 or changing environmental laws or 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
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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 now compliant with the Year 2000 requirements and believes
that its management information system complies with the Year 2000. 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. With respect to information and non-information technology^
delivered by third parties the Company received written assurances that their
year 2000 compliance's is under control.. 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. As of January 21, 2000 the
Company has not been made aware of any material adverse facts relating to "Y2K"
which in any manner could have had any material adverse effect upon its
business, financial condition or 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, Swissray Medical AG (formerly known as SR Medical Holding AG and
SR Medical AG) a Swiss corporation and its wholly owned subsidiary Swissray
(Deutschland) Rontgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company as well as through the Company's other wholly owned
subsidiaries, Swissray America, Inc., a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation and Swissray Information Solutions,
Inc. a Delaware corporation.
Swissray Medical AG (formerly SR Medical Holding AG and SR Medical AG
until renamed in June 1999 and February 1998) acquired all assets and
liabilities, effective July 1998, of its wholly owned subsidiaries, SR Medical
AG (known as Telray AG until renamed in February 1998, a Swiss corporation and
Telray Research and Development AG, a Swiss corporation. Swissray Medical AG
also absorbed all assets and liabilities of the Company's other wholly owned
subsidiary SR Management AG (formerly SR Finance AG), a Swiss corporation.
Effective as of July 1, 1999 Swissray Medical Systems, Inc., a Delaware
corporation (formerly Swissray America Corporation) and Empower Inc., a New York
corporation, have been merged into Swissray America Inc., a Delaware
corporation. Unless otherwise specifically indicated, all references hereinafter
to the "Company" refer to the Registrant and its subsidiaries.
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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; 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. Empower has been merged into
Swissray America, Inc. effective July 1, 1999. The Company is currently engaged
in litigation with the former CEO of Empower, to wit: J. Douglas Maxwell. For
information regarding such litigation reference is made to "Business - Legal
Proceedings".
Both the original purchase and subsequent sale referred to in the
preceding paragraph were contracted on an arms-length basis. The sale of
Empower's assets less than one year after acquisition of Empower related
primarily to the sale of film, chemical and certain servicing of conventional
x-ray equipment since these areas no longer constituted the Company's "core"
business which revolves around its ddR-Multi-System and filmless digital
technology. The original purchase of Empower was for $120,000 (in stock) and the
subsequent sale referred to resulted in a gain of $55,000. Counsel representing
the Company with respect to this transaction determined that such transaction
was not material, did not require stockholder approval and advised management
which acted upon reliance of such legal advice.
During the fiscal year ended June 30, 1997, the Company created a new
Information Solution
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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
(in an arms-length transaction), 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. Counsel representing the Company with respect to
this transaction determined that such transaction was not material, did not
require stockholder approval and advised management which acted upon reliance of
such legal advice. 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
which was recently settled on August 31, 1999. See "Legal Proceedings". 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."
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
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1st September 30, 1996 $5.0625 $3.6875
2nd December 31, 1996 $4.000 $2.375
3rd March 31, 1997 $3.5625 $1.6875
4th June 30, 1997 $3.250 $1.4063
Fiscal Year Ended June 30, 1998 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1997 $1.6375 $1.5625
2nd December 31, 1997 $1.250 $1.125
3rd March 31, 1998 $1.6875 $0.750
4th June 30, 1998 $1.000 $0.500
Fiscal Year Ended June 30, 1999 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1998 (3) $.5625 $0.188
2nd December 31, 1998 $1.375 $0.875
3rd March 31, 1999 $1.25 $0.375
4th June 30, 1999 $2 $2.437
Fiscal Year Ended June 30, 2000 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1999 $4.062 $1.875
2nd December 31, 1999 $7.40625 $2.71875
(1) The Registrant's Common Stock began trading on the Nasdaq SmallCap market on
March 20, 1996 with an opening bid of $4.75. 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 for quarters up to but excluding quarter
ending December 31, 1998 reflect price ranges as they existed during the
quarters indicated but do not retroactively reflect a 1 for 10 reverse stock
split effective October 1, 1998.
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(3) On the date of NASDAQ's delisting (October 26, 1998) the common stock price
was $.97 per share while on the date immediately prior to effectiveness of the
reverse stock split (October 1, 1998) the stock price was $.118 per share.
As of the close of business on January 21, 2000 there were 505
stockholders of the Registrant's Common Stock and 20,984,669 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.
Continued NASDAQ Delisting
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 Company filed such Form 10-K on December 3, 1998 and
attributed its entire delay to the fact that its former auditors failed and
refused to complete the necessary audit in a timely (or otherwise) manner
necessitating the Company's engagement of new auditors. See also "Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure". The
aforesaid October 26, 1998 delisting letter further indicated that the Panel
lacked confidence in the Company's ability to sustain compliance with the per
share bid price requirement and further raised concerns, based upon the
Company's history of losses, as to its ability to satisfy net tangible asset
requirements.
The NASDAQ Listing and Hearing and Review Council (" 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 Council, by letter dated December 9, 1998, and on its own initiative, called
for review of the above referenced Panel's decision. The Council may affirm,
modify, reverse, dismiss, or remand the decision to the Panel. The Registrant
may also request the 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 Council, does not
operate as a stay of NASDAQ's October 26, 1998 delisting decision.
Prior to the above referenced delisting and (a) on May 6, 1998 Nasdaq
advised the Company that its common stock had failed to maintain a closing bid
price of at least $1 for the previous 30 consecutive trading days and that the
Company had 90 days, until August 6, 1998, to comply with the
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bid price requirement (b) on October 1, 1998 the Company effected a one for ten
reverse stock split which resulted in a bid price of at least $1 for a period of
17 consecutive trading days. The bid price for the Company's common stock on the
date before the reverse stock split was $.118.
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
Council's consideration. The Company understands that the 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 ^. Such information primarily consisted of the fact
that current bid price for common stock met NASDAQ standards, that the Company
was current with respect to its Exchange Act reporting requirements and was
accompanied by various literature describing the Company's products and business
prospects. The Company further advised that it anticipated that it could meet
and sustain long term compliance with applicable maintenance criteria based
principally upon anticipated sales of 73 radiographic ddRMulti-Systems. Sales of
ddRMulti-Systems during the first half of fiscal year ending June 30, 2000 have
amounted to 47 Systems. Since filing of the above mentioned Form 10-K on
December 3, 1998 and the simultaneous filing on such date of its Form 10-Q for
quarter ended September 30, 1998, the Company has filed all forms 10-Q and its
most recent 10-K for fiscal year ended June 30, 1999 in a timely manner and on
or before their mandated due dates.
On April 1, 1999 the 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).
By letter dated July 7, 1999 the Company requested that the Panel delay
in making any determination on the issues involved until July 30, 1999 so that
the Company would have ample time within which to conduct its July 23, 1999
Annual Meeting of Stockholders, at which time it anticipated that it would
receive stockholder approval (which it subsequently did receive) for the purpose
of
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creating a class of preferred stock. The Company further anticipated that it
would utilize such new class of preferred stock so as to convert outstanding
debentures into non-redeemable convertible preferred stock. Plans to convert
debentures into preferred stock have not gone forward as the primary purpose
therefore was to increase market capitalization (i.e., total outstanding shares
multiplied by bid price) so as to comply with the $35,000,000 minimum market
capitalization required by NASDAQ. As of January 21, 2000 Company market
capitalization amounted to $183,615,854.
The Panel, in its November 5, 1999 decision, opined that the Company
failed to evidence compliance with all requirements for continued listing on the
NASDAQ SmallCap Market notwithstanding its acknowledgment that the Company met
all quantitative requirements (1) for continued listing. This opinion was based
upon the Panel's subjective determination that shareholder approval should have
been obtained prior to the Company's issuance on July 6, 1999 of 2,000,000
restrictive shares of its common stock to its President for and in consideration
of his waiving certain rights to performance based bonuses as contained in his
employment agreement with the Company. The Panel cited as a basis for such
determination the NASDAQ Marketplace rules which require shareholder approval
when shares issued exceed the lesser of 1% of the total shares outstanding at
the time of issuance or 25,000 shares. The Panel decision also indicated that as
a separate matter it believed that the Company's issuance of 3,000,000 shares to
LFC which exceeded 20% of total shares outstanding and which was priced below
market violated NASDAQ Marketplace Rules based upon the Company's failure to
obtain prior shareholder approval. Notwithstanding the fact that the Company was
not on NASDAQ at the time of security issuance, the Panel indicated that NASDAQ
corporate governance rules make specific provision permitting review of company
activities on a case by case basis even while its securities are not listed on
NASDAQ. The Panel also stated that it believed that the Company has demonstrated
a continued disregard for shareholders' rights, raising public interest concerns
pursuant to certain designated Marketplace Rules. The Company, as indicated in
its appeal, wholly disagrees with the Panel's subjective determination.
As indicated above, the Council may, on its own motion, determine to
review this new Panel decision within 45 calendar days from November 5, 1999, at
which time it may affirm, modify, reverse, dismiss or remand (as the Council
previously did on April 1, 1999) the decision to the Panel and in such event the
Company would be immediately notified. Additionally, the Company is entitled to
request that the Council review the aforesaid November 5, 1999 Panel decision
and the Company perfected such request on November 12. 1999. By letter dated
January 6, 2000 NASDAQ advised that the Council ".. Will likely issue its
decision after its meeting in May".
(1) Quantitative requirements refer to maintenance standards for continued
listing and primarily require at least (a) net tangible assets of
$2,000,000 or market capitalization of $35,000,000 or net income in two
of the last three years of $500,000 , (b) a public shares float of
500,000, (c) a market value of public float of $1,000,000, (d) a
minimum bid price of $1.00, (e) shareholders of 300, (f) two market
makers, (g) two independent directors and (h) an independent audit
committee. The Company currently meets each of the quantitative
requirements enumerated herein.
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<PAGE>
CAPITALIZATION
The following table sets forth (i) the current liabilities and
capitalization of the Company as of September 30, 1999 and (ii) the pro forma
liabilities and capitalization as of September 30, 1999.
Actual Proforma(1)(2)(3)
Current liabilities ............................ 15,238,080 13,838,080
Long-term liabilities, net of current portion .. 16,098,103 15,447,103
Total liabilities .............................. 31,336,183 29,285,183
Common stock subject to put .................... 319,985 319,985
Stockholders' equity:
Common stock, $.01 par value, 30,000,000 .. 159,083 191,369
shares authorized; 15,908,274 issued and
outstanding; 19,136,890 proforma
Additional paid-in-capital ................ 68,776,897 74,215,611
Treasury stock ............................ (2,040,000) (2,040,000)
Accumulated deficit ....................... (71,967,157) (72,578,157)
Accumulated other comprehensive loss ...... (1,747,291) (1,747,291)
Common stock subject to put ............... (319,985) (319,985)
Deferred compensation ..................... (469,722) (469,722)
Total stockholders' equity ..................... (7,608,175) (3,057,175)
Total liabilities and stockholders' equity ..... 24,047,993 26,547,993
(1) Includes October, November and December 1999 issuance of 1,666,667 shares
of common stock for $2,500,000.
(2) Conversion of August 11, 1999 promissory note to convertible debentures of
$1,484,000.
(3) The conversion of $2,135,000 of convertible debentures into common stock in
October 1999.
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Swissray International
SELECTED CONSOLIDATED FINANCIAL 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 June 30, 1995 (six-month
period), June 30, 1996, June 30, 1997, June 30, 1998, June 30, 1999 and the
three months ended September 30, 1999 and September 30, 1998 are derived from
the consolidated financial statements of the Company.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
September 30, June 30,
------------------- -------------------------------------------
1999 1998 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(in thosands, except per share data)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ......................... 3,879 3,656 17,296 22,893 13,151 10,899 3,806
Cost of goods sold ................ 2,978 2,837 13,529 18,082 8,445 5,793 2,484
------- ------- ------- ------- ------- ------- -------
Gross profit ...................... 901 819 3,767 4,811 4,706 5,106 1,322
Gross profit margin (%) ........... 23% 22% 22% 21% 36% 47% 35%
Selling, general and administrative 2,859 3,168 16,067 18,748 17,450 14,966 2,307
------- ------- ------- ------- ------- ------- -------
Operating loss .................... (1,958) (2,349) (12,300) (13,937) (12,744) (9,860) (985)
Other expense (income) ............ (26) 183 (40) 281 (319) (1,004) 3,054
Interest expense .................. 1,821 654 4,639 8,590 762 194 122
------- ------- ------- ------- ------- ------- -------
Loss from continuing operations
before income taxes ............... (3,753) (3,186) (16,899) (22,808) (13,187) (9,050) (4,161)
Income tax provision (benefit) .... -- -- -- -- 110 (365) (339)
------- ------- ------- ------- ------- ------- -------
Loss from continuing operations ... (3,753) (3,186) (16,899) (22,808) (13,297) (8,685) (3,822)
Loss from continuing operations
per common share ............. (0.25) (0.70) (2.52) (8.48) (8.41) (6.69) (4.80)
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Total assets ...................... 24,048 23,761 23,761 25,915 24,788 18,793 13,027
Long-term liabilities ............. 16,098 15,751 15,751 7,771 5,635 -- 705
Common stock subject to put ....... 320 1,820 1,820 1,820 320 -- --
</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 Income Statement 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
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<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, 1999, was
mainly on the industrialization and commercialization of the newly developed
products ddRMulti-System and Bucky Diagnost TS and the building and
strengthening of its organization and distribution channels in the principal
markets USA and Europe.
In October 1997, the Company acquired 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 in Europe, 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 ddRMulti-Systems, both in the US and in
Europe.
During the start-up of the production of the Company's newly developed
products, the ddRMulti-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 ddRMulti-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 EN46002 certified. 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 was received November 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.
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<PAGE>
YEAR 2000 POLICY STATEMENT
The Company has conducted an extensive program to check the status of
its equipment (information and non-information technology) related to the
millennium.
For relevant material (information and non-information technology)
delivered by third parties the Company received written assurances that their
year 2000 compliance's is under control. The Company is actually 100% compliant
and is ready for Y2K.
In fact, 100% of the Company's installed base equipment (information
and non-information technology) fulfills year 2000 compliance.
The Year 2000 Statement of the Company has been published on its
website, http;//www.swissray.com, and all our customers have been informed.
Contingency plans have been worked out by the Company.
YEAR 2000 COMPLIANT LISTS
All products of the Company (information and non-information
technology) fulfill the compliance for Year 2000 and belong to Class A Systems.
The products listed have been tested on a stand alone basis and interfaced with
other products and systems in an operational environment test. 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: Mobile Systems:
TURNOMAT 500 Eurabil 5 Eurabil C-Arm Standard
GEN-X-500 Eurabil 15 Eurabil C-Arm Plus
GEN-X-650 Eurabil 30 Eurabil C-Arm Top
GEN-X-800
GEN-X-1000 Bucky Table Systems:
GEN-X-2000 Euramove 1
GEN-X-3000 Euramove 2
GEN-X-4000 Euramove 3
MRS - GENERATOR Euramove 4
Eurastat 2
Eurastat 4
Bucky-Diagnost TS
Atlas Systems:
Atlas-U - US 2000 Special Systems
Atlas-U - US 3000 Euralem 1400
Atlas-U - US 4000 Euralem 1500
Atlas-BV-Tomo Euralem 1800
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<PAGE>
MRS Stativ Euralem Tomo
Urology Systems:
KU-100 Digital Bucky Systems:
KU-100 H ddRMulti-System
KU-100 H Tomo
Fluoroscopy Systems:
Euroscop 3A
Euroscop 6, 6+, 6++
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
(Information Technology) 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 built on
Microsoft. (Windows 95 and/or Windows NT). SWISSRAY also uses the Microsoft
Office packages for its administration and therefore relies on the operating
system as well as the Microsoft Office package for 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. The Company has
not received any negative responses. All these important partners fulfill the
year 2000 compliance.
YEAR 2000 PROJECT COSTS
The Company has separated its cost in the following parts:
JUNE 30, 1999
Test & Survey own Products $ 50,000
Test & Survey Third Parties Products $ 20,000
Modification own Products $ 20,000
Administration (Communication with Third Parties) $ 5,000
Consultant $ 5,000
----------
TOTAL YEAR 2000 Project costs $100,000
Neither Swissray nor any third party with whom we have material
relationships, suffered any significant adverse consequences resulting from the
transition to Year 2000. However, it is possible that companies including us and
our third-party contractors, will suffer adverse Year 2000 consequences over the
near term. In order to minimize potential adverse effects, we have designated
experienced
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personnel and consultants to identify, correct, test and implement solutions to
Year 2000 problems, if and when they arise. In addition, we have purchased
excess inventory of products and components, in the event that future Year 2000
consequences causes delays in our ability to obtain component supplies. We have
also identified alternate suppliers of non-proprietary components that we may
approach should our inventory of components outlast third-party vendors' Year
2000 problems. We have not established any other contingency plan to address
Year 2000 issues should they arise, and we do not intend to do so.
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 1998
RESULTS OF OPERATIONS
Net sales amounted to $3,879,167 for the three-month period ended
September 30, 1999, compared to $3,656,441 for the three-month period ended
September 30, 1998. The 6.1% increase in net sales was mainly due to the sale of
the ddRMulti-Systems.
Gross profit amounted to $901,133 or 23.2% of net sales for the
three-month period ended September 30, 1999, compared to $819,527 or 22.4% of
net sales for the three-month period ended September 30, 1998. The increase in
gross profit as a percentage of net revenues is attributable to the fact that
the percentage of sales of ddRMulti-Systems to total sales increased to 33.1%
for the three-month period ended September 30, 1999 from 9.2% for the
three-month period ended September 30, 1998.
Operating expenses were $2,859,194, or 73.7% of net revenues, for the
three-month period ended September 30, 199, compared to $3,168,088, or 86.6% of
net revenues for the three-month period ended September 30, 1998. The principal
items were salaries (net of officers and directors compensation) of $1,022,441
or 26.4% of net sales for the three-month period ended September 30, 1999
compared to $1,085,186 or 29.7% of net sales for the three-month period ended
September 30, 1998 and selling expenses of $603,532 or 15.6% of net sales for
the three-month period ended September 30, 1999 compared to $512,799 or 14.0% of
net sales for the three-month period ended September 30, 1998. Research and
development expenses were $465,232 or 12.0% of net sales for the three-month
period ended September 30, 1999 compared to $406,038 or 11.1% of net sales for
the three-month period ended September 30, 1998.
Interest expenses increased to $1,821,613 for the three month ended
September 30, 1999 compared to $653,896 for the three month ended September 30,
1998. This increase is primarily due the increase of interest expense for
amortization of Debenture issuance cost and Conversion Benefit.
FINANCIAL CONDITION
September 30, 1999 compared to June 30, 1999
Total assets of the Company on September 30, 1999 increased by $286,804
to $24,047,993 from
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$23,761,189 on June 30, 1999, primarily due to the increase of Current Assets.
Current Assets increased $826,725 to $12,756,106 on September 30, 1999 from
$11,929,381 on June 30, 1999. The increase in current assets is attributable to
the increase of Cash and cash equivalents of $890,652 and the increase of
Accounts receivable of $144,747 offset by the decrease in prepaid expenses and
sundry receivables of $117,007 and the decrease in inventory of $91,667. Other
Assets decreased $449,929 to $5,098,839 on September 30, 1999 from $5,548,768 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 September 30, 1999, the Company had total liabilities of $31,656,168
compared to $31,515,797 on June 30, 1999. On September 30, 1999, current
liabilities were $15,238,080 compared to $13,944,865 on June 30, 1999. Working
capital at September 30, 1999 was $(2,481,974) compared to $(2,015,484) at June
30, 1999.
CASH FLOW AND CAPITAL EXPENDITURES THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
COMPARED TO THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998.
Cash used for operating activities for the three months ended September
30, 1999 was $1,183,712 compared to $2,301,255 for the three months ended
September 30, 1998. Cash used for investing activities was $50,221 for the three
months ended September 30, 1999 compared to $201,422 for the three months ended
September 30, 1998. Cash flow from financing activities for the three months
ended September 30, 1999 was $2,147,182 compared to $3,856,426 for three months
ended September 30, 1998.
YEAR ENDED JUNE 30, 1999 COMPARED YEAR ENDED JUNE 30, 1998
Results of operations
Net sales amounted to $17,295,882 for the year ended June 30, 1999,
compared to $22,892,978, a decrease of $5,597,096, or 24.4% from the year ended
June 30, 1998.Sales for the year ended June 30, 1998 include sales of the film
and processor business of Empower which was sold on June 30, 1998, of
$7,134,938. Net sales without the film and processor business of Empower
increased for the year ended June 30, 1999 by $1,537,842 or 9.8%. This increase
is due to the additional sales of ddRMulti-Systems.
Gross profit decreased by $1,044,611 or 21.7% to $3,766,581 for the
year ended June 30, 1999, from $4,811,192 for the year ended June 30, 1998.
Gross profit as a percentage of net revenues increased to 21.8% for the year
ended June 30, 1999 from 21% for the year ended June 30, 1998. The increase in
gross profit percentage is due to production efficiencies.
Operating expenses decreased by $2,680,512, or 14.3% to $16,067,217, or
92.9% of net revenues, for the year ended June 30, 1999, from $18,747,729, or
81.9% of net revenues for the year ended June 30, 1998. The principle items were
salaries (net of officers and directors compensation) of $3,784,305 or 21.9% of
net sales for the year ended June 30, 1999 compared to $4,168,540 or
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18.2% of net sales for year ended June 30, 1998 and officers compensation
increasing approximately $1,016,000, primarily from the issuance of common stock
to its President in exchange for extinguishment of certain bonus rights
contained in his employment agreement, selling expenses of $3,286,813 or 19% of
net sales for the year ended June 30, 1999 compared to $3,740,391 or 16.3% of
net sales for the year ended June 30, 1998. The decrease of depreciation and
amortization of $471,582 primarily due to the fact that the depreciable fixed
assets were less for 1999 since many of these assets were fully depreciated at
June 30, 1998. The decrease in selling expenses was a result of the closing of
EMPOWER WHICH TOTALED APPROXIMATELY $476,000 OF COSTS IN. ^Research and
development expenses were $1,808,107 or 10.5% of net sales for the year ended
June 30, 1999 compared to $3,542,149 or 15.5% of net sales for the year ended
June 30, 1998. This decrease is primarily due to the decrease in research and
development related to AddOn-Bucky. Other operating expenses decreased by
approximately $670,000 from the comparable period in 1998 primarily from the
decrease due to the Empower closing of $100,000 and the decrease in occupancy
and insurance costs of approximately $200,000. Principal costs associated with
development of the ddRMulti-System have now been accomplished and research and
development costs are expected to continue regarding upgrades and new product
development with respect to associated and related products relating to the
ddRMulti-System.
Interest expense decreased to $4,638,928 for the year ended June 30,
1999 compared to $8,590,268 for the year ended June 30, 1998. This decrease is
primarily due the decrease of interest expense for amortization of Debenture
issuance cost and Conversion Benefit.
Loss on extinguishment of debt was $832,849 for the year ended June 30,
1999 compared to a gain of $304,923 for the year ended June 30, 1998. The
extinguishment gain or loss resulted from refinancing of Convertible debentures.
Financial Condition
June 30, 1999 compared to June 30, 1998
Total assets of the Company on June 30, 1999 decreased by $2,153,408 to
$23,761,189 from $25,914,597 on June 30, 1998, primarily due to the decrease in
current assets. Current assets decreased $1,139,876 to $11,929,381 on June 30,
1999 from $13,069,257 on June 30, 1998. The decrease in current assets is
primarily attributable to the decrease in inventories of $368,744 and the
decrease in prepaid expenses and sundry receivables of $635,105 primarily from
the collection of VAT receivable. Other assets decreased $1,286,194 to
$5,548,768 on June 30, 1999 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 June 30, 1999, the Company had total liabilities of $29,445,812
compared to $19,755,870 on June 30, 1998. On June 30, 1999, current liabilities
were $13,944,865 compared to $11,984,554 on June 30, 1998. Working capital at
June 30, 199 was ($2,015,484) compared to $1,084,703 at June 30, 1998.
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CASH FLOW AND CAPITAL EXPENDITURES YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR
ENDED JUNE 30, 1998.
Cash used for operating activities for the year ended June 30, 1999 was
$9,788,606 compared to $11,759,371 for the year ended June 30, 1998 primarily as
a result of losses sustained from operations, exclusive of non-cash
compensation. Cash used for investing activities was $879,303 for the year ended
June 30, 1999 compared to $4,517,140 for the year ended June 30, 1998 primarily
from the acquisitions of property and equipment. Cash flow from financing
activities for the year ended June 30, 1999 was $11,068,406 compared to
$14,799,200 for year ended June 30, 1998 as a result of the sale of common stock
and proceeds from the sale of debentures.
The Company does not have any material commitments for capital
expenditures as of June 30, 1999.
Liquidity
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 during the next 12 months and thereafter.
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 March 16, 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 legal fees of $35,000, and
placement agent fees of $550,000 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") 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. All of these debentures have been converted.
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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. All of these debentures have been
converted.
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 16, 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 82% of the average closing bid price for the ten trading days
preceding the date of the 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 January
21, 2000 an unconverted balance of $4,980,594 remains outstanding and,
accordingly, the number of shares being registered for the balance of this
transaction amounts to 763,575 shares.
On October 6, 1998 the Company issued $2,940,000 aggregate principal
amount of 5% convertible debentures (the "Convertible Debentures") including, as
part of the terms of this financing, $540,000 repurchase of stock (717,850 and
747,150 shares from Dominion Capital Fund, Ltd. and Sovereign Partners LP
respectively), 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 82% of the average closing
bid price for the ten trading days preceding the date of the 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 convertible debentures as of January 21,
2000 have been converted and, accordingly the number of shares being registered
for this transaction amounts to 450,732 shares.
The Registrant received gross proceeds of $1,080,000 in December, 1998,
pursuant to
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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 promissory notes (held by Dominion Capital Fund, Ltd. and
Sovereign Partners) were not paid by their due date and the terms of a
Contingent Subscription Agreement, Debenture and Registration Rights Agreement
automatically went into effect with debentures bearing interest at the rate of
5% per annum (payable in stock or cash at the Company's option) and being
convertible, at any time at 82% of the 10 day average bid price for the 10
consecutive trading days immediately preceding the conversion date. 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 as more specifically set
forth in the last paragraph to this subsection.
The Company is also required to register those shares of common stock
underlying the convertible debentures. Accordingly, 187,009 shares are being
registered pursuant to the terms of such agreements .
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 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 monthly anniversary date of issuance of the Convertible
Debentures. None of these convertible debentures as of January 21, 2000 have
been converted and, accordingly, the number of shares being registered for this
transaction amounts to 189,157 shares.
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 (i.e., Dominion Investment
Fund LLC and Sovereign Partners LP) 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 was May 31, 1999, (c) the potential 60 day
extension date on such promissory notes was July 30, 1999, but such extension
right was never utilized, (d) the conversion price is 80% of the 10 day average
closing bid price for the 10 consecutive trading days immediately 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 in all material respects to those described
above regarding December 1998
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transaction. The promissory notes were not paid by their due date and the terms
of a Contingent Subscription Agreement and Registration Rights Agreement
automatically went into effect and, accordingly, the number of shares being
registered for this transaction amounts to 183,046 shares.
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, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $550,000, (c) the initial due date of such
note was June 25, 1999, (d) the potential 60 day extension date on such
promissory note was August 24, 1999 but such extension right was never utilized
(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 promissory notes were not paid by their due date and the terms
of a Contingent Subscription Agreement and Registration Rights Agreement
automatically went into effect and, accordingly, the number of shares being
registered for this transaction amounts to 90,698 shares.
From May 14, 1999 to June 9, 1999 (in a single financing) the Company
issued a principal aggregate amount of $850,000 of convertible debentures
("Convertible Debentures"), convertible into Common Stock of the Company at a
conversion price of 80% of the average closing bid price for the ten trading
days preceding the date of conversion together with accrued interest of 5%.
After deducing fees directly attributable to such offering the offering the
Company received a net amount of $772,727. 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. 63,098 shares have
been already been issued with regard to this transaction and, accordingly, the
number of shares being registered for the balance of this transaction amounts to
110,000 shares.
On July 9, 1999 the Company entered into a fourth 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, to wit: Southshore
Capital, Ltd. now assigned to Parkdale LLC (b) gross proceeds amounted to
$1,100,000, (c) the due date of such note is August 23, 1999 with no right to
extend and (d) the debenture holder did not receive any warrants. 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 promissory notes were not paid by their due date
and the terms of a Contingent Subscription Agreement, Convertible Debenture and
Registration Rights Agreement automatically went into effect and, accordingly,
the number of shares being registered for this transaction amounts to 180,463
shares.
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On August 11, 1999 the Company entered into a fifth 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, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $1,400,000, (c) the due date of such note is
November 11, 1999 with no right to extend and (d) the debenture holder did not
receive any warrants. 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 promissory note
was not paid on its due date and the terms of the Contingent Subscription
Agreement, Convertible Debenture and Registration Rights Agreement automatically
went into effect and, accordingly, the number of shares being registered for
this transaction amounts to 239,800 shares.
In September 1999 and October/November 1999 and December 1999 the
Company entered into two separate transactions whereby ^ it sold 1,000,000,
1,000,000 and 666,667 restrictive shares of its common stock respectively at
$1.00 per share in September 1999 and $1.50 per share in October/November 1999
and December 1999. In accordance with the terms of such Subscription Agreements
and Registration Rights Agreements all 2,666,667 shares sold are being
registered herein.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The results of operations and the financial position of the Company's
subsidiaries outside of the United States are 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 $7,134,938 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 sales of Elscint products and decreased
sales of $1,952,016 for Eastern Europe. The Company sold four of the
ddRMulti-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 ddRMulti-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 ddRMulti-System and the development
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of communication interfaces (DICOM 3.0, HL 7, Dicom Worklist etc.) to extend the
connectivity of the ddRMulti-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
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 expenses, 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
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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.
BACKLOG
Management estimates that as of the end of fiscal year ended June 30,
1999 the Company had an order backlog of $12,000,000 which consisted of
$8,000,000 in conventional x-ray equipment and $4,000,000 in digital (i,e.,
ddRMulti-Systems and information solutions) as compared to an order backlog of
$13,000,000 which consisted of $11,500,000 in conventional x-ray equipment and
$1,500,000 in ddRMulti-Systems as of the fiscal year ended June 30, 1998. As of
June 30, 1999 total backlog amounted to approximately $20,400,000 with
conventional x-ray equipment accounting for $4,500,000 and digital equipment
accounting for $15,900,000.
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 and alleging
that its inability to complete such audit was based upon the Company's failure
to fully cooperate with them) STG advised the Company that it had
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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.
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. 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
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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(R). 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.
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 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 was completed in December 1999
thus allowing 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" and "Government Regulation".
Digital ddRMulti-System/SwissVision
The ddRMulti-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 ddRMulti-System is the first direct
digital
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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 ddRMulti-System
uses the Company's AddOn Bucky(R) as the digital detector. The AddOn Bucky(R) 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 ddRMulti-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
ddRMulti-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.
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
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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. See also risk factor entitled "Reliance on Large
Customers".
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 point-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.
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 73%, 23% and 4% of
the Company's sales during the fiscal year ended June 30, 1999 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."
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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(R) and the ddR-Multi-System to the FDA for Section 510(k) clearance.
On November 21, 1997, the Company's AddOn Bucky(R), the direct digital detector
of the ddR-Multi-System, received FDA approval and on December 18, 1997 the
Company's ddRMulti-System received FDA approval; the Company thus receiving
authorization to market the ddRMulti-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."
The percentage of revenues for fiscal year ended June 30, 1999
attributed to product markets amounted to 81.84%.
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." The Company currently
intends to continue to concentrate its marketing efforts within Switzerland and
U.S. wherein approximately 90% of all Company sales were concluded during fiscal
year ended June 30, 1999, with Switzerland accounting for 73% of all sales and
the U.S. accounting for 23% of such sales (and with the balance of 4% of sales
being conducted in Germany). See also Note 19 to audited financial statements.
The percentage of revenues for fiscal year ended June 30, 1999
attributed to services amounted to 18.16%.
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 August of 1999 the Company signed a one year exclusive sales,
marketing and service agreement with Hitachi Medical Systems America, Inc.
(HMSA), a subsidiary of Hitachi Medical Corporation. Under the terms of the
agreement HMSA will provide sales, marketing, and service for the distribution
of Swissray's ddRMulti-System to end users within certain defined territories
within the United States.
The defined territories referred to consist of the entire U.S.
excepting for (a) the states of Alabama, Arizona, Connecticut, Mississippi,
Maine, Massachusetts, New York, Rhode Island, Vermont and New Hampshire, (b) a
portion of New Jersey that includes the Atlantic City Expressway and north, (c)
certain designated counties within the state of Pennsylvania, (d) the counties
Orange and San Diego within the state of California, and (e) the Panhandle of
Florida -Tallahassee west.
Additionally, the Agreement contains provisions whereby additional
exclusions exist with respect to various identified customers reserved to the
Company principally due to the Company's prior contact with and/or dealings with
such clientele.
In addition HMSA will utilize and promote the Swissray Information
Solutions services and products consisting of consulting and product solutions
for medical imaging informatics.
In the past, the Company has made a significant amount of sales of its
X-ray equipment to a few large customers. For the fiscal year ended June 30,
1999 sales to the Company's single largest customer accounted for approximately
54% 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 the Company's current
single largest customer or a reduction of the volume purchased by it 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 Notes to the Company's Consolidated Financial Statements.
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In August 1998 the Company entered into a global distributorship
agreement for its ddRMulti-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 or honored the distributorship agreement as
of the date hereof and therefore the Company was unable to sell the anticipated
75 ddRMulti-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, 1999 the Company incurred
expenses regarding research and development of $1,808,107 (accounting for 12% of
the Company's operating expenses) compared to $3,542,149 (accounting for 19% of
the Company's operating expenses) for fiscal year ended June 30, 1998 and
compared to $5,786,158 (accounting for 33% of the Company's operating expenses)
for fiscal year ended June 30, 1997. The decrease of the Company's research and
development expenses by 68% from the fiscal year ended June 30, 1997 to the
fiscal year ended June 30, 1999 resulted primarily from the fact that principal
costs associated with development of the direct digital detector, the unique
AddOn-Bucky have been completed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." During the quarter ended
September 30, 1999 the Company incurred additional research and development
expenses of $465,232 (accounting for approximately 16% of the Company's
operating expenses).
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 direct digital chest
examination system (ddRChest-System), a direct digital universal radiography
system (ddRCombi) and a multi-functional floating table. Both the
ddRChest-System and ddRCombi were unveiled at the scientific assembly of the
Radiological Society of North America (RSNA) held in Chicago from November 28 -
December 2, 1999. The ddRChest-System is a dedicated chest unit capable of
taking all chest examinations in a direct digital format, while the ddRCombi is
a multi-functional system in combination with a ceiling suspend unit able to
perform examinations on the seated, upright and recumbent patient.
As of January 21, 2000, the Company employed 11 people in research and
development. The number of people employed in research and development has
increased by 10% since June 30, 1998. The Company is outsourcing certain
research and development activities and intends to continue this policy in the
future.
The Company has established a scientific advisory 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.
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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 September 30, 1999 finished
products accounted for approximately 10% of inventory while raw material, parts
and supplies accounted for approximately 72% of inventory and work in process
for approximately 18%.
The percentage of Company revenues derived from products which included
components then only currently available from a single source supplier amounted
to 13.6% as of June 30, 1999 of which 13.6% related to the single source
supplier of certain camera electronics while 13.6% related to the single source
supplier of optics (both items are included in the same product). The agreement
with the single source supplier of certain camera electronics ^ terminated
December 31, 1999 due to the fact that its manufacturing plant where the camera
electronics had been manufactured ^ permanently closed on such date and Company
management was not satisfied with proposals submitted to it by such supplier
regarding the latters intentions of establishing a new manufacturing plant.
Company agreement with its new supplier of camera electronics provides for
availability of such camera electronics to the Company commencing January 1,
2000. The Company currently has 144 CCD cameras in stock which will be used for
the next 36 ddR-Systems, which can be used for deliveries over the next three
months. New camera systems have been ordered for use in an additional 50
ddRMulti-Systems with an expected delivery date of such cameras in March 2000.
In January of 2000 the Company entered into agreement with its CCD camera
supplier whereby the Company has purchased the production facility (including
necessary tools equipment, diagrams and related knowhow) for approximately
250,000 Swiss Francs (US$161,290) management's intention to have a sufficient
number of CCD cameras on hand (four per system) to cover in excess of those
immediately required to cover orders. Through in-house production all key camera
components the Company has eliminated its reliance upon its former supplier,
looks forward to reduction in camera costs through aforesaid self production and
does not expect any material business interruptions to occur regarding CCD
camera availability in a timely manner nor does it anticipate that such in-house
production will have any affect upon quality of its ddR-Systems. The agreement
with the single source supplier of optics expires in July 2002 and is subject to
renegotiations which are expected to occur assuming contract fulfillment
continues to be concluded in a timely and satisfactory manner with price and
payment terms being comparable to those currently being utilized and meeting
Company capacity requirements. The percentage of revenues from this single
source supplier of optics amounted to approximately 13.6% at fiscal year ended
June 30, 1999. While management has no current expectation or need to replace
this supplier it does not envision encountering any material difficulties in
replacing such supplier (with a different optics manufacturer having the ability
to timely deliver comparable optic quality) if necessary in the event of any
unforeseen circumstances which may require replacement. This agreement may not
be terminated by either party without cause.
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Backlog
Management estimates that as of the end of fiscal year ended June 30,
1999 the Company had an order backlog of $12,000,000 which consisted of
$8,000,000 in conventional x-ray equipment and $4,000,000 in digital (i.e.,
ddRMulti-Systems and information solutions) as compared to an order backlog of
$13,000,000 which consisted of $11,500,000 in conventional x-ray equipment and
$1,500,000 in ddRMulti-Systems as of the fiscal year ended June 30, 1998. The
Company had 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 niche markets.
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."
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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."
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. The Company has obtained for one of its two patents the European
patent as well as the U.S. patent. 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
recently extended to July 31, 2000 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."
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 patent as
well as the U.S. patent for the Add-On Bucky have been granted and
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expire January 2015. The duration of other patents range from 2000 to 2016. In
many instances where patents are filed the "applicant" is listed as a specific
individual (such as the Company's President) while the patent ownership is
listed in the Company's name thereby assuring that the exclusive patent holder
is the Company.
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(R) and the ddR-Multi-System for Section 510(k)
clearance with the FDA. On November 21, 1997, the Company's AddOn Bucky(R), the
direct digital detector of the ddR-Multi-System, received FDA approval and on
December 18, 1997 the Company's ddRMulti-System received FDA approval; the
Company thus receiving authorization to market the ddRMulti-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
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be briefly summarized as follows: 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 was
completed in December 1999 thus allowing the Company to use the CE-Label,
including the medical device numbers for all products manufactured and/or sold
through the Company. See also "Government Regulation".
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 may specifically apply to
it. The Company does not believe that it has been involved in utilization of any
types of substances and/or wastes which it considers to be hazardous and the
operation of its business (or former business), accordingly, is not believed to
have created any potential liability involving environmental matters. 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 or changing environmental laws or
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."
Employees
After giving effect to the Empower, Inc. transaction heretofore
initially referred to on page 5 of this Registration Statement, the Company has
103 employees worldwide, of which 25 were employed by subsidiaries in the United
States, 72 in Switzerland, and 6 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, Brno, Czech
Republic, Gig Harbor, Washington and Wiesbaden, Germany.
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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. in the aforesaid action entitled Serviscope Corporation v.
Swissray International, Inc., and Swissray Healthcare, Inc. commenced in the
Supreme Court of the State of New York under Index No. 605091/97. 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).
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
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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. By order dated July 8, 1999 such motion was denied and the
court confirmed the aforesaid arbitration award.
In addition to the above referenced arbitration proceeding, Swissray
and its subsidiaries commenced an action against Messrs. Durday, Montler and
Harle 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 Superior Court in Pierce County, Washington
(September 1998 under Cause No. 98-2-10701-0), 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. By
order dated June 1, 1999 filed in the Supreme Court of the State of New York,
County of New York (Index No. 603512/98) Messrs. Durday, Montler and Harle's
motion for an order dismissing Swissray's complaint (on the ground of forum non
conveniens) was granted. The aforesaid action commenced by Messrs. Durday,
Montler and Harle in Pierce County, Washington, remained pending.
Parties to each of the aforesaid proceedings thereafter entered into
settlement negotiations resulting in Swissray agreeing to pay $1,500,000 as and
for full settlement of all outstanding claims; such settlement agreement having
been executed on August 31, 1999. In accordance with such settlement agreement
the Company was required and has since paid the sum of $1,000,000 and is further
obligated to pay (in accordance with the terms of an August 31, 1999 promissory
note and over a period of 24 consecutive months) an aggregate of $500,000 with
interest at the rate of 9% per annum. Payments with respect to such promissory
note have been and remain current.
C. Dispute with J. Douglas Maxwell. On or about July 1, 1999 an action was
commenced in the Supreme Court, State of New York, County of New York (Index No.
113099/99) entitled J. Douglas Maxwell ("Maxwell") against Swissray
International, Inc. ("Swissray"), whereby Maxwell is seeking judgement in the
sum of $380,000 based upon his interpretation of various terms and conditions
contained in an Exchange Agreement between the parties dated July 22, 1996 and a
subsequent Mutual Release and Settlement Agreement between the parties dated
June 1, 1998. Swissray has denied the material allegations of Maxwell's
complaint and has asserted three affirmative defenses and two separate
counterclaims seeking (amongst other matters) dismissal of the complaint and
recision of the settlement agreement. It is Swissray's management's intention to
contest this matter vigorously. Maxwell has submitted a motion for Summary
Judgment which Swissray has opposed and as of January 31, 2000 no Court
determination has been made with respect thereto.
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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 ddRMulti-System, with the VA reserving its option to extend the term of the
contract up to March 31, 2001; the ddRMulti-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. Since receipt of
such award the Company has contracted for the sale of 4 ddRMulti-Systems
(through January 21, 2000) to different VA institutions.
In July of 1998 the Company sold its multifunctional direct digital
radiography (ddR) system, the ddRMulti-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.
In October 1998 the Company entered into a distribution agreement with
X-ray Inc. ("XRI"), Warwick, RI. whereby XRI distributed the Company's
ddRMulti-System in the territories of Connecticut, Rhode Island, Vermont, New
Hampshire, Massachusetts and Maine until termination of such contract. The
Company currently anticipates conducting its own distribution within these
areas.
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 ddRMulti-System and Information Solutions as a package with their PACS
system.
In February of 1999 the Company announced the sale of three of its
ddRMulti-System, to Houston, Texas based Kelsey-Seybold Clinic and to the
Federal Maximum Security Facility in Florence, Colorado. The two Kelsey-Seybold
systems were 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, ^ agreed to
distribute Swissray's direct digital radiography system, the ddRMulti-System.
H&H X-Ray, which was to oversee sales in New York, Pennsylvania and Ohio has
ceased business operations and the Company is currently conducting its own
distribution in such areas. Similarly, the Company's contract with RES has
terminated and the Company is conducting its own distribution within these
territories.
Medika, one of the largest medical equipment suppliers in the Southern
Hemisphere, will cover ddRMulti-Systems sales in Puerto Rico, the Caribbean,
Mexico and selected South American markets. RES will represent Swissray in San
Diego and Orange Counties (California). The original contract
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with Medika expired October 1999 and was automatically renewed through October
2000.
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. ("LFC") 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
fully vested, and non-forfeitable 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.
In accordance with the terms of the aforementioned consulting
agreement, LFC has agreed that it will generally provide the following
consulting services: (a) advise and assist the Company in developing and
implementing appropriate plans and materials for presenting the Company and its
business plans, strategy and personnel to the financial community, establishing
an image for the Company in the financial community, and creating the foundation
for subsequent financial public relations efforts, (b) advise and assist the
Company in communicating appropriate information regarding its plans, strategy
and personnel to the financial community; (c) assist and advise the Company with
respect to its (i) stockholder and investor relations, (ii) relations with
brokers, dealers, analysts and other investment professionals, and (iii)
financial public relations generally, (d) perform the functions generally
assigned to investor/stockholder relations and public relations departments in
major corporations, (e) upon the Company's approval, (i) disseminate information
regarding the Company to shareholders, brokers, dealers, other investment
community professionals and the general investing public and (ii) conduct
meetings with brokers, dealers, analysts and other investment professionals to
advise them of the Company's plans, goals and activities and (f) otherwise
perform as the Company's financial relations and public relations consultant.
The agreement further provides that in the event LFC introduces SRMI
(a) to a lender or equity purchaser, not already having a preexisting
relationship with SRMI, with whom SRMI ultimately finances or causes the
completion of such financing, SRMI shall compensate LFC for such services with a
"finder's fee" in the amount of 2.5% of total gross funding provided by such
lender or equity purchaser or (b) to an acquisition candidate, either directly
or indirectly through another intermediary, not already having a preexisting
relationship with SRMI, with whom SRMI ultimately acquires or causes the
completion of such acquisition, SRMI shall compensate LFC for such services with
a "finder's fee" in the amount of 2% of total gross consideration provided by
such acquisition. The compensation to LFC is to be payable in cash and is to be
paid in full at the time the financing or
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acquisition is closed.
LFC, founded in 1985 by John Liviakis, its President, is a full service
investor relations firm, providing services principally to micro through mid-cap
public companies listed on the Nasdaq, American, New York Stock and OTCBB
Exchanges. Such services include financial community and media relations,
editorial services and interactive communications, as well as administrative,
consulting and advisory services. The overall purpose of LFC is to enhance its
corporate clients' recognition in the financial community, the media and among
shareholders. In furtherance of its agreement with the Company and in addition
to and/or in conjunction with those consulting services referred to above and in
the consulting agreement between the parties, LFC has performed the following
services on behalf of the Company in its efforts to assist and advise the
Company with respect to its stockholder and investor relations as well as its
relations with brokers, dealers, analysts and other investment professionals.
Specifically LFC has performed the following services:
1) pro-actively soliciting sponsorship for the Company's common stock from
stockholders, institutions, and analysts; 2) accepting incoming investor calls
from brokers, shareholders and financial institutions; 3) assisting the Company
in packaging its investor relations materials; 4) assisting the Company in the
writing and dissemination of its press releases; 5) assisting the Company in
media relations; and 6) generally advising the Company, upon request, on matters
of a corporate financial nature.
Additionally, LFC has introduced the Company and subsequently entered
into an investment banking relationship with Raymond James & Associates in order
to assist the Company in evaluating strategic alternatives including, but not
limited to, identifying proposals from potential suitors or strategic partners
as well as supporting the Company's financing requirements.
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 fully vested, and
non-forfeitable restrictive shares of its common stock.
In accordance with terms of aforementioned consulting agreement, Rolcan
has agreed to facilitate the endeavors of the Company's medium and long term
business plans through services, including but not limited to, introducing
Company management (i) to potential financial partners, financial brokers, and
assist in developing market awareness within the financial community with an
emphasis upon introductions to offshore investors in Europe, the Middle East and
the Far East and to the extent practicable assisting the Company in having its
stock listed on various European exchanges and (ii) continuing to discuss
Company financial requirements and types of financing which may be available
and/or appropriate under then existing circumstances.
Rolcan has advised that it is currently continuing to conduct due
diligence activities with respect to locating international banking enterprises
on behalf of the Company with a view towards
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obtaining financial backing in areas of lines of credit, equipment leasing,
receivable and inventory financing and areas of a similar nature. Such efforts
if successful, are intended to alleviate cash flow difficulties that may arise
as a result of substantial and significant increase in the Company's business
activities (and most specifically in its recent major increase in contracting
for the sale of 32 of its ddRMulti-Systems to Romania. Rolcan, established in
1993 by its Managing Director and control stockholder, Roland Kaufmann, is a
business consulting firm primarily engaged in the types of activities enumerated
above with its principal activities being conducted outside the U.S.
The issuance of the above referenced restrictive shares to LFC and
Rolcan was based upon the then bid price of $0.375 per share as quoted on the
date (March 22, 1999) that the parties each agreed to the terms and conditions
of their respective Consulting Agreements, notwithstanding the fact that when
such binding oral agreements were reduced to writing and executed on March 29,
1999 the closing bid price had risen to $0.906 per share. The factors considered
by the Company's Board in determining the 33% discount from the bid price of
$.375 per share when issuing the above reference shares to LFC and Rolcan was
based upon the Board's determination that there is a substantial and significant
difference between the valuation of free trading securities and restricted
shares. The principal differences considered relate to the facts that (a)
restricted shares may not be sold in the open market and (b) restrictive legend
appearing on such restricted shares may not be removed for a period of at least
one year absent registration and then only in accordance with Rule 144 (assuming
the Company continues to meet necessary reporting requirements for utilization
of Rule 144). The Board further considered the fact that even if the above
referenced Rule 144 requirements were met the holder of restricted shares
remained subject to specific volume limitations (usually 1% of outstanding
common stock) with respect to sales made within a 3 month period subsequent to 1
year holding period. In addition to all of the above, the Board also considered
the fact that the Company's shares have had a history of substantial and
significant volatility.
In April of 1999 the Company entered into distribution agreements with
(a) Linear Medical Systems, Inc. for the territory of Arizona and (b) Capital
X-Ray, Inc. for the territories of Alabama and Mississippi.
In May of 1999 the European Patent Office issued patent No. EP 0 804
853 and in July of 1999 the U.S. Patent Office issued patent No. 5,920,604 -
both for the Company's Radiography (ddR) detector, the AddOn-Bucky (R) which
patent relates to the optical arrangement and process for transmitting and
converting primary x-ray images, which is the first of two inventions for the
AddOn-Bucky(R). The second patent application for optical arrangement and method
for electronically detecting an x-ray image was granted in September 1999 as
hereinafter indicated. The AddOn-Bucky(R) is incorporated in Swissray's unique
multifunctional ddRMulti-System.
In July of 1999 the Company signed an investment banking agreement with
Raymond James & Associates, Inc. (NYSE:RJE - news). Under the terms of the
agreement, Raymond James will assist Swissray in evaluating strategic
alternatives including, but not limited to, identifying and evaluating proposals
from potential suitors or strategic partners, as well as supporting the
Company's financing requirements.
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In August of 1999 the Company signed a one year exclusive sales,
marketing and service agreement with Hitachi Medical Systems America, Inc.
(HMSA), a subsidiary of Hitachi Medical Corporation. Under the terms of the
agreement HMSA will provide sales, marketing, and service for the distribution
of Swissray's ddRMulti-System to end users within certain defined territories
within the United States. In addition HMSA will utilize and promote the Swissray
Information Solutions services and products consisting of consulting and product
solutions for medical imaging informatics.
On September 30, 1999 the Company announced that the U.S. Patent Office
issued patent No. US 005920604A for its direct digital Radiography (ddR)
detector, the AddOn Bucky(R). The U.S. patent was awarded to Swissray pursuant
to application submitted by inventors R. G. Laupper, Chairman and President, CEO
of Swissray International, Inc. and Peter Waegli (Bremgarten, Switzerland), for
the optical arrangement and process for transmitting and converting primary
x-ray images generated on a two dimensional primary image array. The Company had
previously been awarded, in May 1999 the European patent for the technology
indicated herein. A separate patent application for the mirror optics has been
submitted and is pending approval in both Europe and the U.S.
In October 1999 the Company was awarded a purchase order for 32 of its
unique direct digital Radiography System from the Romanian Ministry of Health
for its multifunctional ddRMulti-System, valued at over US$13,800,000.
Installation will be in various hospitals throughout Romania. It is anticipated
that an initial payment aggregating 15% of the aforesaid total gross proceeds,
(i.e., approximating $2,070,000) due under such contract will be made in March
2000 with the Company expecting to complete its delivery requirements (and
received the balance of monies due) on or before June 30, 2000.
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 54 Secretary, Treasurer and Director
Ueli Laupper 29 Vice President and Director
Dr. Erwin Zimmerli 52 Director and Member of the Independent Audit
Committee
Erich A. Kalbermatter 43 Chief Operating Officer *
Dr. Sc. Dov Maor 53 Director and Member of the Independent Audit
Committee
Michael Laupper 27 Chief Financial Officer
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* 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 from its inception in June 1988 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
having previously been employed by the Company from January 1993 to July 1995 as
Export Manager. 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 America
Inc. since its formation in September 1998 and Swissray Healthcare, Inc.
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
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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 worked in
conjunction with the Company's former CFO and has been the Company's CFO since
August 1999. 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 since 1999 and 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.
Employment Agreements
RUEDI G. LAUPPER ^ entered into a five-year employment agreement with
Swissray Management AG, a wholly owned subsidiary of the Registrant, on December
18, 1997, which agreement provided for automatic renewal for another five years
unless terminated by either party no later than December 31, 2001. Such
agreement also provided for (i) an annual salary of 299,000 Swiss francs (or
$194,121), (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
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bonus was calculated at 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.
Pursuant to June 30, 1999 Board meeting (attended by the Company's
President, Ruedi G. Laupper, who absented himself from the meeting prior to vote
upon and adoption of resolutions) the EBIT bonus provisions referred to above
were extinguished in exchange for (a) extending the duration of the employment
agreement to December 18, 2007 and (b) issuance to Ruedi G. Laupper of 2,000,000
fully vested, and non-forfeitable shares of restrictive Company common stock in
exchange for and in consideration of his agreeing to cancel the above referenced
EBIT provisions in his employment contract which otherwise would have entitled
him to receive 25% of all Company earnings before interest and taxes ("EBIT")
payable in shares of Company Common Stock during each year of such employment
contract, which contract expires December, 2007. Valuation assigned to the
aforesaid 2,000,000 fully vested, and non-forfeitable shares was based upon
Board members agreement that such price would be based upon 75% of bid price at
the time proposal was initially made and agreed to on March 12, 1999, i.e. 75%
of $0.50 bid price on March 12, 1999. The Board resolution approving the above
referenced transaction (and utilizing the aforesaid agreed to valuation date)
occurred on June 30, 1999, at which time the bid price of the Common Stock was
$2.625 and at which time the above referenced shares were issued to Mr. Laupper.
In accordance with SEC guidelines (and notwithstanding the percentage discount
from bid price discussed above) the Company's financial statements reflect a 10%
(as opposed to 25%) discount from bid price with respect to this transaction.
At such June 30, 1999 Board meeting members expressed their consensus
that while the Company had not, as yet, had any earnings, that its business
(after significant and ongoing infusions of capital) had now reached the point
where it was expected that "breakeven" was reasonably foreseeable within the
current fiscal year and that it was further expected that in both the near term
(i.e., within the next two fiscal years) and long term (i.e., the period of time
commencing subsequent to the close of fiscal year ended June 30, 2002) that
substantial and significant earnings would be forthcoming as a result of its
development of its ddR Multi-System (and related products) and the industry's
acceptance of same as reflected by substantial sales increases and the then
anticipated sale of a significant number of its ddRMulti-Systems to the
Government of Romania (which sale has since occurred as a result of the Romanian
Bidding Commission having accepted the Company's tender as made to the Ministry
of Health of the Government of Romania resulting in the Company entering into a
contract for the sale of 32 of its ddRMulti-Systems with a valuation of in
excess of $13,800,000). It is currently anticipated that an initial payment
aggregating 15% of the aforesaid total gross proceeds (i.e. a sum approximating
$2,070,000) due under such contract will be made to the Company in March 2000
with the further expectation that the Company will complete all delivery
requirements within its current fiscal year on or before June 30, 2000 and that
pro rata payments of the 85% balance of the gross proceeds due under such
contract will be paid pro rata upon deliveries
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<PAGE>
of Company ddRMulti-Systems.
Based upon the above, Board members reaffirmed their aforesaid March
12, 1999 agreement that it would be in the best interests of all parties
concerned (and especially Company stockholders) to eliminate the above
referenced EBIT provisions so that what might otherwise amount to significant
earnings being paid to the Company's President in stock (pursuant to the 25% of
EBIT bonus provisions) be replaced with a permanent one time solution. It was
then resolved and subsequently accepted by the Company's President that
2,000,000 restrictive shares of the Company's Common Stock be issued to him in
exchange for cancellation of the above referenced 25% of EBIT bonus provisions
and in accordance with March 12, 1999 original agreement.
Swissray International
EARNINGS BEFORE INTEREST AND TAXES ("EBIT")
The selected consolidated financial data presented below shows earnings before
interset and taxes ("EBIT") and 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 Pospectus the selected consolidated financial data as of and for the
fiscal years ended June 30, 1997, June 30, 1998 and June 30, 1999 and the three
months ended September 30, 1999 are derived from the consolidated financial
ststements of the Company.
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
September 30, June 30,
------- -----------------------------
1999 1999 1998 1997
------- ------- -------- -------
(in thousands)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C>
Net sales ...................................................................... $ 3,879 $ 17,296 $ 22,893 $ 13,151
Cost of goods sold ............................................................. 2,978 13,529 18,082 8,445
------- ------- -------- -------
Gross profit ................................................................... 901 3,767 4,811 4,706
Selling, general and administrative expenses ................................... 2,859 15,581 18,748 17,450
------- ------- -------- -------
Loss from continuing operations ................................................ (1,958) (11,814) (13,937) (12,744)
Other expenses (income) ........................................................ (26) (40) 281 (319)
------- ------- -------- -------
EARNINGS BEFORE INTEREST AND TAXES ("EBIT") ....................................$ (1,932) $(11,774) $(14,218) $(12,425)
======= ======= ======== =======
</TABLE>
Breakeven would occur when "Earnings Before Interest and Taxes on the above line
would be $-0-
The above referenced proposal was initially orally made to the
Company's President by its Board of Directors on March 12, 1999 and the key
meeting with respect to discussion thereon occurred on such date, and such
agreement was subsequently finalized (i.e. reduced to writing) at the Company's
June 30, 1999 Board meeting wherein discussions were basically limited to those
set forth above and at which the only persons present were Board members and at
which time Board members again agreed that valuation assigned to shares issued
would reflect price at time of initial proposal as previously agreed to. There
were no offers or counter-offers between the Company and its President but
rather directors agreed to and voted in favor of issuance of the above
referenced 2,000,000 restrictive shares and the Company's President (abstaining
himself from such vote) agreed to such resolution.
It is management's present intention for the Company to seek
stockholder ratification as relates to this matter. Absent such ratification the
Board may nevertheless determine (and in all likelihood will determine) to leave
the agreement in effect, as is. Nevertheless, such ratification is intended to
be sought in an effort to comply with NASDAQ Marketplace Rule
4310(c)(25)(H)(i)(a).
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<PAGE>
The above referenced Rule provides in part that "Each Issuer shall
require shareholder approval." (A) when a stock option or purchase plan is to be
established or other arrangements made pursuant to which stock may be acquired
by officers or directors, except for warrants or rights issued generally to
security holders of the company or broadly based plans an arrangement including
other employees (e.g. ESPOS). In a case where the shares are issued to a person
not previously employed by the company, as an inducement essential to the
individual's entering into an employment contract with the company shareholder
approval will generally not be required. The establishment of a plan or
arrangement under which the amount of securities which may be issued does not
exceed the lesser of 1 percent of the number of shares of Common Stock, 1
percent of the voting power outstanding, or 25,000 shares, will not generally
require shareholder approval".
The Company is not currently on NASDAQ (see risk factor entitled
"Delisting Due to Non-compliance With certain NASDAQ Standards" as well as
Business subsection entitled "Continued NASDAQ Delisting") but nevertheless
wishes to obtain stockholder ratification regarding its issuance of restrictive
shares of its Common Stock in amounts greater than 25,000 shares per person
since NASDAQ may consider this issue for companies who are reapplying for
listing (on a case by case basis) and in the case of the Company, has so
considered such issuance to the detriment of the Company's
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
$94,924 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
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<PAGE>
$12,000, (b) an automobile allowance equivalent to $11,333, (c) 25 days of
vacation and (d) a "Bel Etage" insurance 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 expired 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, 1997, 1998 and 1999 concerning the cash
and non-cash compensation earned by or awarded to the Chief Executive Officer of
the Registrant, the three other most highly compensated executive officers of
the Registrant as of June 30, 1999 and the former Chairman of the Board of
Directors (the "Named Executive Officers").
<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 1999 $194,121 $8,377 $907,000(1)(8) --- ---
President and Chief Executive 1998 $173,587 $16,057 $15,000 (1) --- ---
Officer, Chairman of the 1997 --- --- $1,122,973 (7) --- ---
Board of Directors 1997 $146,983 --- $15,000 (1) 12,000(5) ---
Josef Laupper 1999 $ 83,566 $6,494 $12,000 (1) --- ---
Secretary, Treasurer 1998 $ 94,669 --- $12,000 (1) --- ---
1997 $ 96,861 --- $12,000 (1) --- ---
Ueli Laupper 1999 $ 94,924 $7,077 $10,000 (1) --- ---
Vice President Internatioal 1998 $ 95,685 --- $10,000 (1) --- ---
Sales (2) 1997 $ --- --- $ --- --- ---
Herbert Laubscher 1998 $ 79,244 --- $ --- --- ---
Chief Financial Officer (2)(3) 1997 $ --- --- $ --- --- ---
Ulrich R. Ernst (4) 1997 $ 96,979 --- $10,000 (1) --- ---
Erich A. Kalbermatter 1999 $153,333 --- $ --- --- ---
Chief Operating Officer 1998 $ 33,652 --- $ --- --- ---
- --------------------
</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.
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<PAGE>
(7) Compensation paid in equivalent of 48,259 post reverse split shares of
Common Stock for cancellation of Common Stock held by officer, as
follows:
Ruedi G. Laupper, the Company's President, surrendered for
cancellation an aggregate of 1,608,635 shares of common stock owned by
him in order for the Company to meet its obligations with respect to
various warrantees and representations made by it regarding
availability of a sufficient number of authorized but unissued shares
to timely meet convertible debenture conversions and avoid Company
default (regarding financings which occurred in or about September 1996
and January 1997). By surrendering such shares Ruedi G. Laupper lost
his holding period under Rule 144 which at that point would have
entitled him to utilize Rule 144 every three months to sell such
restrictive shares (as free trading) subject to volume limitation
imposed by Rule 144. In exchange for losing such valuable right and
once stockholders had increased the number of authorized shares of
Company common stock at a Special Meeting called for such purposes, Mr.
Laupper, as previously agreed to, received a number of shares equal to
30% (48,259 post reverse split shares) more than those previously
canceled (creating a brand new holding period for him for purposes of
Rule 144 transactions).At the time that the Company's President
surrendered his aforesaid 1,608,635 shares for cancellation (to wit:
March 7, 1997) the bid price of the Company's common stock was $2.6875
while at the time that such individual received the 48,259 post split
shares referred to above (on June 30, 1997) the bid price for the
Company's common stock was $2.421875.
(8) Dollar value assigned to the 2,000,000 shares of Common Stock issued
for relinquishment of EBIT bonus based upon Board members agreement
that such price would be based upon 90% of bid price at the time
proposal was initially made, i.e., 90% of $0.50 bid price on March 12,
1999.
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.
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<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) $2.94(4) 6/13/02 265,200 282,840 300,480
Josef Laupper(5) -- -- -- -- -- -- -- --
Ueli Laupper(5) -- -- -- -- -- -- -- --
Herbert Laubscher(5) -- -- -- -- -- -- -- --
Ulrich Ernst(5)(6) -- -- -- -- -- -- -- --
</TABLE>
(1) The options to purchase the Registrant's Common Stock were granted under
the Swissray International, Inc. 1996 Non-Statutory Stock Option Plan.
(2) These options were owned indirectly through SR Medical Equipment Ltd., a
corporation wholly owned by Mr. Laupper. They were immediately exercisable
on the date of grant but do not give effect to subsequent October 1998 1
for 10 reverse stock split.
(3) The exercise price per share is contingent on purchase of the entire amount
of securities.
(4) The market price on date of grant was based on the average of the high and
low reported prices on the Nasdaq SmallCap Market on June 13, 1997. On
October 26, 1998 the Company's securities were delisted by NASDAQ.
(5) These individuals own no stock options of the Registrant.
(6) Mr. Ernst was Chairman of the Board of Directors from May 1995 until March
18, 1997.
STOCK OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 1998
With respect to the Named Executive Officers there were no granting of
stock options under either the Company's 1996 or 1997 Stock Option Plans (the
"Plans") during the fiscal year ended June 30, 1998.
-75-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options Options
Name At Fiscal Year-End(#) At Fiscal Year-End($)
(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"). 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 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 January 21, 2000,
none of such options have been granted.
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<PAGE>
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.
Pursuant to February 1999 Board of Directors approval and subsequent
July 23, 1999 stockholder approval, the Registrant adopted its 1999 Non
Statutory Stock Option Plan, whereby it reserved for issuance up to 3,000,000
shares of its common stock. Thereafter in August 1999 the Registrant filed a
Registration Statement on Form S-8 (File No. 0-26972) so as to register those
shares of common stock underlying the aforesaid options. All of these options
have been granted.
The Registrant currently has outstanding non-statutory stock options to
purchase an aggregate of 161,000 shares of Common Stock. See "Management --
Compensation of Directors and Executive Officers" and Notes to the Consolidated
Financial Statements June 30, 1999, 1998 and 1997 .
Retirement and Long-Term Incentive Plans
The Swiss and German Subsidiaries, mandated by government regulations,
are required to
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<PAGE>
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, 1999, 1998 and 1997, were $509,959, $347,854 and $274,009, respectively.
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 Company had no Compensation Committee during the last completed
fiscal year. The Corporation's executive compensation was supervised by all
members of the Company's Board of Directors and the following directors were
concurrently officers of the Company in the following capacities: Ruedi G.
Laupper (Chairman of the Board of Directors, President and Chief Executive
Officer); Josef Laupper (Secretary and Treasurer and director) and Ueli Laupper
(Vice President and director). No executive officer of the Company 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 Company'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 in consideration of Mr.
Laupper's agreement to cancellation of 160,863 post split shares of Common Stock
held by Ruedi G. Laupper or companies controlled by him. See also footnote 7 to
Summary Compensation Table for additional material information regarding this
transaction.
The Company did not issue any shares of its Common Stock to any of its
officers during fiscal year ended June 30, 1999 excepting for the issuance of
2,000,000 restrictive shares to Ruedi G. Laupper in exchange for and in
consideration of cancellation of certain bonus provisions contained in
employment contract.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of January 18, 2000 (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). The title of class of all
securities indicated below is Common Stock with $.01 par value per share.
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<PAGE>
<TABLE>
<CAPTION>
No. Of Shares Percentage of
Beneficially Shs. Benficially
Name and Address of Beneficial Owner ^ Owned (1) Owned (1)
- ------------------------------------ -------------- ----------------
<S> <C> <C>
Ruedi G. Laupper (2)(10) 2,966,074 14.02%
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland
Josef Laupper (3) 200,000 .95%
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland
Erwin Zimmerli (4) 248,750 1.18%
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland
Ueli Laupper (11) 493,750 2.33%
320 WEST 77TH Street
New York, New York 10024
Dov Maor (13) 31,250 *
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland
Michael Laupper (12) 125,000 *
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland
Dominion Capital Fund, Ltd. ^ 1,054,866 (5) 4.87%
c/o Thomson Kernaghan & Co. Ltd.
365 Bay Street
Toronto, Ontario M5H 2V2
Canada
Sovereign Partners LP ^ 1,390,830 (6) 6.34%
90 Grove Street - Suite 01
Ridgefield, New Jersey 06877
Liviakis Financial Communications, Inc. (LFC)^ 3,000,000 (7) 14.30%
495 MILLER AVENUE - 3RD Floor
Mill Valley, California 94914
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<PAGE>
Rolcan Finance Ltd. ^ 800,000 (8) 3.81%
Seestrasse 17
P.O. Box 53
CH 8702 Zollikon 2
Switzerland
Parkdale LLC (14) 1,420,263 (14) 6.64%
c/o Thomson Kernaghan & Co. Ltd.
365 Bay Street
Toronto, Ontario M5H 2V2
Canada
All directors and officers as
a group (six persons) 4,064,824 (9) 18.62%
</TABLE>
* Represents less than 1% of the 20,984,669 shares outstanding as of January
21, 2000.
(1) 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.
(2) Includes (i) 37,500 shares owned indirectly by Ruedi G. Laupper through SR
Medical Equipment Ltd., a corporation which is wholly owned by him; (ii)
460,324 shares owned indirectly by Ruedi G. Laupper through Tomlinson
Holding Inc., a corporation which is wholly owned by him, (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 and (iv)
an additional 156,250 shares which may be acquired upon exercise of balance
of immediately exercisable options issued in October 1999.
(3) Includes 175,000 shares which may be acquired upon exercise of balance of
immediately exercisable options issued in October 1999.
(4) Includes 173,750 shares which may be acquired upon exercise of balance of
immediately exercisable options.
As of the January 21, 2000, an aggregate principal outstanding balance
(exclusive of interest) for those Convertible Debentures referred to below
amounts to $15,277,794. None of these convertible debentures are owned by
officers and/or directors of the Company.
(5) Includes 380,944 shares currently owned as well as up to 673,922 shares
which normally could be issued (inclusive of 67,746 shares as may be issued
for interest earned), at any time, upon conversion of previously issued
convertible debentures (the "Convertible Debentures"). The person or
persons having voting control are Livingstone Asset Management Ltd.,
Navigator Management Ltd. (President) and David Sims (director of
Navigator) - British Virgin Islands.
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<PAGE>
(6) Includes 436,045 shares currently owned as well as up to 954,785 shares
which normally could be issued (inclusive of 99,805 shares as may be issued
for interest earned), at any time, upon conversion of previously issued
convertible debentures (the "Convertible Debentures"). The person or
persons having voting control are Southridge Capital Management LLC, P.P.,
Steven Hicks (President) - Connecticut.
The foregoing information contained in footnotes 5 and 6 above assumes
conversion based on 18% - 20% discount from market (dependent upon debenture)
based upon the last reported sales price on January 21, 2000. 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 4.99% of outstanding Company shares (other
than as a result of mandatory conversion provisions). The 4.99% limitation is
only contractual in nature. The 4.99% limitation does not apply and,
accordingly, would not limit beneficial ownership in any manner in the event
that (a) 50% or more of the Company is acquired, (b) the Company is merged into
another company or (c) a change of control occurs.
(7) Pursuant to written Agreement, the Registrant's President, Ruedi G.
Laupper, has sole voting rights with respect to these shares without any
limitation thereon so long as same are owned by LFC. LFC in turn may not
sell any of such shares for a period of one year subsequent to commencement
of ownership and then only in accordance and subject to volume limitations
imposed in accordance with the applicable provisions of Rule 144 under the
Securities Act of 1933.
(8) Roland Kaufmann, Managing Director and a control person of this firm has
voting control over these shares. (9) Includes 842,000 shares issuable upon
option exercise. (10) When taking into account the number of shares owned
beneficially by Ruedi G. Laupper (2,797,824) as well as those shares over
which he exercises voting control (as indicated in footnote 7 above) Ruedi
G. Laupper exercises voting control over approximately 28% of all voting
shares as of January 21, 2000.
(11) Includes 193,750 shares which may be acquired upon exercise of balance of
immediately exercisable options issued in October 1999.
(12) Includes 100,000 shares which may be acquired upon exercise of balance of
immediately exercisable options issued in October 1999.
(13) Includes 31,250 shares which may be acquired upon exercise of immediately
exercisable options issued in October 1999.
(14) Includes 1,000,000 shares currently owned as well as up to 420,263 shares
which normally could be issued (inclusive of 38,206 shares as may be issued
for interest earned), at any time, upon conversion of previously issued
convertible debentures (the "Convertible Debentures"). The person or
persons having voting control are Livingstone Asset Management Ltd.,
Navigator Management Ltd. (President) and David Sims (director of
Navigator) - British Virgin Islands.
As heretofore indicated the person or person having voting control over
Dominion Capital, Dominion Investment and Parkdale are Livingston Asset
Management Ltd., Navigator Management Ltd. (President) and David Sims (director
of Navigator) - British Virgin Islands. These persons or firms having voting
control do not own any Company shares of record but rather have been given the
right
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to vote by Dominion Capital, Dominion Investment and Parkdale with respect to
those shares owned by such entities. Accordingly, such persons and/or firms
exercise, in the aggregate, the right to vote over 2,613,941 shares owned in the
aggregate by Dominion Capital, Dominion Investment and Parkdale.
CERTAIN TRANSACTIONS
Reference is herewith made to Compensation Committee Interlock, second
paragraph regarding (a) 48,259 restrictive shares of Company common stock issued
to its President during fiscal year ended June 30, 1998 and (b) 2,000,000
restrictive shares issued to its President during fiscal year ended June 30,
1999. For further information with respect to the latter transaction reference
is herewith made to "Management - Employment Agreements", second paragraph. With
respect to both transactions referred to herein the Company's board determined
same to be as fair to the Company as could have been made with unaffiliated
parties and both of such transactions were unanimously approved by its Board
with the Company's President abstaining from voting.
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 Notes to
the Consolidated Financial Statements June 30, 1998, 1997 and 1996.
SELLING HOLDERS
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.
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 January 21, 2000, certain
information with respect to the Selling Holders, (who participated in financings
from August 31. 1998 to December 13, 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 excepting that those persons or
firms indicated in footnotes 4 through 8 inclusive below did not participate in
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convertible debenture financing.
NAME OF SELLING HOLDER(3) SHARES(1) % OF CLASS(2)
Dominion Capital Fund Ltd. ........ 673,922 3.11%
Sovereign Partners Ltd. Partnership 954,785 4.35%
Dominion Investment Fund LLC ...... 138,812 .66%
^
Endeavour Capital Fund SA ......... 78,572 .27%
Excaliber Limited Partnership ..... 31,428 .15%
^
Parkdale LLC ...................... 1,420,263 6.64%
Southridge Capital Management LLC . 333,334 1.56%
Striker Capital Ltd. .............. 833,334 3.82%
ALFRED HAHNFELDT .................. 333,332 1.56%
Greenfield Investments Consultants 166,667 .79%
Trianon Opus One Inc. (4) ......... 85,077 .40%
Gary B. Wolff (5) ................. 150,000 .71%
Dr. Erwin Zimmerli (6) ............ 100,000 .47%
Display Presentations Ltd. (7) .... 65,000 .31%
Live Marketing (8) ................ 16,864 .08%
(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 January 21, 2000 at an 18% to 20%
discount (as required) and including 247,414 shares which may be issued for
interest earned through mandatory conversion date.
(2) Based upon an aggregate of 20,984,669 shares arrived at by adding the
aggregate of those shares indicated in column designated "Shares" to those
shares issued and outstanding as of January 21, 2000.
(3) The names of those person(s) who have voting control over each of these
entities is as follows: (i) Dominion Capital Fund, LTD., Dominion
Investment Fund, LLC and Parkdale LLC - Livingstone Asset Management Ltd.,
Navigator Management Ltd. (President) and David Sims (director of
Navigator) - British Virgin Islands, (ii) Sovereign Partners Limited
Partnership - Southridge Capital Management LLC, G. P., Steven Hicks
(President) - Connecticut, (iii) Aberdeen Avenue, LLC - Minglewood Capital
LLC., CTC Corporation Ltd., Bas Horsten (director ofF CTC) and (iv)
Greenfield Investments Consultants Stephen Hicks and Dan Pickett.
(4) These shares are being registered pursuant to certain "piggy-back"
registration rights granted to an otherwise unaffiliated lender, Trianon
Opus One Inc., pursuant to terms of a promissory note (see "Description of
Capital Stock - Promissory Note").
(5) The shares being registered underlie certain outstanding warrants granted
to such individual in December 1998 (50,000 warrants) and March 1999
(100,000 warrants).
(6) The shares being registered underlie certain outstanding warrants granted
to such individual who is a member of the Company's Board of Directors.
(7) These shares were issued in accordance with October 8, 1999 agreement and
as partial
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consideration for services rendered and in accordance with certain "piggy-back"
registration rights granted to this otherwise unaffiliated stockholder.
(8) These shares were issued in accordance with October 31, 1999 agreement and
as partial consideration for services rendered and in accordance with
certain "piggy-back" registration rights granted to this otherwise
unaffiliated stockholder.
Each of the Selling Holders referred to herein have indicated in
writing to the Company that they are neither broker-dealers nor affiliates of
broker-dealers.
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
1,728,621 shares of Common Stock are being registered hereunder; which shares
were previously issued with restrictive legend. There is no remaining
unconverted balance on what was an 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.
PLAN OF DISTRIBUTION
Each Subscription Agreement and Debenture, as amended to date, contains
a contractual provision between Registrant and debenture holder whereby
debenture holder is limited in the amount of debenture it may convert and own.
One exception to such limitation (referred to as the mandatory conversion
provision) provides for the automatic conversion on last date of debenture with
respect to any outstanding unconverted balances. Additional exceptions to such
limitation (i.e. where contractual limitation does not apply) relate to (i) if
there is a public announcement that 50% or more of the Company is being
acquired, (ii) a public announcement that the Company is being merged, or (iii)
a change in control. Excepting for such limitations, the debenture holder is
entitled to convert any Debentures solely to the extent that, after such
conversion, (a) the number of shares of common stock beneficially owned by the
debenture 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 (b) the number of shares of common stock issuable upon such
conversion would result in beneficial ownership of no more than 4.99% of the
outstanding shares of common stock.
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
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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
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
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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.
RESTRICTIVE SHARES BEING REGISTERED PURSUANT TO CONTRACTUAL AGREEMENTS
An aggregate of 81,864 shares of Company common stock are being
registered hereunder in accordance with certain "piggy-back" registration rights
granted to two otherwise unaffiliated firms in exchange for services rendered by
such firms to the Company, as follows:
(a) On October 8, 1999 the Company entered into an agreement with
Display Presentations, Hauppauge, New York (hereinafter "Display"), whereby
Display agreed to provide certain construction and related services for purposes
of assisting the Company's establishment of its booth at the November 1999 RSNA
Convention held in Chicago, Illinois. Total costs in accordance with such
contract amounted to $415,000 with one-half of such costs ($207,500) having been
paid in cash and with the balance paid through issuance of 65,000 restrictive
shares of SRMI common stock, which shares were based upon a market valuation of
$3.192 per share (which was the bid price when the written agreement was orally
agreed to). In accordance with such written agreement the Company was required
to register such shares in this Registration Statement and (b) on October 31,
1999 the Company entered into an agreement with Live Marketing, Chicago,
Illinois (hereinafter "Live"), whereby Live agreed to provide certain video
production, audio/video equipment rental, lighting, on site personnel and
related services for purposes related to SRMI's booth at the 1999 RSNA
Convention, Total costs in accordance with such contract amounted to $156,180 of
which $105,590 was paid in cash and with the balance of $50,590 paid in 16,864
restrictive shares of SRMI common stock, which shares were based upon market
valuation of $3.00 per shares (which was the bid price when the written
agreement was orally agreed to). In accordance with such written agreement the
Company was required to register such shares in this Registration Statement.
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
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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
thereafter 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 January 21, 2000 was
20,984,669. In addition, the Registrant currently has reserved 1,728,621 shares
for previously issued restrictive shares pursuant to convertible debentures
referred to under Registration Nos. 333-50069 and 333-59829 and an additional
aggregate of 5,472,088 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) 161,000 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") and (ii) 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"). ^
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."
Preferred Stock
In accordance with stockholder approval received at Annual Meeting of
Stockholders held July 23, 1999, the Registrant filed on July 28, 1999 (with the
Department of State of the State of New York) an amendment to its Certificate of
Incorporation pursuant to which it obtained authority to issue up to 1,000,000
shares of preferred stock, par value $.01 per share. None of such shares have
been issued.
The preferred stock is issuable with such rights, preferences,
privileges and such number of
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shares constituting each series to be fixed by the Board of Directors without
further action by the holders of common stock. The Board of Directors could,
without stockholder approval, issue preferred stock with voting and conversion
rights, which could dilute the voting power of the holders of the common stock.
The issuance of shares of preferred stock by the Board of Directors could be
utilized, under certain circumstances, as a method of preventing a takeover of
the Company whether or not stockholders approve or disapprove of such takeover.
As of the date hereof, the Board of Directors has not authorized any series of
preferred stock and there are no agreements or understandings for the issuance
of any shares of preferred stock. See also risk factor entitled "Authority to
Issue Preferred Stock With Terms That May Not Be Beneficial to Common Stock
Holders".
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
with Trianon being the selling shareholder.
Promissory Notes - Subsequently Converted Into Debentures
(a) 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 . The promissory notes (held by Dominion Capital Fund, Ltd.
and Sovereign Partners) were not paid by their due date and the terms of a
Contingent Subscription Agreement, Debenture and Registration Rights Agreement
automatically went into effect with debentures bearing interest at the rate of
5% per annum (payable in stock or cash at the Company's option) and being
convertible, at any time at 82% of the 10 day average bid price for the 10
consecutive trading days immediately preceding the conversion date. 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, as more specifically
set forth in the last paragraph to this subsection.
The Company is also required to register those shares of common stock
underlying the
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convertible debentures. Accordingly, 181,009 shares are being registered
pursuant to the terms of such agreements .
(b) March 2, 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 (i.e., Dominion Investment Fund LLC
and Sovereign Partners LP) 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 were May 31, 1999, (c) the potential 60 day extension
date on such promissory notes was July 30, 1999 but such extension right was
never utilized, (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 in all material respects to those described above (in subparagraph
(a) regarding December 1998 transaction) . The promissory notes were not paid on
their due date and the terms of the Contingent Subscription Agreement and
Registration Rights Agreement automatically went into effect and, accordingly,
the number of shares being registered for this transaction amounts to 183,046
shares.
(c) March 26, 1999
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, to wit: Aberdeen Avenue,
LLC, (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 was August 24, 1999 but such extension right was never utilized,
(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 promissory notes were not paid on their due date and the terms
of the Contingent Subscription Agreement and Registration Rights Agreement
automatically went into effect and, accordingly, the number of shares being
registered for this transaction amounts to 90,698 shares.
(d) July 9, 1999
On July 9, 1999 the Company entered into a fourth promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the March
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2, 1999 promissory note financing referred to directly above excepting (a) the
lender is different, to wit: Southshore Capital, Ltd. who has since assigned its
rights to Parkdale LLC, (b) gross proceeds amounted to $1,100,000, (c) the due
date of such note is August 23, 1999 with no right to extend and (d) the
debenture holder did not receive any warrants. 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 promissory note was not paid on its due date and the terms
of the Contingent Subscription Agreement, Convertible Debenture and Registration
Rights Agreement automatically went into effect and, accordingly, the number of
shares being registered for this transaction amounts to 180,463 shares.
(e) August 11, 1999
On August 11, 1999 the Company entered into a fifth 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, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $1,400,000, (c) the due date of such note is
November 11, 1999 with no right to extend and (d) the debenture holder did not
receive any warrants. 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 promissory note
was not paid on its due date and the terms of the Contingent Subscription
Agreement, Convertible Debenture and Registration Rights Agreement automatically
went into effect and, accordingly, the number of shares being registered for
this transaction amounts to 239,800 shares.
With respect to each debenture referred to in this subsection in
paragraphs designated (a) through (e) inclusive hereof, the Company has the
right to redeem debentures during the first four months thereof at the rate of
115% of the face amount of the debenture to be redeemed (plus accrued interest)
which percentage increase to 120% during the fifth and sixth months of the
debenture and which percentage further increases to 125% at any time after the
last day of the aforesaid sixth month. Additionally, with respect to each of
these debentures, the debenture holder may not require the Company to pay any
balance due in cash and it has been the Company's policy to pay such outstanding
indebtedness through issuance of shares of its common stock.
Registration Rights
The Convertible Debentures
The Registrant issued $15,277,794 aggregate principal amount of
Convertible Debentures from August of 1998 to January 18, 2000. With respect to
specific dates and dollar amounts of debentures issued, reference is made to
risk factor entitled "Potential Adverse Effect Upon Stock Price ..". 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
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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.
Other than on the date of such mandatory conversion provision (and certain other
defined circumstances regarding acquisition, merger and/or change of control as
summarized in the fifth paragraph to the section entitled "Selling Holders") ,
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 4.99% of the outstanding shares of Common Stock of the
Registrant. This conversion limitation is contractual in nature.
Reference is herewith made to chart appearing under "Selling Holders"
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 (which agreed to
-91-
<PAGE>
date was either 30, 45 or 60 days from closing dependent upon Agreement) 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.
The Registrant has not paid any "periodic amounts" (notwithstanding
delays in anticipated effective date) nor has any demand for payment been made
upon the Registrant. 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 January 21, 2000 if
all of the Convertible Debentures (issued from August 1998 to December 13, 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 January 21, 2000, the Registrant would be required to issue 2,388,480 shares
of Common Stock (inclusive of shares which may be issued in exchange for
interest earned through mandatory conversion date).
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
-92-
<PAGE>
capital stock of the Registrant, are based, with respect to the Convertible
Debentures. See "Selling Holders" 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 was quoted on the NASDAQ SmallCap Market ("NASDAQ")
under the symbol "SRMI" until October 26, 1998 delisting. See also risk factor
entitled "Delisting Due to Non-Compliance With Certain NASDAQ Standards". 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 January 21, 2000, the last reported sale price of the Common Stock on
Electronic Over-the-Counter Bulletin Board was $8.75 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.
Reference is herewith made to risk factor entitled "Potential Adverse
Effect Upon Stock Price as a Result of Registration of Significant Number of
Shares .." and in particular to the chart which is a part thereof. Reference is
also made to risk factor entitled "Past History of Debt (Debenture) Fund Raising
to Retire Existing Indebtedness" which indicates Company's need to raise funds
partially to retire certain existing debenture indebtedness.
See also "Restrictive Shares Being Registered Pursuant to Contractual
Agreements" with respect to registration of an aggregate of 81,864 shares of
Company common stock.
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 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 (which while currently appears unlikely cannot be discounted), 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.
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.
-93-
<PAGE>
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 years ended June 30, 1999 and June 30,1998 included herein
have been included in reliance upon the report of Feldman Sherb Horowitz & 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.
INTERIM FINANCIAL STATEMENTS
The information for the interim period ended September 30, 1999 is
unaudited but includes all adjustments considered necessary for a fair
presentation of the results.
-94-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statements for Fiscal Years Ended
June 30, 1999, 1998 and 1997
Independent Auditors' Reports ................................ F-1 - F-3
Consolidated Balance Sheets .................................. F-4
Consolidated Statements of Operations ........................ F-6
Consolidated Statements of Cash Flows ........................ F-7
Consolidated Statements of Stockholders' Equity .............. F-8
Notes to Consolidated Financial Statements ................... F-9 - F-25
Unaudited Financial Statements for Three Months Ended
September 30, 1999 and 1998 ....................... F-26 - F-30
-95-
<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 sheets of Swissray
International, Inc. and subsidiaries as of June 30, 1999 and 1998, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the 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, 1999 and 1998, and the results of its
operations, changes in stockholders' equity (deficit) and cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
(Formerly Feldman Sherb Ehrlich & Co., P.C.)
Certified Public Accountants
New York, New York
August 6, 1999
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 opinon, 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 misstatements. 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 statements 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 farily, 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
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 obtian reasonable assurance about whether the
financial statements are free of material misstatements. 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 preparation. 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, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
------------------------------
1999 1998
------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,281,297 $ 1,281,552
Accounts receivable, net of allowance for doubtful
accounts of $219,993 and $32,356 2,448,879 2,584,651
Inventories 7,332,401 7,701,145
Prepaid expenses and sundry receivables 866,804 1,501,909
------------------------------
TOTAL CURRENT ASSETS 11,929,381 13,069,257
------------------------------
PROPERTY AND EQUIPMENT 6,283,040 6,010,378
------------------------------
OTHER ASSETS
Loan receivable 15,948 20,005
Licensing agreement 3,104,109 3,600,766
Patents and trademarks 199,906 230,614
Software development costs 347,762 455,318
Security deposits 28,035 38,280
Note receivable - net of allowance of $544,376 and $30,733 --- 513,643
Goodwill 1,603,007 1,796,336
Debt issuance costs on convertible --- 180,000
------------------------------
TOTAL OTHER ASSETS 5,298,768 6,834,962
------------------------------
TOTAL ASSETS $23,511,189 $25,914,597
==============================
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL
CONSOLIDATED BALANCE SHEET (Continued)
JUNE 30, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
------------------------------
1999 1998
------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 247,028 $ 233,746
Notes payable - banks 3,667,159 3,551,091
Notes payable - short-term 1,700,000 ---
Loan payable 126,006 125,029
Accounts payable 5,422,321 5,030,449
Accrued expenses 2,003,844 2,365,450
Restructuring 500,000 500,000
Customer deposits 278,507 176,583
Due to stockholders and officers --- 2,206
------------------------------
TOTAL CURRENT LIABILITIES 13,944,865 11,984,554
------------------------------
CONVERTIBLE DEBENTURES, net of conversion benefit 15,305,852 7,330,642
------------------------------
LONG-TERM DEBT, less current maturities 195,095 440,674
COMMON STOCK SUBJECT TO PUT 1,819,985 1,819,985
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 140,062 41,426
Additional paid-in capital 65,174,013 58,074,793
Treasury stock (540,000) ---
Deferred compensation (707,222) ---
Accumulated deficit (68,213,741) (50,481,713)
Accumulated other comprehensive loss (1,787,735) (1,475,779)
Common stock subject to put (1,819,985) (1,819,985)
------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (7,754,608) 4,338,742
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,511,189 $ 25,914,597
==============================
</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, 1999, 1998 and 1997
<TABLE>
<CAPTION>
----------------------------------------------------
1999 1998 1997
(Restated) (Restated)
----------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 17,295,882 $ 22,892,978 $ 13,151,701
COST OF SALES 13,529,301 18,081,786 8,445,414
----------------------------------------------------
GROSS PROFIT 3,766,301 4,811,192 4,706,287
----------------------------------------------------
OPERATING EXPENSES
Officers and directors compensation 1,586,293 569,816 1,816,879
Salaries 3,784,305 4,168,540 2,059,396
Selling 3,286,813 3,740,391 1,873,389
Research and development 1,808,107 3,542,149 5,786,158
General and administrative 2,554,867 2,612,262 2,879,257
Restructuring cost --- 500,000 ---
Other operating expenses 1,066,039 1,735,877 1,645,800
Bad debts 706,877 133,196 619,160
Depreciation and amortization 1,273,916 1,745,498 770,294
----------------------------------------------------
TOTAL OPERATING EXPENSES 16,067,217 18,747,729 17,450,333
----------------------------------------------------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND INCOME TAXES (12,300,636) (13,936,537) (12,744,046)
Other income (expenses) 40,385 (281,227) 318,763
Interest expense (4,638,928) (8,590,268) (762,168)
----------------------------------------------------
OTHER EXPENSES (4,598,543) (8,871,495) (443,405)
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS (16,899,179) (22,808,032) (13,187,451)
INCOME TAX PROVISION --- --- 110,223
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS (16,899,179) (22,808,032) (13,297,674)
Extraordinary income (expenses) (832,849) 304,923 (384,514)
----------------------------------------------------
NET LOSS $(17,732,028) $(22,503,109) $(13,685,188)
====================================================
LOSS PER COMMON SHARE BASIC
Loss from continuing operations (2.59) (8.48) (8.41)
Extraordinary items (0.13) 0.11 (0.24)
----------------------------------------------------
NET LOSS (2.72) (8.37) (8.65)
====================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,525,423 2,690,695 1,581,757
============ ========= =========
</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, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
(Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $(17,732,028) $(22,503,109) $(13,685,188)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization 1,327,395 1,874,206 770,294
Provision for bad debts 931,146 (38,803) 552,725
Write-off of affiliate receivable --- --- 166,384
Common stock and stock options issued for services 1,477,203 --- 2,309,435
Issuance of common stock in lieu of interest payments 128,107 449,376 132,950
Interest expense on Debt issuance cost and
conversion benefit 2,778,006 7,905,225 511,125
Interest expense on option value per Black Scholes 91,763 --- ---
Early extinguishment of debt (gain) 832,849 (304,923) ---
Deferred compensation (707,222) --- ---
(Increase) decrease in operating assets:
Accounts receivable (51,866) 2,887,427 (1,857,662)
Accounts receivable - others --- --- 31,533
Accounts receivable - long-term --- 163,680 283,603
Inventories 368,744 (3,790,038) (998,271)
Prepaid expenses and sundry receivables 635,106 434 229 (860,457)
Increase (decrease) in operating liabilities:
Accounts payable 391,873 (306,300) 1,601,074
Accounts payable-affiliates --- --- (1,541)
Accrued expenses (361,606) 1,463,512 266,245
Customers deposits 101,924 6,147 92,763
----------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (9,788,606) (11,759,371) (10,684,988)
----------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment (692,954) (2,849,205) (3,431,375)
Capitalized computer software (1,518) (225,174) (352,036)
Patents and trademarks --- (52,386) (12,925)
Goodwill --- (802,107) (299,837)
Asset purchase net of cash received --- (591,108) ---
Increase in notes receivable (199,132) --- ---
Collection of note receivable --- --- 448,857
Security deposits 10,245 5,448 (23,776)
(Repayment of) loan receivable 4,056 (2,608) 2,896
----------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (879,303) (4,517,140) (3,668,196)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 20,191,413 10,342,060 9,198,821
Proceeds from long-term borrowings --- --- 248,987
Proceeds related to debentures not funded (227,273) --- ---
Principal payment of short-term borrowings (11,268,343) (3,852,075) (2,093,074)
Principal payment of long-term borrowings (245,580) (21,748) (442,681)
Principal payment of long-term borrowings with stock --- (62,267) ---
Issuance of common stock for cash 3,160,396 8,461,262 7,753,222
Purchase of treasury stock (540,000) --- ---
Repayment from (payment to) stockholders and officers (2,207) (68,032) 87,653
----------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 11,068,406 14,779,200 14,752,928
----------------------------------------------------
EFFECT OF EXCHANGE RATE ON CASH (400,752) (332,444) (561,122)
----------------------------------------------------
NET INCREASE (DECREASE) IN CASH (255) (1,809,755) (161,378)
CASH AND CASH EQUIVALENT - beginning of period 1,281,552 3,091,307 3,252,685
----------------------------------------------------
CASH AND CASH EQUIVALENTS - end of period $ 1,281,297 $ 1,281,552 $ 3,091,307
====================================================
</TABLE>
F-7
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Cash paid for interest $ 462,997 $ 161,093 $ 122,427
Cash paid for taxes --- --- 56,562
DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Stock options, warrants and common stock issued for services 2,218,163 --- 2,287,935
Shares issued in lieu of interest paymnets 126,107 449,376 132,950
Stock issued for acquisition --- 1,499,997 120,000
Beneficial conversion feature recorded as additional paid-in
capital 1,633,164 5,738,149 1,000,000
</TABLE>
F-8
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CONSOLITATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Common
Additional Stock
Paid-in to be
Common Stock Capital issued Treasury
Shares Amount (Restated) (Restated) ) Stock
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - July 1, 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 -- --
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- -- --
Issuance of common stock for cash 3,861,287 38,613 3,121,784 -- --
Stock options exercised for services 1,000 10 7,290 -- --
Shares issued for services 3,801,500 38,015 1,247,110 -- --
Issuance of common stock in lieu of interest payment 199,830 1,998 126,109 -- --
Beneficial conversion feature of convertible debentures -- -- 1,633,164 -- --
Shares issued to officers for services 2,000,000 20,000 872,000 -- --
Treasury stock - at cost -- -- -- -- (540,000)
Interest expense on option value per Black Scholes -- -- 91,763 -- --
----------------------------------------------------------------------
BALANCE - JUNE 30, 1999 14,006,239 $ 140,062 $ 65,174,013 $ -- $(540,000)
======================================================================
F-9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated Other
Deficit Deferred Comprehensive Common Stock Total
(Restated) Compensation Loss Subject to Put (Restated)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - July 1, 1996 $(14,293,416) $ -- $ (836,047) $ -- $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
COMPREHENSIVE LOSS:
Net loss of the year (17,732,028) -- -- -- (17,732,028)
Foreign currency translation losses net of taxes $ -0- -- -- (311,956) -- (311,956)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- -- (18,043,984)
--------------
Issuance of common stock for cash -- -- -- -- 3,160,397
Stock options exercised for services -- -- -- -- 7,300
Shares issued for services -- (707,222) -- -- 577,903
Issuance of common stock in lieu of interest payment -- -- -- -- 128,107
Beneficial conversion feature of convertible debentures -- -- -- -- 1,633,164
Shares issued to officers for services -- -- -- -- 892,000
Treasury stock - at cost -- -- -- -- (540,000)
Interest expense on option value per Black Scholes -- -- -- -- 91,763
---------------------------------------------------------------------
BALANCE - JUNE 30, 1999 $(68,213,741) $(707,222) $(1,787,735) $(1,819,985) $ (7,754,608)
=====================================================================
</TABLE>
F-10
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
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 of DMS
Industries, Inc. and acquired all of the outstanding stock 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 conducted
principally through its wholly owned subsidiaries.
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 an equity
method and have operated at a loss in excess of equity are carried at a zero
value.
BUSINESS ACQUISITION
On April 1, 1997, the Company 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 for under the purchase method of accounting. 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 this transaction, 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.
In connection with the abovementioned acquisitions, the Company has recorded put
options totaling $1,819,985. Such amount is excluded from permanent equity. As
of June 30, 1999, both options were exercised and subject to dispute. (See
Litigation footnote)
REVENUE AND INCOME RECOGNITION POLICIES
Revenues from the sale of products are 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
affect 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-11
<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") resulting
from the acquisition of SSG 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 debt, 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.
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
F-12
<PAGE>
Company amortizes capitalized software development costs over 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, 1999,
1998 and 1997 were $ 1,452,309, $ 1,737,935, and $ 781,189, 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 as their effect would be anti-dilutive.
ACCOUNTING FOR STOCK OPTIONS
The Company adopted Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation". SFAS 123 encourages the use of
a fair-value-based method of accounting for stock-based awards under which the
fair value of stock options is determined on the date of grant and expensed over
the vesting period. Under SFAS 123, companies may, however, measure compensation
costs for those plans using the method prescribed by Accounting Principles Board
Opinion No. 25, ("APB No.25"), "Accounting for Stock Issued to Employees."
Companies that apply APB No. 25 are required to include pro forma disclosures of
net earnings and earnings per share as if the fair-value-based method of
accounting had been applied. The Company elected to account for such plans under
the provisions of APB No. 25.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial statements to
conform to the June 30, 1999 presentation.
F-13
<PAGE>
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 PRONOUNCEMENTS
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.
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. The $513,643 was written off during
the year ended June 30, 1999..
NOTE 3 - INVENTORIES
Inventories are summarized by major classification as follows:
<TABLE>
<CAPTION>
June 30,
---------------------------------------------
1999 1998
------------------- --------------------
<S> <C> <C>
Raw materials, parts and supplies $ 5,558,330 $ 7,047,001
Work in process 1,048,197 160,064
Finished goods 725,874 494,080
------------------- --------------------
$ 7,332,401 $ 7,701,145
=================== ====================
</TABLE>
NOTE 4 - PREPAID EXPENSES AND SUNDRY RECEIVABLES
Prepaid expenses and sundry receivables consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Prepaid expenses, deposits and advance payments $ 229,236 $ 616,183
Insurance claim for fire damage 389,220 165,655
Prepaid and refundable taxes 240,368 708,246
Employee loans 7,980 11,825
-------------- ---------------
$ 866,804 $ 1,501,909
============== ===============
</TABLE>
F-14
<PAGE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1999 1998
----------------- ----------------
<S> <C> <C>
Land and building $ 5,501,853 $ 4,956,328
Equipment 1,448,961 1,305,092
Office furniture and equipment 333,596 330,035
----------------- ----------------
7,284,410 6,591,455
Less: Accumulated depreciation and amortization 1,001,370 581,077
----------------- ----------------
$ 6,283,040 $ 6,010,378
================= ================
</TABLE>
Depreciation and amortization expense, for property and equipment, for the years
ended June 30, 1999, 1998 and 1997 were $ 547,693, $1,077,074 and $233,040
respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible Assets at June 30, 1999 and 1998 consisted of the following
<TABLE>
<CAPTION>
June 30,
---------------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Excess of cost over fair value of net
assets acquired $ 1,933,275 $ 1,933,275
Licensing 4,966,575 4,966,575
Software development cost 578,729 577,210
Patents and Trademarks 313,330 313,330
Other -- 8,385
------------------- -----------------
7,791,909 7,798,775
Less: Accumulated amortization 2,537,125 1,715,741
------------------- -----------------
$ 5,254,784 $ 6,083,034
=================== =================
</TABLE>
Amortization expense, for Intangible Assets, for the years ended June 30, 1999,
1998 and 1997 were $ 830,194, $ 1,227,719 and $ 537,254, respectively.
NOTE 7 - 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. 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 using 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.
F-15
<PAGE>
NOTE 8 - 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
letters of credit, both with a commission of 15% per $ 1,000,000, quarterly
while outstanding. There were $ 1,052,906 in outstanding guarantees and $ -0- in
letter of credits as of June 30, 1999. The Company also negotiated a fixed line
of credit for up to $2,630,000 with an agreed repayment of $65,750 per 180 days
first time applicable as of June 30, 1999. All lines of credit are based on the
Exchange rate in effect on June 30, 1999.
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1999 1998
------------- -------------------
<S> <C> <C>
Migros Bank revolving line of credit, due on demand,with interest at 4.75% per
annum, collateralized by certain accounts receivable, and a cash deposit at
Migros Bank as of June 30, 1999 of $485,367 $ 798,730 $ 408,786
Migros Bank, on demand with six week notice, with interest as of June 30, 1999
and 1998 at 3.7/8% and 4% per annum, collateralized by land and building 2,529,930 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 accounts
receivable. Cash balances on deposit at Union Bank of Switzerland at June 30,
1999 and 1998 were $332,812 and $627,625, respectively 338,499 512,305
------------- -------------------
$ 3,667,159 $ 3,551,091
============= ===================
</TABLE>
NOTE 9 - LOAN PAYABLE
The Company has negotiated a 5% demand loan from a private foundation fund. The
loan balance payable at June 30, 1999 and 1998 was $126,006 and $125,029
respectively.
NOTE 10 - SHARES ISSUED FOR COMPENSATION
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
F-16
<PAGE>
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 Company on July 22, 1997. In June 1999 the
Company incurred additional compensation to the President of the Company of
2,000,000 fully vested, nonforfeitable shares with a fair value of $892,000.
The compensation was in consideration of the President's agreement to extinguish
his rights contained in his employment agreement which entitled him to a 25%
bonus of the Company's earnings (as defined).
In 1999 the Company issued 3,800,000 fully vested, nonforfeitable shares of
common stock with a fair value of $1,284,000 to consultants for services to be
rendered over a term of one year. Such amount has been deferred and is being
amortized over the term of the consulting agreements.
NOTE 11 - CONVERTIBLE DEBENTURES
Convertible debentures consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
Convertible debenture dated December 11, 1997. The debenture was converted
into 327,101 shares in Fiscal 1999. $ - $ 145,969
Convertible debenture dated March 14, 1998. A total of $2,500,000 was converted
into 2,482,656 shares in Fiscal 1999. The remaining balance of $3,000,000 was
refinanced. (See August 31, 1998 debenture) - 5,500,000
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 2,000,000
Convertible debenture of $6,143,849 dated August 31, 1988 and due August
31, 2000 with interest of 5% per annum. The debentures are convertible into
common shares at a price equal to the lesser of eighty-two (82%) of the average
closing bid price for the ten trading days preceding the date of the conversion.
All debentures are convertible at the earlier of a registration effective
date or March 1, 1998. Any debenture not so converted is subject to mandatory
conversion on August 31, 2000. The company at its sole direction can redeem the
debenture at 115% of the face amount up to the fourth month, at 120% within the
fifth and sixth month and at 125% after the sixth month following the closing
date. $514.428 of the balance was converted into 1,051,529 shares in Fiscal 1999
. Debt issuance cost was $311,000, beneficial conversion feature was $-0-. 5,629,421 -
F-17
<PAGE>
Convertible debenture including $ 540,000 repurchase of stock dated October 6,
1988 and due October 6, 2000 with interest of 5% per annum.The debentures are
convertible into common shares at a price equal to the lesser of eighty-two
(82%) of the average closing bid price for the ten trading days preceding the
date of the conversion. All debentures are convertible at the earlier of
a registration effective date or October 6, 1998. Any debenture not so
converted is subject to mandatory conversion on October 6, 2000. The Company
at its sole direction can redeem the debenture at 115% of the face amount up to
the fourth month, at 120% within the fifth and sixth month and at 125% after the
sixth month following the closing date. Debt issuance cost was $300,000,
beneficial conversion feature was $53,112. 2,940,000 -
Convertible debenture dated January 29, 1999 and due January 29, 2001 with
interest of 3% per each 30 days for the first ninety days, 3.5% per each 30 days
for the ninety-first to the one hundred-twentieth day and 4% per each 30 days
from the hundred-twenty-first day until the earlier of conversion or redemption
The debentures are convertible into common shares at a price equal to the lesser
of eighty-two (82%) of the average closing bid price for the ten trading days
preceding the date of the conversion. All debentures are convertible at the
earlier of a registration effective date or January 29, 1999. Any debenture
not so converted is subject to mandatory conversion on January 29, 2001. The
Company at its sole direction can redeem the debentures at any time. Debt
issuance cost was $150,000, beneficial conversion feature was $-0-. 1,170,000 -
Convertible debenture dated May 13, 1999 and due May 13, 2001 with interest of
5% per annum. The debentures are convertible into common shares at a price
equal to the lesser of eighty (80%) of the average closing bid price for the ten
trading days preceding the date of the conversion. All debentures are
convertible at the earlier of a registration effective date or May 13, 1999.
Any debenture not so converted is subject to mandatory conversion on May
13, 2001. The company at its sole direction can redeem the debenture at 115%
of the face amount up to the fourth month, at 120% within the fifth and sixth
month and at 125% after the sixth month following the closing date. Debt
issuance cost was $80,000, interest rollover was $39,600, beneficial conversion
feature was $735,025. 1,119,600 -
Convertible debenture dated May 31, 1999 and due May 31, 2001 with interest of
5% per annum. The debentures are convertible into common shares at a price
equal to the lesser of eighty (80%) of the average closing bid price for the ten
trading days preceding the date of the conversion. All debentures are
convertible at the earlier of a registration effective date or May 31, 1999.
Any debenture not so converted is subject to mandatory conversion on May
31, 2001. The company at its sole direction can redeem the debenture at 115%
of the face amount up to the fourth month, at 120% within the fifth and sixth
month and at 125% after the sixth month following the closing date.Debt issuance
cost was $110,000, interest rollover was $22,200, beneficial conversion feature
was $140,049. 1,132,200 -
Convertible debenture dated June 26, 1999 and due June 26, 2001 with interest of
5% per annum. The debentures are convertible into common shares at a price
equal to the lesser of eighty (80%) of the average closing bid price for the ten
trading days preceding the date of the conversion. All debentures are
convertible at the earlier of a registration effective date or June 26, 1999.
Any debenture not so converted is subject to mandatory conversion on June
26, 2001. The company at its sole direction can redeem the debenture at 115%
of the face amount up to the fourth month, at 120% within the fifth and sixth
month and at 125% after the sixth month following the closing date.Debt issuance
cost was $50,000, interest rollover was $11,000, beneficial conversion feature
was $281,005. 561,000 -
F-18
<PAGE>
Convertible debenture dated May 5, May 24 and June 10, 1999 and due May 5, May
24 and June 10, 2001, respectively with interest of 5% 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 trading days preceding the date of the
conversion. The investor shall not be allowed to convert any portion of the
Debentures for 120 days from the Closing date, unless the bid price is greater
than $5.50. Every 30-day period after the Closing date, the investor shall
be allowed to convert and sell based upon if the bid price is over $1.50 then
15% of the original face amount can be converted, if the bid price is over
$7.50 then 20% of the original face amount can be converted. No conversion
can be made for 300 days if the bid price is below $1.50 All debentures
are convertible at the earlier of a registration effective date or May 5, May
24 and June 10, 1999, respectively. Any debenture not so converted is subject
to mandatory conversion on May 5, May 24 and June 10, 2001, respectively.
The company at its sole direction can redeem the debenture at 120% of the face
amount including interest. Debt issuance cost was $100,000, beneficial
conversion feature was $423,973. 850,000 -
----------------- ---------------
15,402,221 7,645,969
Less: discount due to beneficial conversion features, net of
accumulated amortization of $327,604 and $310,559
respectively (96,369) (315,327)
----------------- ---------------
$ 15,305,852 $ 7,330,642
================= ===============
</TABLE>
The Company is currently in violation of certain covenants in their debenture
agreements. Such covenants have been waived by the holders.
NOTE 12 - NOTES PAYABLE - SHORT-TERM
Notes payable - short-term consists of the following
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------
1999 1998
-------------------- ---------------------
<S> <C> <C>
Promissory note, dated June 11, 1999 $654,000,
due September 9, 1999, collateralized by inventory $ 600,000 $ --
Promissory note, dated April 1999, currently in default,
personally guaranteed by the Company's president and
collateralized by 428,259 shares owned by the Company's
president. Subsequent to June 30, 1999, the collateral
was transferred to the lenders. The Company agreed to
issue the president 535,324 shares to replace the
collateral shares. 1,100,000 --
-------------------- ---------------------
$ 1,700,000 $ --
==================== =====================
</TABLE>
F-19
<PAGE>
NOTE 13 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------
1999 1998
-------------------- ---------------------
<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 $ 122,175 $ 153,603
Note payable - Union Bank of Switzerland, related
to the acquisition of equipment sold to a customer,
in monthly installments of $12,589 with imputed interest at
6.0% per annum, maturing on September 30, 2000 188,907 335,062
Capitalized leases related to the acquisition of
various computer and office equipment in payable
monthly installments over periods through 2001,
with interest imputed at rates ranging from 9.1% to 28.3% 131,041 185,755
-------------------- ---------------------
442,123 674,420
Less: Current portion (247,028) (233,746)
-------------------- ---------------------
$ 195,095 $ 440,674
==================== =====================
</TABLE>
The aggregate long-term debt principal payment are as follows:
Year Ending June 30,
2000 $ 247,028
2001 144,578
2002 40,006
2003 10,511
NOTE 14 - 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.
Preferred Stock
In July 1999, the Company amended its Certificate of Incorporation to authorized
the issuance of 1,000,000 shares of preferred stock, $.01 par value per share.
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 1999
and 1997 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, 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
----------------------------------------
As Pro
Reported Forma
------------------- -------------------
<S> <C> <C>
Nel loss (in thousands) ($13,685) ($13,959)
Basic and diluted net loss per share ($8.65) ($8.82)
</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 in 1997; dividend yield 0%, expected volatility
61.6%, risk-free interest rate 6.25%, expected lives in years 1%.
The weighted average fair value of stock options granted during the year ended
June 30, 1997 was $22.80. No employee stock options were granted in fiscal 1999
and 1998.
F-20
<PAGE>
A summary of the status of the Stock Option Plans at June 30, 1999, 1998 and
1997 and the changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ------------------------------ ----------------------------
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 180,000 $23.40 196,900 $23.40 133,500 $25.20
of year
Granted 15,500 $.44 - $0.00 $17.80
79,500
Exercised (1,000) $7.30 (16,900) $7.30 $0.00
(16,100)
-------------- --------------- -------------- -------------- -------------- ------------
Outstanding
at end of year 194,500 $24.30 180,000 $24.30 196,900 $23.40
============== =============== == ============== ============== ==== ============== ============
Exercisable at
end of year 194,500 $24.30 180,000 $24.30 196,900 $23.40
============== =============== == ============== ============== ==== ============== ============
</TABLE>
The following table summarizes information about stock options under the Stock
Option Plans at June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
----------------------------------------------------------------------------------
Weighted Average
Number Remaining Contractual Weighted Average
Range of Exercise Pr Outstanding Life Exercise Price
- -------------------------------- ----------------- --------------------------- -----------------------
<S> <C> <C> <C>
$.01 - $.44 15,500 9.5 $0.44
$7.30 - $10.00 18,000 8.4 $8.00
$20.00 - $40.00 127,500 7.8 $22.10
$47.50 - $65.00 33,500 7.5 $58.70
-----------------
194,500
=================
</TABLE>
Stock Warrants
In Fiscal 1999, the Company issued 462,500 warrants. The Company recognized
interest cost for the warrants issued of $92,000. Such value was determined
using the Black-Scholes method. The following table summarized information about
stock warrants at June 30, 1999:
<TABLE>
<CAPTION>
Warrants Outstanding and Exercisable
-- ------------------------------------------------------------------------------------------
Range of Exercise Price Number Outstanding Remaining Contractual Life Average Exercise Price
- ----------------------------- ------------------------ -------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
$.375 - $9.38 462,500 4.5 $.96
</TABLE>
NOTE 15 - 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, 1999, 1998 and 1997, were $ 509,959, $347,854 and $274,009,
respectively.
F-21
<PAGE>
NOTE 16 - OTHER INCOME (EXPENSES)
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1999 1998 1997
------------------- ------------------ ---------------
<S> <C> <C> <C>
Interest income $60 $58,902 $68,950
Interest income-stockholder and officer - - 4,351
Foreign currency income (9,097) (87,148) 484,846
Miscellaneous income 49,422 60,648 6,833
Loss from investments - - (246,217)
Loss on sale of certain asset and liabilities - (313,629) -
------------------- ------------------ ---------------
Total other income (expenses) $40,385 ($281,227) $318,763
=================== ================== ===============
</TABLE>
NOTE 17 - INCOME TAXES
Deferred income tax assets as of June 30, 1999 of $12,500,000 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,
1999 1998 1997
------------------ ----------------- -----------------
<S> <C> <C> <C>
Statutory federal income tax (benefit) $ (5,600,000) $ (7,754,000) $ (4,101,913)
Foreign income tax (benefit) in excess
of domestic rate 377,000 543,000 509,203
Benefit not recognized on operating 3,693,000 5,111,000 2,816,057
loss
Permanent and other differences 1,530,000 2,100,000 886,886
------------------ ----------------- -----------------
$ - $ - $ 110,233
================== ================= =================
</TABLE>
Net operating loss carryforwards at June 30, 1999 were approximately as follows:
United States (expiring through June 30, 2014) $ 21,000,000
Switzerland (expiring through June 30, 2009) 21,000,000
-------------------
$ 42,000,000
===================
F-22
<PAGE>
NOTE 18 - EXTRAORDINARY ITEMS
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-.
In Fiscal 1999 the Company recognized a loss from early extinguishment of debt
NOTE 19 SIGNIFICANT CUSTOMER AND CONCENTRATION OF CREDIT RISK
The Company sells its products to various customers primarily in Europe and the
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, 1999. 1998 and 1997 there were sales to
customers that exceeded 10% of net consolidated sales. Sales to these customers
were: 1999 customer A, $9,253,480 (54%), 1998 customer A $ 7,647,354 (33%),
1997 customer A, $1,899,084 (14%) customer B $2,389,613 (18%).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, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- ----------------- ----------------
<S> <C> <C> <C>
United States $ 4,026,931 $ 9,127,569 $ 2,000,608
Switzerland 12,625,381 12,851,115 2,184,161
Germany 643,570 914,294 1,393,072
Other export sales - - 7,573,860
==================== ================= ================
$ 17,295,882 $ 22,892,978 $ 13,151,701
==================== ================= ================
</TABLE>
The following summarizes identifiable assets by geographic area:
<TABLE>
<CAPTION>
1999 1998
--------------------- -----------------
<S> <C> <C>
United States $ 7,522,543 $ 8,075,151
Switzerland 16,007,209 17,454,379
Germany 231,437 385,067
--------------------- -----------------
$ 23,763,188 $ 25,914,597
===================== =================
</TABLE>
F-23
<PAGE>
The following summarizes operating losses before provision for income tax:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------- -------------------
<S> <C> <C> <C>
United States $ (10,685,663) $ (13,962,842) $ (175,254)
Switzerland (5,392,436) (8,803,842) (12,678,800)
Germany (243,317) (42,184) (333,397)
------------------ ------------------- -------------------
$ (16,321,416) $ (22,808,868) $ (13,187,451)
================== =================== ===================
</TABLE>
NOTE 20 - 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, 1999, 1998 and 1997 was
325,000, $ 324,726 and $ 297,926 respectively. Future minimum annual lease
payments, based on the exchange rate in effect on June 30, 1999, under the
facilities lease agreements are as follows: 2000 $173,549, 2001 $162,526, 2002
$166,995, 2003 $137,994, Thereafter $0.
The Company has employment agreements with three of its executives. Minimum
compensation under these agreements are as follows:
Year Ended
June 30, 2000 $ 382,321
June 30, 2001 299,326
June 30, 2002 202,498
June 30, 2003 109,037
--------------------
$ $993,182
====================
NOTE 21 - LITIGATION
An arbitrator awarded judgement in favor of SSG in February of 1999, which order
was confirmed by the Supreme Court of the State of NY on July 8, 1999. The
judgement of $1,500,000 has been recorded in the financial statements and is
included in common stock subject to put.
On or about July 1, 1999 an action was commenced in the Supreme Cout, State of
New York, County of New York entitled J. Douglas Maxwell ("Maxwell") against the
Company, whereby Maxwell is seeking judgement in the sum of $380,000 based upon
his interpretation of various terms and conditions contained in an Exchange
Agreement between the parties dated July 22, 1996 and a subsequent Mutual
Release and Settlement Agreement between the parties dated June 1, 1998.
Swissray has denied the material allegations of Maxwell's complaint and has
asserted three affirmative defenses and two separate counteclaims seeking
(amongst other matters) dismissal of the complaint and and recision of the
settlement agreement. It is Swissray's management's intention to contest this
matter vigorously. The $380,000 has been recorded in the financial statements
and is included in common stock subject to put.
NOTE 22 - 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.
F-24
<PAGE>
NOTE 23 - 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
were accounted for as purchases. 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.
<TABLE>
<CAPTION>
SWISSRAY INTERNATIONAL, INC
UNAUDITED PROFORMA CONDENSED COMBINED CONSOLIDATED STATEMENT
OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND JUNE 30, 1997
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 2,690,695 1,587,757
outstanding
</TABLE>
It was not practicable to include information for SSG for the year ended
June 30, 1997
NOTE 24-VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Balance at
Beginning Charged to End of
of Year Expenses Deductions Year
Allowance for doubtful acounts:
Year ended December 30, 1999 $954,498 $706,877 $897,006 ------
Year ended December 30, 1998 $912,568 $133,169 $141,266 $954,498
Year ended December 30, 1997 $409,843 $619,160 $ 66,465 $962,568
F-25
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
ASSETS
September 30, June 30,
1999 1999
(Unaudited)
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ....................... $ 2,171,949 $ 1,281,297
Accounts receivable, net of allowance for doubtful
accounts of $ 212,166 and $ 219,993 ............. 2,593,626 2,448,879
Inventories ..................................... 7,240,734 7,332,401
Prepaid expenses and sundry receivables ......... 749,797 866,804
----------- -----------
Total Current Assets ............................ 12,756,106 11,929,381
----------- -----------
PROPERTY AND EQUIPMENT .......................... 6,193,048 6,283,040
----------- -----------
OTHER ASSETS
Loan receivable ................................. 16,987 15,948
Licensing agreement ............................. 2,979,945 3,104,109
Patents and trademarks .......................... 192,441 199,906
Software develompent costs ...................... 328,167 347,762
Security deposits ............................... 26,625 28,035
Goodwill ........................................ 1,554,674 1,603,007
TOTAL OTHER ASSETS .............................. 5,098,839 5,548,768
----------- -----------
Total Assets .................................... $24,047,993 $23,511,189
=========== ===========
F 26
<PAGE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt ............ $ 226,726 $ 247,028
Notes payable - banks ........................... 4,060,490 3,667,159
Notes payable - short-term ...................... 2,230,908 1,700,000
Loan payable .................................... 125,590 126,006
Accounts payable ................................ 5,318,943 5,422,321
Accrued expenses ................................ 2,642,437 2,003,844
Restructuring ................................... 500,000 500,000
Customer deposits ............................... 132,986 278,507
----------- -----------
TOTAL CURRENT LIABILITIES ....................... 15,238,080 13,944,865
----------- -----------
Convertible Debentures, net of conversion benefit 15,901,793 15,305,852
----------- -----------
LONG-TERM DEBT, less current maturities ......... 196,310 195,095
----------- -----------
COMMON STOCK SUBJECT TO PUT ..................... 319,985 1,819,985
----------- -----------
STOCKHOLDERS' DEFICIT
Common stock .................................... 159,083 140,062
Additional paid-in capital ...................... 68,776,897 65,174,013
Treasury Stock .................................. (2,040,000) (540,000)
Deferred Compensation ........................... (469,722) (707,222)
Accumulated deficit ............................. (71,967,157) (68,213,741)
Accumulated other comprehensive loss ............ (1,747,291) (1,787,735)
Common stock subject to put ..................... (319,985) (1,819,985)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT ..................... (7,608,175) (7,754,608)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ..... $ 24,047,993 $ 23,511,189
=========== ===========
F 27
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
September 30,
1999 1998
Unaudited Unaudited
------------ ------------
NET SALES ......................... $ 3,879,167 $ 3,656,441
COST OF SALES ..................... 2,978,034 2,836,914
------------ ------------
GROSS PROFIT ...................... 901,133 819,527
------------ ------------
OPERATING EXPENSES
Officers and directors compensation 137,813 155,187
Salaries .......................... 1,022,441 1,085,186
Selling ........................... 603,532 512,799
Research and development .......... 465,232 406,038
General and administrative ........ 222,747 450,640
Other operating expenses .......... 85,548 264,489
Depreciation and amortization ..... 321,881 293,749
------------ ------------
TOTAL OPERATING EXPENSES .......... 2,859,194 3,168,088
------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND EXTRAORDINARY ITEM ......... (1,958,061) (2,348,561)
Other income (expenses) ........... 26,258 (183,367)
Interest expense .................. (1,821,613) (653,896)
------------ ------------
OTHER INCOME (EXPENSES) ........... (1,795,355) (837,263)
------------ ------------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM ....... (3,753,417) (3,185,824)
Extraordinary expense ............. -- (29,667)
------------ ------------
NET LOSS .......................... $ (3,753,417) $ (3,215,491)
============ ============
LOSS PER COMMON SHARE
Loss from continuing operations ... ($ 0.25) ($ 0.70)
Extraordinary items ............... 0.00 (0.01)
------------ ------------
NET LOSS .......................... ($ 0.25) ($ 0.71)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ................ 14,786,198 4,510,201
------------ ------------
F 28
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
1999 1998
Unaudited Unaudited
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITES
Net loss ....................................... $ (3,753,416) $ (3,215,491)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization ................ 332,865 306,906
Provision for bad debts ...................... (7,827) --
Issuance of common stock in lieu of
interest payments ......................... 34,244 587,197
Interest expense on Debt issuance cost and
conversion benefit ......................... 1,511,476 --
Amortization of deferred compensation ........ 237,500
Early extinguishment of debt (gain) ......... -- 29,667
(Increase) decrease in operating assets:
Accounts receivable .......................... (136,921) 222,819
Inventories .................................. 91,666 (814,733)
Prepaid expenses and sundry receivables ...... 117,007 223,577
Increase (decrease) in operating liabilities:
Accounts payable ............................. (103,378) 236,533
Accrued expenses ............................. 638,592 276,803
Customers deposits ........................... (145,520) (154,533)
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES .......... (1,183,712) (2,301,255)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of proberty and equipment ........ (43,585) (201,422)
Capitalized computer software ................ (7,007) --
Security deposits ............................ 1,410 --
(Repayment of) loan receivable ............... (1,039) --
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES .......... (50,221) (201,422)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings .......... 22,305,507 13,582,986
Principal payment of short-term borrowings ... (21,415,142) (11,204,161)
Principal payment of long-term borrowings .... 1,216 (22,399)
Issuance of common stock for cash ............ 2,748,827 1,500,000
Issuance of stock options for cash ........... 6,774 --
Purchase of treasury stock ................... (1,500,000) --
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES .......... 2,147,182 3,856,426
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH ................ (22,597) (376,024)
------------ ------------
NET INCREASE IN CASH .......................... 890,651 977,725
CASH AND CASH EQUIVALENTS - beginning of period 1,281,297 1,281,552
------------ ------------
CASH AND CASH EQUIVALENTS - end of period ...... $ 2,171,949 $ 2,259,277
============ ============
F 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(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, 1999.
(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 September 30, 1999 and the results of operations and
cash flows for the interim period presented. Operating results for the three
months ended September 30, 1999 are not necessarily indicative of the results to
be expected for the full year ending June 30, 2000.
(3)INVENTORIES
Inventories are summarized by major classification as follows:
September 30, June 30,
---------------------------
1999 1999
---------- ----------
Raw materials, parts and supplies $5,202,463 $5,558,330
Work in process 1,294,016 1,048,197
Finished goods 744,255 725,874
---------- ----------
$7,240,734 $7,332,401
========== ==========
Inventories are stated at lower of cost or market, with cost being determined on
the first-in, first-out (FIFO) method. Inventory cost includes
material, labor, and overhead.
(4)Accumulated Other Comprehensive Loss
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income" requires the disclosure of comprehensive income to reflect changes in
equity that result from transactions and economic events that are not with
shareholders. Accumulated other comprehensive loss for the periods presented
represents foreign currency translation items associated with the Company"
German and Switzerland operations. There was no tax expense or tax benefit
associated with the foreign currency translation items.
F 30
<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 ............................................ 5
Risk Factors .................................................. 10
The Company ................................................... 26
Use of Proceeds ............................................... 28
Market Prices and Dividend Policy ............................. 28
Capitalization ................................................ 33
Selected Consolidated Financial Data .......................... 34
Management's Discussion and Analysis Of Financial Condition and
Results of Operations ....................................... 35
Business ...................................................... 49
Management .................................................... 67
Stock Options and Stock Appreciation Rights ................... 74
Stock Options Granted in 1997 ................................. 75
Stock Options Granted in 1998 ................................. 75
Aggregated Option Exercises in Last Fiscal Year and Year-End
Option Values ............................................... 76
Principal Stockholders ........................................ 78
Certain Transactions .......................................... 82
Selling Holders ............................................... 82
Plan of Distribution .......................................... 84
Description of Capital Stock .................................. 86
Legal Matters ................................................. 94
Independent Auditors .......................................... 94
Interim Financial Statements .................................. 94
Index to Consolidated Financial Statements .................... 95
-96-
<PAGE>
SWISSRAY INTERNATIONAL, INC.
7,200,709 SHARES OF
COMMON STOCK
PROSPECTUS
February ____, 2000
-97-
<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 ...................... 85,000.00
LEGAL FEES AND EXPENSES ........................... 195,000.00
TRANSFER AGENT AND REGISTRATION FEES .............. 1,500.00
BLUE SKY FEES AND EXPENSES ........................ 15,000.00
MISCELLANEOUS EXPENSES ............................ 5,000.00
-----------
TOTAL ................................. $ 326,128.93
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
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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 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
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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.
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 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
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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,
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. The placement agent for such convertible debentures was Rolcan
Finance, Ltd. 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
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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. The placement agent for such convertible
debentures was Rolcan Finance, Ltd. 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 legal fees of $35,000 and
placement agent fees of $550,000 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") and the Company has received written
representations from each investor to that effect. The placement agent for such
convertible debentures was Rolcan Finance, Ltd. 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 December 3, 1999 all conversions were completed.
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. The placement
agent for such convertible debentures was Net Financial International, Ltd. 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. All of these debentures have been
converted as of December 3, 1999.
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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. The placement agent for such convertible debentures was
Net Financial International, Ltd. 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 January 21, 2000 an
unconverted balance of $4,980,594 remains outstanding and, accordingly, the
number of shares being registered for the balance of this transaction amounts to
763,575 shares.
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 (717,850 and 747,150 shares
from Dominion Capital Fund, Ltd. and Sovereign Partners LP respectively) 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. There was no placement agent involved in this
financing. 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 January 21, 2000 and, accordingly, the number of shares being registered
for this transaction amounts to 450,732.
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 . The promissory notes (held by Dominion Capital Fund, Ltd.
and Sovereign Partners) were not paid by their due date and the terms of a
Contingent Subscription Agreements, Debentures and Registration Rights
Agreements automatically went into effect with debentures in the principal sum
of $1,119,600 (inclusive of interest on aforesaid promissory notes) bearing
interest at the rate of 5% per annum (payable in stock or cash at the
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Company's option) and being convertible, at any time at 82% of the 10 day
average bid price for the 10 consecutive trading days immediately preceding the
conversion date. 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.
None of these convertible debentures have been converted as of January 21, 2000
and, accordingly, the number of shares being registered for this transaction
amounts to 181,009 shares.
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. The
placement agent for such convertible debentures was Rolcan Finance, Ltd. 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
January 21, 2000 and, accordingly, the number of shares being registered for
this transactions amounts to 189,157.
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 (i.e., Dominion Investment Fund LLC
and Sovereign Partners LP) 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 were May 31, 1999, (c) the potential 60 day extension
date on such promissory notes was July 30, 1999 but such extension right was
never utilized, (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 in all material respects to those described above (in subparagraph
(a) regarding December 1998 transaction) There was no placement agent involved
in this financing. The promissory notes were not paid on their due date and the
terms of the Contingent Subscription Agreements, Debentures and Registration
Rights Agreements automatically went into effect with debentures in the
principal sum of $1,132,200 (inclusive of interest on aforesaid promissory
notes) going into effect. None of these Convertible Debentures have been
converted as of January 21, 2000 and, accordingly the number of shares being
registered for this transaction is 183,046 shares.
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, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $550,000, (c) the initial due date of such
note
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is June 25, 1999, (d) the potential 60 day extension date on such promissory
note was August 23, 1999 but such extension right was never utilized, (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. There was no placement agent involved in this financing. The
promissory notes were not paid on their due date and the terms of the Contingent
Subscription Agreement, Debenture and Registration Rights Agreement
automatically went into effect with debentures in the principal sum of $561,000
(inclusive of interest on aforesaid promissory notes) going into effect. None of
these Convertible Debentures have been converted as of January 21, 2000, and,
accordingly, the number of shares being registered for this transaction amounts
to 90,698 shares.
From May 14, 1999 to June 9, 1999 (in a single financing) the Company
issued a principal aggregate amount of $850,000 of convertible debentures
("Convertible Debenture"), convertible into Common Stock of the Company at a
conversion price of 80% of the average closing bid price for the ten trading
days preceding the date of conversion together with accrued interest of 5%.
After deducing fees directly attributable to such offering the offering the
Company received a net amount of $772,727. 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. There was no placement agent
involved in this financing. 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. 63,098 shares have been already been
issued with regard to this transaction and, accordingly, the number of shares
being registered for the balance of this transaction amounts to 110,000 shares.
On July 9, 1999 the Company entered into a fourth promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the March 2, 1999 promissory note
financing referred to directly above excepting (a) the lender is different, to
wit: Southshore Capital, Ltd., (b) gross proceeds amounted to $1,100,000, (c)
the due date of such note is August 23, 1999 with no right to extend and (d) the
debenture holder did not receive any warrants. 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. There was no placement agent involved in this financing. The
promissory note was not paid on its due date and the terms of the Contingent
Subscription Agreement, Convertible Debenture and Registration Rights Agreement
automatically went into effect with debentures in the principal sum of
$1,148,400 (inclusive of interest on aforesaid promissory note) going into
effect. None of these Convertible Debentures have been converted as of January
21, 2000 and, accordingly, the number of shares being registered for this
transaction amounts to 180,463 shares.
On August 11, 1999 the Company entered into a fifth promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the March 2, 1999 promissory note
financing referred to directly above excepting (a) the lender is different, to
wit: Aberdeen Avenue, LLC, (b) gross proceeds amounted to $1,400,000, (c) the
due date of such
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note is November 11, 1999 with no right to extend and (d) the debenture holder
did not receive any warrants. 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. There was no
placement agent involved in this financing. The terms of the Contingent
Subscription Agreement, Convertible Debenture and Registration Rights Agreement
went into effect on November 11, 1999 with the principal sum of the Convertible
Debenture being $1,526,000. No portion of this Convertible Debenture has been
converted as of January 21, 2000 and, accordingly, the number of shares being
registered for this transaction amounts to 239,800 shares.
In September 1999 and October/November 1999 the Company entered into
two separate transactions whereby in each instance it sold 1,000,000 restrictive
shares of its common stock at $1.00 per share in September 1999 and $1.50 per
share in October/November 1999 and December 1999. In accordance with the terms
of such Subscription Agreements and Registration Rights Agreements all 2,666,667
shares sold are being registered herein.
With respect to each of the above referenced financings, to the extent
required, the Company has filed Forms D with the SEC indicating the manner in
which net proceeds received were utilized. Such Forms D require that distinction
be made for net proceeds utilized as "payments to officers, directors and/or
affiliates" as opposed to "payment to others". In each instance the Forms D, as
filed, indicate "payment to others".
Additional Selling Shareholders
In addition to those Selling Shareholders referred to above, the
following persons and/or firms may be considered to be "Additional Selling
Shareholders".
NAME NO. OF SHARES OR OPTIONS
---- ------------------------
Trianon Opus One Inc. ("Trianon") .... 85,077
Gary B. Wolff ("Wolff") .............. 150,000
Dr. Erwin Zimmerli ("Zimmerli") ...... 100,000
Display Presentations Ltd. ("Display") 65,000
Live Marketing ("Live") .............. 16,864
Trianon owns the number of shares indicated pursuant to terms of
promissory note referred to under "Description of Capital Stock - Promissory
Note", which note contained "piggy-back" registration rights. Both Wolff and
Zimmerli own the number of options indicated with the right to convert same into
shares of common stock (on a one for one basis) while Display and Live were
issued the number of shares alongside their respective names as partial
consideration for services rendered, pursuant to agreements containing certain
"piggy-back" registration rights. The agreements are filed as exhibits to this
Registration Statement and are summarized under the heading entitled
"Restrictive Shares Being Registered Pursuant to Contractual Agreements.
None of the transactions referred to in this Item were conducted by any
underwriter. For each transaction conducted from April 28, 1997 to date, the
identity of the class of persons to whom
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the securities were sold was "Accredit Investors". Those transactions conducted
prior to April 28, 1997 were conducted in accordance with Regulation S, whereby
the identity of the class of persons to whom the securities was sold was "non-US
persons" as defined in Regulation S.
Those sales of unregistered securities referred to herein as having
been conducted with "non-US persons" from May 20, 1995 through March 5, 1997
were conducted in accordance with the exemption afforded by Regulation S Rules
governing offers and sales made outside the United States without registration
under the Securities Act of 1933 while each of those sales of unregistered
securities indicated herein as having been conducted from April 28, 1997 to the
present were conducted in accordance with exemption afforded by Rule 506 of
Regulation D under the Securities Act of 1933.
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
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(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).
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).
3.14 Amendment to Registrant's Certificate of Incorporation, dated July 28,
1999.
5.1 Opinion of Gary B. Wolff, P.C., counsel to the Registrant
(Incorporated by reference to Exhibit 5.1 of Registrant's first
amendment to filing of Form S-1 Registration
II-11
<PAGE>
Statement, Registration No. 333-59829 filed April 27, 1999).
5.1(a) Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
5.1(b) Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
5.1(C) 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).
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 ^ 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
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<PAGE>
Registration Statement, Registration No. 333-38229, filed December 17,
1997). See attached Schedule.
10.8 ^ 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). See attached Schedule.
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).
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 ^ 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). See attached Schedule.
10.16 ^ 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). See attached
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<PAGE>
Schedule.
10.17 ^ 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). See attached Schedule.
10.18 ^ 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). See attached Schedule.
10.19 ^ 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). See attached Schedule.
10.20 ^ 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). See attached Schedule.
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 ^ 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). See attached Schedule.
10.23 ^ 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). See attached Schedule.
10.24 ^ 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). See
attached Schedule.
10.25 This Exhibit Number skipped.
10.26 ^ 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). See attached Schedule.
10.27 ^ Registration Rights Agreement dated June, 1998 (Incorporated by
reference as
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<PAGE>
Exhibit 10.27 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333- 59829 filed July 24, 1998). See
attached Schedule.
10.28 ^ 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). See
attached Schedule.
10.29 ^ Subscription Agreement dated August, 1998 with March 17, 1999
amendment (Incorporated by reference as Exhibit 10.29 to Registrant's
first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998). See attached
Schedule.
10.30 ^ Registration Rights Agreement dated August, 1998 (Incorporated by
reference as Exhibit 10.30 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.31 ^ Debenture dated August, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.31 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration
No. 333-59829 filed April 27, 1998). See attached Schedule.
10.32 ^ Subscription Agreement dated October, 1998 with March 17, 1999
amendment (Incorporated by reference as Exhibit 10.32 to Registrant's
first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998). See attached
Schedule.
10.33 ^ Registration Rights Agreement dated October, 1998 (Incorporated by
reference as Exhibit 10.33 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.34 ^ Debenture dated October, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.34 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration
No. 333-59829 filed April 27, 1998). See attached Schedule.
10.35 ^ Promissory Note dated December, 1998 (Incorporated by reference as
Exhibit 10.35 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.36 ^ Contingent Subscription Agreement dated December, 1998 with March
17, 1999 amendment (Incorporated by reference as Exhibit 10.36 to
Registrant's first amendment to filing of Form S-1 Registration
Statement, Registration No. 333-59829 filed April 27, 1998). See
attached Schedule.
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<PAGE>
10.37 ^ Registration Rights Agreement dated December, 1998 (Incorporated by
reference as Exhibit 10.37 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.38 ^ Debenture dated December, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.38 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration
No. 333-59829 filed April 27, 1998). See attached Schedule.
10.39 ^ Warrant dated December, 1998 (Incorporated by reference as Exhibit
10.39 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.40 ^ Subscription Agreement dated January, 1999 (Incorporated by
reference as Exhibit 10.40 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.41 ^ Registration Rights Agreement dated January, 1999 (Incorporated by
reference as Exhibit 10.41 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.42 ^ Debenture dated January, 1999 (Incorporated by reference as Exhibit
10.42 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.43 ^ Warrant dated January 28, 1999 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.43 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration
No. 333-59829 filed April 27, 1998). See attached Schedule.
10.44 ^ Promissory Note dated March 2, 1999 (Incorporated by reference as
Exhibit 10.44 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.45 ^ Contingent Subscription Agreement dated March 2, 1999 (Incorporated
by reference as Exhibit 10.45 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998). See attached Schedule.
10.46 ^ Registration Rights Agreement dated March 2, 1999 (Incorporated by
reference as Exhibit 10.46 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.47 ^ Debenture dated March 2, 1999 (Incorporated by reference as Exhibit
10.47 to Registrant's first amendment to filing of Form S-1
Registration Statement,
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<PAGE>
Registration No. 333-59829 filed April 27, 1998). See attached
Schedule.
10.48 ^ Warrant dated March 2, 1999 (Incorporated by reference as Exhibit
10.48 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.49 ^ Promissory Note dated March 26, 1999 (Incorporated by reference as
Exhibit 10.49 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.50 ^ Contingent Subscription Agreement dated March 26, 1999 (Incorporated
by reference as Exhibit 10.50 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998). See attached Schedule.
10.51 ^ Registration Rights Agreement dated March 26, 1999 (Incorporated by
reference as Exhibit 10.51 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333- 59829 filed
April 27, 1998). See attached Schedule.
10.52 ^ Debenture dated March 26, 1999 (Incorporated by reference as Exhibit
10.52 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.53 ^ Warrant dated March 26, 1999 (Incorporated by reference as Exhibit
10.53 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27,
1998). See attached Schedule.
10.54 ^ Subscription Agreement dated May , 1999. See attached Schedule.
10.55 ^ Registration Rights Agreement dated May , 1999. See attached
Schedule.
10.56 ^ Debenture dated May , 1999. See attached Schedule.
10.57 ^ Promissory Note dated July 9, 1999. See attached Schedule.
10.58 ^ Security Agreement dated July 9, 1999. See attached Schedule.
10.59 ^ Contingent Subscription Agreement dated July 9, 1999. See attached
Schedule.
10.60 ^ Registration Rights Agreement dated July 9, 1999. See attached
Schedule.
10.61 ^ Debenture dated August 23, 1999. See attached Schedule.
10.62 ^ Promissory Note dated August 11, 1999. See attached Schedule.
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<PAGE>
10.63 Consulting Agreement between Registrant and Liviakis Financial
Communications, Inc. dated March 24, 1999 with exhibit thereto
entitled Voting Trust Agreement.
10.64 Contract between Registrant and Rolcan Finance Ltd. Dated April 14,
1999.
10.65 Master Supplier Agreement between Registrant and Data General
Corporation effective January 20, 1999.
10.66 ^ Authorized Distributor Agreement with Medika Equipos Medicos, Inc.,
exclusive of exhibits thereto *.
10.67 Subscription Agreement dated September 7, 1999. See attached Schedule.
10.68 Registration Rights Agreement dated September 7, 1999. See attached
Schedule.
10.69 ^ Subscription Agreement dated October/November 1999. See attached
Schedule.
10.70 ^ Registration Rights Agreement dated October/November 1999. See
attached Schedule.
10.71 ^ Contingent Subscription Agreement dated August 11, 1999. See
attached Schedule.
10.72 ^ Registration Rights Agreement dated August 11, 1999. See attached
Schedule.
10.73 ^ Debenture dated November 11, 1999. See attached Schedule.
10.74 Agreement with Display Presentations
10.75 Agreement with Live Marketing
10.76 Sales, Marketing and Service Agreement with Hitachi Medical Systems
America Inc. *.
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.
23.1(b) Consent of Bederson & Company LLP.
23.1(c) Consent of Bederson & Company LLP.
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<PAGE>
23.2 Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1a).
23.2(a) Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1b).
23.2(b) Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1b).
23.3 Consent of Feldman Sherb Ehrlich & Co., P.C.
23.3(a) Consent of Feldman Sherb Horowitz & Co., P.C.
23.3(b) Consent of Feldman Sherb Horowitz & Co., P.C.
23.3(c) Consent of Feldman Sherb Horowitz & Co., P.C.
27 FINANCIAL DATA SCHEDULES
* Items marked with asterisk indicate request for confidential treatment.
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;
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) 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,
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<PAGE>
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
(iii) 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.
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<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 February 8, 2000.
SWISSRAY INTERNATIONAL, INC.
By:_______________________
Name: Ruedi G. Laupper
Title: Chairman of the Board of
Directors, President &
Principal 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>
SIGNATURE TITLE DATE
<S> <C> <C>
- ---------------------------------- Chairman of the Board of Dated: Jan. , 2000
Reudi G. Laupper Directors, President &
Principal Executive Officer
- ---------------------------------- Secretary, Treasurer and a Dated: Jan. , 2000
Josef Laupper Director
- ---------------------------------- Principal Financial Officer Dated: Jan. , 2000
Michael Laupper & Controller
- ---------------------------------- Vice President and a Director Dated: Jan. , 2000
Ueli Laupper
- ---------------------------------- Director Dated: Jan. , 2000
Dr. Erwin Zimmerli
- ---------------------------------- Director Dated: Jan. , 2000
Dr. Sc. Dov Maor
</TABLE>
EXHIBIT 5.1 C
February 8, 2000
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 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,
/S/Gary B. Wolff/
Gary B. Wolff, P.C.
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Banque Frank S.A * Aug 15, 1997 Fabio Pellanda
Cefeo Investments Ltd. Aug 12, 1997 J.M. Duffey
Deere Park Capital Management, Inc., Aug 12, 1997 Douglas Gerrard
A Nominee
Elara Ltd. Aug 14, 1997 Geoffrey Tirman
Otato Limited Partnership Aug 13, 1997 Eva Forbes
Thomson Kernaghan & Co. Ltd. Aug 1, 1997 Mark Valentine
* This document has been filed.
<PAGE>
Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 15, 1997,
("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 ET H:
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement, dated as of August 15, 1997, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor 6% Convertible Debentures of the
Company (the "Debentures"), which will be convertible into shares of the common
stock, $.0l 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:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meaning:
(i) "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.
(ii) "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").
(iii) "Registrable Securities" means the Conversion Shares.
<PAGE>
(iv) "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 thirty (30) days after the Closing Date, a
Registration Statement on Form SB-2 covering a sufficient number of shares of
Common Stock for the Initial Investors (or any other available form), but in no
event less than 5,000,000 shares of Common Stock into which the $5,000,000 of
Debentures in the total offering would be convertible. 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 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 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
Form SB-2 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.
(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
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<PAGE>
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 by November 3, 1997 (the
"Initial Date"), then the Company will make payments to the Initial Investor in
such amounts and at such times as shall be determined pursuant to this Section
2(c). The amount to be paid by the Company to the Initial Investor shall be
determined as of each Computation Date, as defined below in this Section 2(c),
and such amount shall be equal to two (2%) percent of the purchase price paid by
the Initial Investor for the Debenture pursuant to the Subscription Agreement
for the period from the Initial Date to the first Computation Date, and two (2%)
percent 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 Company in immediately
available funds within five business days after each Computation Date.
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.
As used in this Section 2(c), the following terms shall have the
following meanings:
"Computation Date" means the date which is the earlier of (a) 35 days
after the Company is notified by the SEC that the Registration Statement may be
declared effective or (b) one hundred twenty (120) days after the Closing Date
and, if the Registration Statement required to be filed by the Company pursuant
to Section 2(a) 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.
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 thirty (30)
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 each 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
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<PAGE>
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
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<PAGE>
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 NASDAQ
Small Cap 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) an appropriate instruction and opinion of such counsel; and
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<PAGE>
(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.
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<PAGE>
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: (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof 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
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<PAGE>
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 or
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to
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<PAGE>
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.
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<PAGE>
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, C/O Gary B. Wolff, Esq., 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 federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. 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
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<PAGE>
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. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.
(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)
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<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:_/s/ Ruedi G. Laupper
Name: Ruedi G. Laupper
Title: President and Chairman of the Board
Banque Franck S.A.
---------------------------------------------
(Name of Initial Investor)
By: /s/ Fabio Pellanda
Name:
Title:Senior Vice-President
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<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Banque Frank S.A * Aug 20, 1997 $ 300,000 Aug 20, 2000 AUG-1997-103
Cefeo Investments Ltd. Aug 18, 1997 $1,000,000 Aug 18, 2000 AUG-1997-105
Deere Park Capital Management, Inc., Aug 18, 1997 $ 500,000 Aug 18, 2000 AUG-1997-101
A Nominee
Elara Ltd. Aug 20, 1997 $ 500,000 Aug 20, 2000 AUG-1997-102
Otato Limited Partnership Aug 18, 1997 $ 250,000 Aug 18, 2000 AUG-1997-104
Thomson Kernaghan & Co. Ltd. Aug 20, 1997 $2,450,000 Aug 20, 2000 AUG-1997-106
</TABLE>
* This document has been filed.
<PAGE>
Exhibit 10.8
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 August 20, 2000
August 20, 1997
$300,000
Number
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay to Banque Frank S.A. or
registered assigns (the "Holder") on August 20, 2000, (the "Maturity Date"), the
principal amount of Three Hundred Thousand Dollars ($300,000) 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 Six Percent (6.0%) 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 5 day closing bid prices, as reported by Nasdaq, or whatever
primary exchange the Company's Common Stock may be traded on, for the 5 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
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to the Holder, or per Holder's instructions, within 8 business days of the date
of conversion. The Debentures are subject to automatic conversion at the end of
three 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 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 of 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 third 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 the Company's receipt of a facsimile or original
of Holder's signed Notice of Conversion and the original Debenture to be
converted, 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, or portion thereof is convertible in accordance with the
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<PAGE> 3
provisions regarding conversion set forth in the conversion notice. 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
Debenture.
(b) Conversion Date. Fifty percent (50%) of the face amount of this
Debenture may be converted at the earlier of the effective date of the
Registration Statement or November 3, 1997. 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 Purchaser's intention to convert the Debenture indicated. An
additional fifty percent (50%) of the face amount of this Debenture, 100%
cumulatively, may be converted thirty days after the earlier of the effective
date of the Registration Statement or December 3, 1997. 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 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 3
business days thereafter. As long as the Debentures to be converted are received
by the Company or its designated attorney within 3 business days after it
receives a facsimile or original of the signed Notice of Conversion, the Company
shall deliver to the Holder, or per the Holder's instructions, the shares of
Common Stock, without restrictive legend or stop transfer instructions, within 8
business days of receipt of the facsimile Conversion Notice.
(c) Common Stock to be Issued Without Restrictive Legend. Upon the
conversion of any Debentures and upon receipt by the Company or its attorney of
a facsimile or original of Holder's signed conversion notice Company shall
instruct Company's transfer agent to issue Stock Certificates without
restrictive legend or stop transfer instructions 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. Company 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 Company.
(d) Conversion Rate. Purchaser is entitled, at its option to convert
fifty percent (50%) of the face amount of this Debenture, plus accrued interest,
at the earlier of the effective date of the Registration Statement or November
3, 1997, at 80% of the 5 day average closing bid price, as reported by Nasdaq,
or whatever primary exchange the Company's Common Stock may be traded on, for
the 5 trading days immediately preceding the applicable Conversion Date (the
"Conversion Price"). Purchaser is entitled, at its option to convert an
additional fifty percent (50%) of the face amount of this Debenture (100%
cumulatively), plus accrued interest, at the earlier of 30 days following the
effective date of the Registration Statement or December 3, 1997, at 80% of the
5 day average closing bid price, as reported by Nasdaq, or whatever primary
exchange the Company's Common Stock may be traded on, for the 5 trading days
immediately preceding the applicable Conversion Date. 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
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<PAGE> 4
down, as the case may be, to the nearest whole share.
The Debentures are subject to a mandatory, 36 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 Company 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 the time period referred to above in Section 3.2(b), the
Company shall deliver a certificate, without stop transfer instructions, 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 the Conversion Date, 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.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
---------------------- ----------------------
<S> <C> <C>
1 $100
2 $200
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
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 pay any amounts incurred under this Section 3.2(g) in
immediately available funds within five (5) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a Holder's
right to pursue actual damages 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 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
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<PAGE> 6
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 3.2(d) at any time after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 36 month conversion period.
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.
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.
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<PAGE> 7
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 August of 1997, to
permit the conversion of 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.
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<PAGE> 8
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 having an aggregate principal amount of not more than $5,000,000
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 attorneys, 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
8
<PAGE> 9
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 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 book 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 to the Company with a
reasonable request to exchange it for an equal principal amount of Debentures or
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 of 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 a 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
9
<PAGE> 10
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 or in the United States District Court for
the Southern District of New York. The Company hereby expressly and irrevocably
submits to the jurisdiction of the Courts of the state of New York and of the
United States District Court for the Southern District of New York for the
purpose of any such litigation
10
<PAGE> 11
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 Borough of Manhattan, City, County and
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 /s/ Ruedi G. Laupper
Name: Ruedi G. Laupper
Title: President and Chairman of the Board
11
<PAGE> 12
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 $______________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated August __, 1997.
Date of Conversion______________________________________________
Applicable Conversion Price_____________________________________
Number of Shares Issuable upon this conversion__________________
Signature_______________________________________________________
[Name]
Address_________________________________________________________
- ----------------------------------------------------------------
Phone_______________________ Fax______________________________
12
<PAGE> 13
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
- -------------------------------------------------------------------------------
(name, address and SSN or EIN of assignee)
Dollars ($ )
- -------------------------------------------------------------------------------
(principal amount of Debenture, $10,000 or integral multiples of $10,000)
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
on face of Debenture)
Signature Guaranteed:
13
Name Dated Signatory
- --------------------------------------- ------------ ---------------
The Isosceles Fund Limited Dec 2, 1997 Water Blum Gentilomo
Otato Limited Partnership * Dec 5, 1997 Eva Forbes
Thomson Kernaghan & Co. Ltd. Nov 26, 1997 Mark Valentine
* This document has been filed
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 5, 1997,
("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 December 5, 1997, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor 8% 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
1
<PAGE> 2
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 thirty (30) calendar days after the Closing Date, an
amendment to the Form S-1 Registration Statement, or a new Registration
Statement if required, covering a sufficient number of shares of Common Stock
for the Initial Investors into which is not more than $3,800,000 of Debentures
in the total offering would be convertible. In the event the amendment is not
filed within thirty (30) 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 30 days following the Closing
Date that the Registration Statement is not filed. The Investor is also granted
additional Piggyback 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 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 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 Form S- 1 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
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<PAGE> 3
Registration Statement no later than thirty (30) 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 by February 20, 1998, (the "Initial
Date"), then the Company will make payments to the Initial Investor in such
amounts and at such times as shall be determined pursuant to this Section 2(c).
The amount to be paid by the Company to the Initial Investor shall be determined
as of each Computation Date, as defined below in this Section 2(c), and such
amount shall be equal to two (2%) percent of the purchase price paid by the
Initial Investor for the Debenture pursuant to the Subscription Agreement for
the period from the Initial Date to the first Computation Date, and two (2%)
percent 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 Company in immediately
available funds within five business days after each Computation Date.
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
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<PAGE> 4
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 thirty (30) 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.
As used in this Section 2(c), the following terms shall have the
following meanings:
"Computation Date" means the date which is the earlier of (a) 35 days
after the Company is notified by the SEC that the Registration Statement may be
declared effective or (b) one hundred twenty (120) days after the Closing Date
and, if the Registration Statement required to be filed by the Company pursuant
to Section 2(a) 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.
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 thirty (30) days of
the Closing Date, an amendment to the Form S-1 Registration Statement, or a new
Registration Statement if required, 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 each 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;
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<PAGE> 5
(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
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<PAGE> 6
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 NASDAQ Small Cap
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
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<PAGE> 7
are included in such Registration/statement) an appropriate instruction and
opinion of such counsel; 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.
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<PAGE> 8
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: (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof 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
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<PAGE> 9
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
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<PAGE> 10
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 or
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
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<PAGE> 11
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, C/O
Gary B. Wolff, Esq., 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
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<PAGE> 12
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 the interpreted in accordance
with the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of Delaware 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. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(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.
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(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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<PAGE> 14
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:/s/ Ruedi G. Laupper
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: /s/ Forbes
Name:Ms Eva forbes
Title:Authorizaed signature
14
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ------ --------------- -----------
<S> <C> <C> <C> <C> <C>
The Isosceles Fund Limited * Dec 2, 1997 $ 583,630 Dec 2, 1999 DEC-1997-RLV-2
Otato Limited Partnership Dec 5, 1997 $ 583,630 Dec 5, 1999 DEC-1997-RLV-3
Thomson Kernaghan & Co. Ltd. Nov 26, 1997 $ 583,630 Nov 26, 1999 DEC-1997-RLV-1
* This document has been filed
</TABLE>
<PAGE>
Exhibit 10.16
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 December 2 ,1999
December 2 ,1997
$583,630
Number DEC-1997-RLV-2
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay to The ISOSCELES
FUND LIMITED or registered assigns (the "Holder") on November 24,
1999, (the "Maturity Date"), the principal amount of Five Hundred
Eighty-three Six Hundred Thirty Dollars ($583,000) 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 Eight Percent (8.0%) 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
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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 75% of
the average of the 5 day closing bid prices, as reported by Nasdaq, or whatever
primary exchange the Company's Common Stock may be traded on, for the 5 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 8
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 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.
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(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
original Debenture to be converted in whole or in part, 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. Twenty-five percent (25%) of the face amount
of this Debenture may be converted at the earlier of the effective date of the
Registration Statement or March 21, 1998. 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. An additional
twenty-five percent (25%) of the face amount of the Debentures, fifty percent
(50%) cumulatively, may be converted after the earlier of 30 days after the
effective date of the Registration Statement or April 20, 1998. An additional
twenty-five percent (25%), seventy-five percent (75%) cumulatively, may be
converted after the earlier of 60 days after the effective date of the
Registration Statement or May 20, 1998. An additional twenty-five percent (25%),
one hundred percent (100%) cumulatively, may be converted after the earlier of
90 days after the effective date of the Registration Statement or June 19, 1998.
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 Without Restrictive Legend. Upon the
conversion of any Debentures and upon receipt by the Company or its attorney of
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a facsimile or original of Holder'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 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
twenty-five percent (25%) of the face amount of this Debenture, plus accrued
interest, at the earlier of the effective date of the Registration Statement or
March 21, 1998, at 75% of the 5 day average closing bid price, as reported by
Nasdaq, or whatever primary exchange the Company's Common Stock may be traded
on, for the 5 trading days immediately preceding the applicable Conversion Date
(the "Conversion Price"). Holder is entitled, at its option to convert an
additional twenty-five percent (25%), fifty percent (50%) cumulatively, of the
face amount of this Debenture, plus accrued interest at the earlier of 30 days
after the effective date of the Registration Statement or April 20, 1998, at 75%
of the 5 day average closing bid price, as reported by Nasdaq, or whatever
primary exchange the Company's Common Stock may be traded on, for the 5 trading
days immediately preceding the applicable Conversion Date. Holder is entitled,
at its option, to convert an additional twenty-five percent (25%), seventy-five
percent (75%) cumulatively, of the face amount of this Debenture, plus accrued
interest at the earlier of 60 days after the effective date of the Registration
Statement or May 20, 1998, at 75% of the 5 day average closing bid price, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the 5 trading days immediately preceding the applicable
Conversion Date. Holder is entitled, at its option, to convert an additional
twenty-five percent (25%), one hundred percent (100%) cumulatively, of the face
amount of this Debenture, plus accrued interest at the earlier of 90 days after
the effective date of the Registration Statement or June 19, 1998, at 75% of the
5 day average closing bid price, as reported by Nasdaq, or whatever primary
exchange the Company's Common Stock may be traded on, for the 5 trading days
immediately preceding the applicable Conversion Date. 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) Redemption Terms. The Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
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Debentures during the two hundred ten (210) day period following the Closing
Date. In the event the Company exercises such right of redemption up to and
including the two hundred tenth (130th) day following the Closing Date it shall
pay the Holder, in U.S. currency One Hundred Thirty Percent (130%) of the face
amount of the Debentures redeemed. Mandatory redemption by the Company shall be
effected by the Company notifying the Holder by facsimile at the number listed
in the Subscription Agreement of the Company's intention to exercise its right
of mandatory redemption. The Company shall state in such notice the dollar
amount of the Debentures it intends to redeem, the amount that it will pay to
effectuate such redemption and the date by which the Holder must deliver the
Debentures to Joseph B. LaRocco, Escrow Agent (including the Escrow Agent's
address) unless the Company is already in receipt of those Debentures to be
redeemed. The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 10 business days following the date the Company notifies
the Holder by facsimile of the redemption. The Company shall give the Holder at
least 2 business day's notice of the above information. On or before the date by
which the Holder is to deliver the original Debentures to the Escrow Agent, the
Company shall wire to the Escrow Agent that amount necessary to pay the Holder
to effectuate the mandatory redemption. Once the Escrow Agent is in receipt of
the original Debentures and those funds necessary to effectuate the mandatory
conversion he shall wire those funds to the Holder and deliver to the Company
the original Debentures via overnight courier. The Holder shall not be entitled
to send a Conversion Notice to the Company with respect to the Debentures being
redeemed during such period.
(iii) 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
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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, without stop
transfer instructions, 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
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9 $900
10 $1,000
(greater than) 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 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
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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 Agreement.
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
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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.
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 November of 1997, to
permit the conversion of 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
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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
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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 having an aggregate principal amount of not more than $3,800,000
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
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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
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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 Delaware applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of Delaware.
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 Delaware. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of Delaware 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 Delaware. 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
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<PAGE>
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 Delaware 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 /s/ Ruedi G. Laupper
Name: Ruedi G. Laupper
Title: Chairman and President
14
<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 $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated November ____, 1997.
Date of Conversion__________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
15
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($ )
-------
(principal amount of Debenture, $10,000 or integral multiples of $10,000)
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:
16
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ------ ---------------
<S> <C> <C> <C>
The Isosceles Fund Limited Dec 2, 1997 $ 583,630 Walter Blum Gentilomo
Otato Limited Partnership Dec 5, 1997 $ 145,969 Eva Forbes
Thomson Kernaghan & Co. Ltd.* Nov 26, 1997 $1,428,686 Mark Valentine
* This document has been filed
</TABLE>
<PAGE>
----------------------------------
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: $3,250,000
This offering consists of $3,250,000 of Convertible
Debentures of Swissray International, Inc.
--------------------
SUBSCRIPTION AGREEMENT
--------------------
1
<PAGE> 2
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $3,250,000. 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:
2
<PAGE> 3
ABA #:
Swift #:
Account #:
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
3
<PAGE> 4
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 dated November 26, 1997,
together with any Exhibits thereto, relating to an offering (the "Offering") of
up to $3,250,000 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").
4
<PAGE> 5
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,428,686 of the Company's Debentures. The Debentures shall pay an 8%
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 75% of the average of the 5 day closing bid prices, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the five 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 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(c). 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:
5
<PAGE> 6
(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 including Form 10-KSB for the fiscal year ended June 30, 1997
and Form 10-Q for the quarter ended September 30, 1997 (the "Disclosure
Documents") have been made available for inspection by the undersigned
or the undersigned has had 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
6
<PAGE> 7
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.
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:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE
COMPANY'S REGISTRATION
7
<PAGE> 8
STATEMENT INITIALLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON __________, 1997, AND MAY BE SOLD IN ACCORDANCE
WITH THE COMPANY'S PROSPECTUS DATED ___________, 1997, WHICH
FORMS A PART OF SUCH REGISTRATION STATEMENT, OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
(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,
8
<PAGE> 9
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. 1,500,000
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
9
<PAGE> 10
offering. Upon an increase in the number of authorized shares of Common Stock of
the Company to 50,000,000, the Company shall reserve a total of at least
5,000,000 shares to cover conversion of all the Debentures issued in 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).
(ii) In anticipation of the potential need for additional
Reserved Shares, the Company has forwarded (to the S.E.C.) a Proxy Statement for
an annual meeting currently scheduled to be held on December 23, 1997, whereat
the Company proposes to increase its authorized shares to 50,000,000 shares of
Common Stock.
(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, 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 except at set forth in Exhibit D.
10
<PAGE> 11
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,
11
<PAGE> 12
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, 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.
12
<PAGE> 13
(k) Prior Shares Issued Under Regulation S or Regulation D. In the past
six months the Company raised $4,265,500 in Regulation S offerings. The Company
has raised $5,000,000 in Regulation D offerings in August of 1997 a portion of
which is being rolled over. Also the Company is in the process of raising up to
an additional $3,800,000 in Regulation D financing.
(l) Current Authorized Shares. As of November 20, 1997, there were
30,000,000 authorized shares of Common Stock of which approximately 28,443,403
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. As of their
respective dates, 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-KSB for the year ended
June 30, 1997, which could make any of the disclosures contained therein
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 notes thereto or, in the case of unaudited financial
statements, only to normal recurring year-end 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 the funds being held in
escrow, less placement fees, at which time the Escrow Agent shall then have the
Debentures delivered to the Purchaser, per the Purchaser's instructions.
13
<PAGE> 14
(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, 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 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 used for working capital.
(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 10% of the gross proceeds of this offering.
4. TERMS OF CONVERSION.
14
<PAGE> 15
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Purchaser's signed Notice of Conversion
and the original Debenture to be converted in whole or in part, 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. Twenty-five percent (25%) of the
face amount of the Debentures may be converted at the earlier of the effective
date of the Registration Statement or March 21, 1998. 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. An additional twenty-five percent (25%) of the face amount of the
Debentures, fifty percent 50% cumulatively, may be converted after the earlier
of 30 days following the effective date of the Registration Statement or April
20, 1998. An additional twenty-five percent (25%), seventy-five percent (75%)
cumulatively, may be converted after the earlier of 60 days following the
effective date of the Registration Statement or May 20, 1998. An additional
twenty-five percent (25%), one hundred percent (100%) cumulatively, may be
converted after the earlier of 90 days following the effective date of the
Registration Statement or June 19, 1998. 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 Without Restrictive Legend. 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.
15
<PAGE> 16
(d) (i) Conversion Rate. Purchaser is entitled, at its option to
convert twenty-five percent (25%) of the face amount of the Debentures, plus
accrued interest, at the earlier of the effective date of the Registration
Statement or March 21, 1998, at 75% of the 5 day average closing bid price, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the 5 trading days immediately preceding the applicable
Conversion Date (the "Conversion Price"). Purchaser is entitled, at its option
to convert an additional twenty-five percent (25%), fifty percent (50%)
cumulatively, of the face amount of the Debentures, plus accrued interest, at
the earlier of 30 days after the effective date of the Registration Statement or
April 20, 1998, at 75% of the 5 day average closing bid price, as reported by
Nasdaq, or whatever primary exchange the Company's Common Stock may be traded
on, for the 5 trading days immediately preceding the applicable Conversion Date.
Purchaser is entitled, at its option, to convert an additional twenty-five
percent (25%), seventy-five percent (75%) cumulatively, of the face amount of
the Debentures, plus accrued interest at the earlier of 60 days after the
effective date of the Registration Statement or May 20, 1998, at 75% of the 5
day average closing bid price, as reported by Nasdaq, or whatever primary
exchange the Company's Common Stock may be traded on, for the 5 trading days
immediately preceding the applicable Conversion Date. Purchaser is entitled, at
its option, to convert an additional twenty-five percent (25%), one hundred
percent (100%) cumulatively, of the face amount of the Debentures, plus accrued
interest at the earlier of 90 days after the effective date of the Registration
Statement or June 19, 1998, at 75% of the 5 day average closing bid price, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the 5 trading days immediately preceding the applicable
Conversion Date. 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) Redemption Terms. The 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 hundred ten (210) day period following the Closing
Date. In the event the Company exercises such right of redemption up to and
including the two hundred tenth (210th) day following the Closing Date it shall
pay the Purchaser, in U.S. currency One Hundred Thirty Percent (130%) of the
face amount of the Debentures redeemed. Mandatory redemption by the Company
shall be effected by the Company notifying the Purchaser by facsimile at the
number listed in this Agreement of the Company's intention to exercise its right
of mandatory redemption. The Company shall state in such notice the dollar
amount of the Debentures it intends to redeem, the amount that it will pay to
effectuate such redemption and the date by which the Purchaser must deliver the
Debentures to Joseph B. LaRocco, Escrow Agent (including the Escrow Agent's
address) unless the Company is already in receipt of those Debentures to be
redeemed. The date by which the Debentures must be delivered to the Escrow Agent
shall not be later
16
<PAGE> 17
than 10 business days following the date the Company notifies the Purchaser by
facsimile of the redemption. The Company shall give the Purchaser at least 2
business day's notice of the above information. On or before the date by which
the Purchaser is to deliver the original Debentures to the Escrow Agent, the
Company shall wire to the Escrow Agent that amount necessary to pay the
Purchaser to effectuate the mandatory redemption. Once the Escrow Agent is in
receipt of the original Debentures and those funds necessary to effectuate the
mandatory conversion he shall wire those funds to the Purchaser and deliver to
the Company the original Debentures via overnight courier. The Purchaser shall
not be entitled to send a Conversion Notice to the Company with respect to the
Debentures being redeemed during such period.
(iii) 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, without
17
<PAGE> 18
stop transfer instructions, 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.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- - ---------------------- ----------------------
<S> <C>
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
</TABLE>
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
18
<PAGE> 19
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 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 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.
19
<PAGE> 20
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 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.
Other than the Mandatory Conversion provisions contained in this Agreement
which are not limited by the following, in no other event shall the Purchaser be
entitled to convert that 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 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 4.9% 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.
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
<PAGE> 21
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,
<PAGE> 22
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 Delaware. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of Delaware 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
<PAGE> 23
further irrevocably consents to the service of process by registered mail,
postage prepaid, or by personal service within or without the State of Delaware.
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 Delaware 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. C/O Gary B. Wolff, Esq., 747 Third Avenue, 25th
Floor, New York, NY 10017(ii) if to the undersigned, at the address for
correspondence set
<PAGE> 24
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 Delaware, as such
laws are applied by Delaware courts to agreements entered into, and to be
performed in, Delaware by and between residents of Delaware, 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: Thomson Kernaghan & Co. Ltd
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
<PAGE> 25
is required to be reported to the Securities and Exchange Commission 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 Toronto, Canada.
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 1995 and 1996
and who reasonably expects an individual income in
excess of $200,000 in 1997; 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 1995 and
1996 and who reasonably expects a joint income in
excess of $300,000 during 1997; 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
<PAGE> 26
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)
<PAGE> 27
Name:Thomson Kernaghan & Co. Ltd
Principal Place of Business: Toronto, Canada
----------------------------------------------------------------------
Address for Correspondence (if different): SAME
----------------------------
365 Bay St. Toronto, Ontario MSH-2V2__________________ (Number and Street)
----------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:(416) 860-6130
(Area Code) (Number)
Jurisdiction of Incorporation:_Toronto, Canada
Date of Formation: N/A____________________________________________________
Taypayer Identification Number:N/A_______________________________________
Number of Shareholders: Unlimited_________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name: Mark Valentine______________________________________________________
Position or Title: Vice President & Director______________________________
<PAGE> 28
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 Thomson Kernaghan & Co. Ltd and, further, that Thomson Kernaghan & Co.
Ltd has all requisite authority to purchase the Debentures and enter into this
Subscription Agreement.
$1,428,686_______________________ Nov. 26, 1997_____________
Amount of Debentures subscribed for Date
Thomson Kernaghan & Co. Ltd
(Purchaser)
By: /s/ Mark Valentine
(Signature)
Name: Mark Valentine_____________
(Please Type or Print)
Title: Vice President & Director
(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
<PAGE> 29
UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this 26 day of November, 1997
SWISSRAY INTERNATIONAL, INC.
BY Ruedi G. Laupper
Ruedi G. Laupper, its Chairman and President
duly authorized
<PAGE> 30
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 NOVEMBER ____, 1997.
DATE OF CONVERSION_________________________________________
APPLICABLE CONVERSION PRICE_________________________________
NUMBER OF SHARES ISSUABLE UPON THIS CONVERSION______________
SIGNATURE___________________________________________________
[NAME]
ADDRESS_____________________________________________________
- ------------------------------------------------------------
PHONE______________________ FAX___________________________
<PAGE> 31
Exhibit E
_______________, 1997
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
<PAGE> 32
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
<PAGE> 33
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: _____________________
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Canadian Advantage Limited Partnership Nov. 26, 1997
Dominion Capital Fund, Ltd. Nov. 26, 1997
Sovereign Partners LP Nov. 26, 1997
* This document has been filed.
<PAGE>
Exhibit 10.18
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December ___, 1997,
("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").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement, dated as of December ___, 1997, between the Initial
Investor and the Company (the "Subscription Agreement"), the Company has agreed
to issue and sell to the Initial Investor 8% 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
<PAGE> 2
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 thirty (30) calendar days after the Closing Date, an
amendment to the Form S-1 Registration Statement, or a new Registration
Statement if required, covering a sufficient number of shares of Common Stock
for the Initial Investors into which is not more than $3,800,000 of Debentures
in the total offering would be convertible. In the event the amendment is not
filed within thirty (30) 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 30 days following the Closing
Date that the Registration Statement is not filed. The Investor is also granted
additional Piggyback 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 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 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 Form S-1 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
2
<PAGE> 3
Registration Statement no later than thirty (30) 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 by February 20, 1998, (the "Initial
Date"), then the Company will make payments to the Initial Investor in such
amounts and at such times as shall be determined pursuant to this Section 2(c).
The amount to be paid by the Company to the Initial Investor shall be determined
as of each Computation Date, as defined below in this Section 2(c), and such
amount shall be equal to two (2%) percent of the purchase price paid by the
Initial Investor for the Debenture pursuant to the Subscription Agreement for
the period from the Initial Date to the first Computation Date, and two (2%)
percent 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 Company in immediately
available funds within five business days after each Computation Date.
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
3
<PAGE> 4
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 thirty (30) 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.
As used in this Section 2(c), the following terms shall have the
following meanings:
"Computation Date" means the date which is the earlier of (a) 35 days
after the Company is notified by the SEC that the Registration Statement may be
declared effective or (b) one hundred twenty (120) days after the Closing Date
and, if the Registration Statement required to be filed by the Company pursuant
to Section 2(a) 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.
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 thirty (30) days of
the Closing Date, an amendment to the Form S-1 Registration Statement, or a new
Registration Statement if required, 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 each 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;
4
<PAGE> 5
(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
5
<PAGE> 6
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 NASDAQ Small Cap
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
6
<PAGE> 7
are included in such Registration /statement) an appropriate instruction and
opinion of such counsel; 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.
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<PAGE> 8
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: (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof 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
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<PAGE> 9
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
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<PAGE> 10
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 or
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
10
<PAGE> 11
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, C/O
Gary B. Wolff, Esq., 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
11
<PAGE> 12
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 the interpreted in accordance
with the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of Delaware 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. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(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.
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<PAGE> 13
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
13
<PAGE> 14
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: President and Chairman of the Board
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
14
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ----------- --------------- --------------
<S> <C> <C> <C> <C>
Canadian Advantage Limited Partnership* Nov. 26, 1997 $ 500,000 Nov 26, 1999 NOV-1997-103
Dominion Capital Fund, Ltd. Nov. 26, 1997 $2,190,000 Nov 26, 1999 NOV-1997-102
Sovereign Partners LP Nov. 26, 1997 $1,000,000 Nov 26, 1999 NOV-1997-101
* This document has been filed.
</TABLE>
<PAGE>
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 November 26, 1999
November 26, 1997
$500,000.00
Number NOV-1997-103
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay to Canadian
Advantage Limited Partnership or registered assigns (the "Holder") on
November 26, 1999, (the "Maturity Date"), the principal amount of Five
Hundred Thousand Dollars ($500,000) 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 Eight Percent (8.0%) 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 75% of the average of the 5 day closing bid prices, as reported by Nasdaq,
or whatever primary
1
<PAGE> 2
exchange the Company's Common Stock may be traded on, for the 5 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 8
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 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.
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<PAGE> 3
(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
original Debenture to be converted in whole or in part, 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. Twenty-five percent (25%) of the face amount
of this Debenture may be converted at the earlier of the effective date of the
Registration Statement or March 21, 1998. 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. An additional
twenty-five percent (25%) of the face amount of the Debentures, fifty percent
(50%) cumulatively, may be converted after the earlier of 30 days after the
effective date of the Registration Statement or April 20, 1998. An additional
twenty-five percent (25%), seventy-five percent (75%) cumulatively, may be
converted after the earlier of 60 days after the effective date of the
Registration Statement or May 20, 1998. An additional twenty-five percent (25%),
one hundred percent (100%) cumulatively, may be converted after the earlier of
90 days after the effective date of the Registration Statement or June 19, 1998.
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 Without Restrictive Legend. 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 (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 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.
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<PAGE> 4
(d) (i) Conversion Rate. Holder is entitled, at its option to convert
twenty-five percent (25%) of the face amount of this Debenture, plus accrued
interest, at the earlier of the effective date of the Registration Statement or
March 21, 1998, at 75% of the 5 day average closing bid price, as reported by
Nasdaq, or whatever primary exchange the Company's Common Stock may be traded
on, for the 5 trading days immediately preceding the applicable Conversion Date
(the "Conversion Price"). Holder is entitled, at its option to convert an
additional twenty-five percent (25%), fifty percent (50%) cumulatively, of the
face amount of this Debenture, plus accrued interest at the earlier of 30 days
after the effective date of the Registration Statement or April 20, 1998, at 75%
of the 5 day average closing bid price, as reported by Nasdaq, or whatever
primary exchange the Company's Common Stock may be traded on, for the 5 trading
days immediately preceding the applicable Conversion Date. Holder is entitled,
at its option, to convert an additional twenty-five percent (25%), seventy-five
percent (75%) cumulatively, of the face amount of this Debenture, plus accrued
interest at the earlier of 60 days after the effective date of the Registration
Statement or May 20, 1998, at 75% of the 5 day average closing bid price, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the 5 trading days immediately preceding the applicable
Conversion Date. Holder is entitled, at its option, to convert an additional
twenty-five percent (25%), one hundred percent (100%) cumulatively, of the face
amount of this Debenture, plus accrued interest at the earlier of 90 days after
the effective date of the Registration Statement or June 19, 1998, at 75% of the
5 day average closing bid price, as reported by Nasdaq, or whatever primary
exchange the Company's Common Stock may be traded on, for the 5 trading days
immediately preceding the applicable Conversion Date. 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) Redemption Terms. The 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 hundred ten (210) day period following the Closing
Date. In the event the Company exercises such right of redemption up to and
including the two hundred tenth (130th) day following the Closing Date it shall
pay the Holder, in U.S. currency One Hundred Thirty Percent (130%) of the face
amount of the Debentures redeemed. Mandatory redemption by the Company shall be
effected by the Company notifying the Holder by facsimile at the number listed
in the Subscription Agreement of the Company's intention to exercise its right
of mandatory redemption. The Company shall state in such notice the dollar
amount of the Debentures it intends to redeem, the amount that it will pay to
effectuate such redemption and the date by which the Holder must deliver the
Debentures to Joseph B. LaRocco, Escrow Agent (including the Escrow Agent's
address) unless the Company is already in receipt of those Debentures to be
redeemed. The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 10 business days following the date the Company notifies
the Holder by
4
<PAGE> 5
facsimile of the redemption. The Company shall give the Holder at least 2
business day's notice of the above information. On or before the date by which
the Holder is to deliver the original Debentures to the Escrow Agent, the
Company shall wire to the Escrow Agent that amount necessary to pay the Holder
to effectuate the mandatory redemption. Once the Escrow Agent is in receipt of
the original Debentures and those funds necessary to effectuate the mandatory
conversion he shall wire those funds to the Holder and deliver to the Company
the original Debentures via overnight courier. The Holder shall not be entitled
to send a Conversion Notice to the Company with respect to the Debentures being
redeemed during such period.
(iii) 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,
without stop transfer instructions, 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,
5
<PAGE> 6
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.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- - ---------------------- ----------------------
<S> <C>
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
</TABLE>
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
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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.
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.
8
<PAGE> 9
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 November of 1997, to
permit the conversion of 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.
9
<PAGE> 10
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 having an aggregate principal amount of not more than $3,800,000
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.
10
<PAGE> 11
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
11
<PAGE> 12
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 Delaware applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of Delaware.
12
<PAGE> 13
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 Delaware. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of Delaware 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 Delaware. 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 Delaware 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.
13
<PAGE> 14
By_/s/ Ruedi G. Laupper_____________________
Name: Ruedi G. Laupper
Title: Chairman and President
14
<PAGE> 15
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 $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated November ____, 1997.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
15
<PAGE> 16
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
- --------------------------------------------------------------------------------
(name, address and SSN or EIN of assignee)
Dollars ($ )
- --------------------------------------------------------------------------------
(principal amount of Debenture, $10,000 or integral multiples of $10,000)
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:
16
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ----------- ---------------
<S> <C> <C> <C>
Canadian Advantage Limited Partnership Nov. 26, 1997 $ 500,000
Dominion Capital Fund, Ltd. Nov. 26, 1997 $2,190,000
Sovereign Partners LP Nov. 26, 1997 $1,000,000
* This document has been filed.
</TABLE>
<PAGE>
EXHIBIT 10.20
----------------------------------
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: $3,250,000
This offering consists of not more than $3,250,000 of
Convertible Debentures of Swissray International, Inc.
--------------------
SUBSCRIPTION AGREEMENT
-------------------
1
<PAGE> 2
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $3,250,000. 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:
2
<PAGE> 3
ABA #:
Swift #:
Account #:
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
3
<PAGE> 4
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 dated __________ __, 1997,
together with any Exhibits thereto, relating to an offering (the "Offering") of
up to $3,250,000 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, which amount represents the
unconverted portion of Purchaser's investment, with agreed upon interest, in the
Company's August, 1997, Regulation D offering. The Debentures shall pay an 8%
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.
4
<PAGE> 5
"Market Price" shall mean 75% of the average of the 5 day closing bid prices, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the five 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 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(c). 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
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<PAGE> 6
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 including Form 10-KSB for the fiscal year ended June 30, 1997
and Form 10-Q for the quarter ended September 30, 1997 (the "Disclosure
Documents") have been made available for inspection by the undersigned
or the undersigned has had 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.
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<PAGE> 7
(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:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT INITIALLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON __________, 1997, AND
MAY BE SOLD IN ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED
___________, 1997, WHICH FORMS A PART OF SUCH REGISTRATION
STATEMENT, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
(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,
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<PAGE> 8
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
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<PAGE> 9
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. 1,500,000
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. Upon an increase in the number of authorized shares of Common Stock of
the Company to 50,000,000, the Company shall reserve a total of at least
5,000,000 shares to cover conversion of all the Debentures issued in 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
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<PAGE> 10
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).
(ii) In anticipation of the potential need for additional
Reserved Shares, the Company has forwarded (to the S.E.C.) a Proxy Statement for
an annual meeting currently scheduled to be held on December 23, 1997, whereat
the Company proposes to increase its authorized shares to 50,000,000 shares of
Common Stock.
(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, 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 except at set forth in Exhibit D. 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
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<PAGE> 11
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,
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<PAGE> 12
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, 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 $4,265,500 in Regulation S offerings. The Company
has raised $5,000,000 in Regulation D offerings in August of 1997 a portion of
which is being rolled-over. Also, the Company is in the process of raising up to
an additional $3,800,000 in Regulation D financing.
(l) Current Authorized Shares. As of November 20, 1997, there were
30,000,000 authorized shares of Common Stock of which approximately 28,443,403
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. As of their
respective dates, 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
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<PAGE> 13
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-KSB for the year ended June 30, 1997,
which could make any of the disclosures contained therein 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 notes thereto or, in the case of unaudited financial
statements, only to normal recurring year-end 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 the funds being held in
escrow, less placement fees, 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, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or
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<PAGE> 14
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 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 used for working capital.
(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 10% of 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
and the original Debenture to be converted in whole or in part, 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. Twenty-five percent (25%) of the
face amount of the Debentures may be converted at the earlier of the effective
date of the Registration Statement or March 21, 1998. 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. An additional twenty-five percent (25%) of the face amount of the
Debentures, fifty percent 50% cumulatively, may be converted after the earlier
of 30 days following the effective date of the Registration Statement or April
20, 1998. An additional
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<PAGE> 15
twenty-five percent (25%), seventy-five percent (75%) cumulatively, may be
converted after the earlier of 60 days following the effective date of the
Registration Statement or May 20, 1998. An additional twenty-five percent (25%),
one hundred percent (100%) cumulatively, may be converted after the earlier of
90 days following the effective date of the Registration Statement or June 19,
1998. 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 Without Restrictive Legend. 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 twenty-five percent (25%) of the face amount of the Debentures, plus
accrued interest, at the earlier of the effective date of the Registration
Statement or March 21, 1998, at 75% of the 5 day average closing bid price, as
reported by Nasdaq, or whatever primary exchange the Company's Common Stock may
be traded on, for the 5 trading days immediately preceding the applicable
Conversion Date (the "Conversion Price"). Purchaser is entitled, at its option
to convert an additional twenty-five percent (25%), fifty percent (50%)
cumulatively, of the face amount of the Debentures, plus accrued interest, at
the earlier of 30 days after the effective date of the Registration Statement or
April 20, 1998, at 75% of the 5 day average closing bid price, as reported by
Nasdaq, or whatever primary exchange the Company's Common Stock may be traded
on, for the 5 trading days immediately preceding the applicable Conversion Date.
Purchaser is entitled, at its option, to convert an additional twenty-five
percent (25%), seventy-five percent (75%) cumulatively, of the face amount of
the Debentures, plus accrued interest at the earlier of 60 days after the
effective date of the Registration Statement or May 20, 1998, at 75% of the 5
day average closing bid price, as reported by Nasdaq, or whatever primary
exchange the Company's Common Stock may be traded on, for the 5 trading days
immediately preceding the applicable Conversion Date. Purchaser is entitled, at
its option, to convert an additional twenty-five percent (25%), one hundred
percent (100%) cumulatively, of the face amount of the
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<PAGE> 16
Debentures, plus accrued interest at the earlier of 90 days after the effective
date of the Registration Statement or June 19, 1998, at 75% of the 5 day average
closing bid price, as reported by Nasdaq, or whatever primary exchange the
Company's Common Stock may be traded on, for the 5 trading days immediately
preceding the applicable Conversion Date. 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) Redemption Terms. The 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 hundred ten (210) day period following the Closing
Date. In the event the Company exercises such right of redemption up to and
including the two hundred tenth (210th) day following the Closing Date it shall
pay the Purchaser, in U.S. currency One Hundred Thirty Percent (130%) of the
face amount of the Debentures redeemed. Mandatory redemption by the Company
shall be effected by the Company notifying the Purchaser by facsimile at the
number listed in this Agreement of the Company's intention to exercise its right
of mandatory redemption. The Company shall state in such notice the dollar
amount of the Debentures it intends to redeem, the amount that it will pay to
effectuate such redemption and the date by which the Purchaser must deliver the
Debentures to Joseph B. LaRocco, Escrow Agent (including the Escrow Agent's
address) unless the Company is already in receipt of those Debentures to be
redeemed. The date by which the Debentures must be delivered to the Escrow Agent
shall not be later than 10 business days following the date the Company notifies
the Purchaser by facsimile of the redemption. The Company shall give the
Purchaser at least 2 business day's notice of the above information. On or
before the date by which the Purchaser is to deliver the original Debentures to
the Escrow Agent, the Company shall wire to the Escrow Agent that amount
necessary to pay the Purchaser to effectuate the mandatory redemption. Once the
Escrow Agent is in receipt of the original Debentures and those funds necessary
to effectuate the mandatory conversion he shall wire those funds to the
Purchaser and deliver to the Company the original Debentures via overnight
courier. The Purchaser shall not be entitled to send a Conversion Notice to the
Company with respect to the Debentures being redeemed during such period.
(iii) 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").
16
<PAGE> 17
(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, without stop transfer instructions, 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.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- - ---------------------- ----------------------
<S> <C>
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Beyond 10
</TABLE>
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 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 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.
18
<PAGE> 19
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 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.
Other than the Mandatory Conversion provisions contained in this
Agreement which are not limited by the following, in no other event shall the
19
<PAGE> 20
Purchaser be entitled to convert that 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 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 4.9% 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.
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
20
<PAGE> 21
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
21
<PAGE> 22
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 Delaware. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of Delaware 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 Delaware. 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 Delaware and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
22
<PAGE> 23
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. C/O Gary B. Wolff, Esq., 747 Third
Avenue, 25th Floor, New York, NY 10017(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 Delaware,
as such laws are applied by Delaware courts to agreements entered into, and to
be performed in, Delaware by and between residents of Delaware, 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)
23
<PAGE> 24
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 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:
(a) the shareholder is a natural person whose
individual net worth* or joint net worth
with his or her spouse exceeds $1,000,000;
or
(b) the shareholder is a natural person who had
an individual income* in excess of $200,000
in each of 1995 and 1996 and who reasonably
expects an individual income in excess of
$200,000 in 1997; or
24
<PAGE> 25
(c) 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 1995 and 1996 and who reasonably expects
a joint income in excess of $300,000 during
1997; 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.
25
<PAGE> 26
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:______________________________________________________________
Taxpayer Identification Number:_________________________________________________
Number of Shareholders:_________________________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________________________
Position or Title:______________________________________________________________
26
<PAGE> 27
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.
27
<PAGE> 28
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of November, 1997
SWISSRAY INTERNATIONAL, INC.
BY___________________________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
28
<PAGE> 29
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 NOVEMBER ____, 1997.
DATE OF CONVERSION__________________________________________
APPLICABLE CONVERSION PRICE_________________________________
NUMBER OF SHARES ISSUABLE UPON THIS CONVERSION______________
SIGNATURE___________________________________________________
[NAME]
ADDRESS_____________________________________________________
- ------------------------------------------------------------
PHONE______________________ FAX___________________________
29
<PAGE> 30
EXHIBIT E
_______________, 1997
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
30
<PAGE> 31
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
31
<PAGE> 32
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: ____________________________
32
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Atlantis Capital fund, Ltd. Mar. 26, 1998 $ 250,000 Mark Valentine
Canadian Advantage Limited Partnership * Mar. 26, 1998 $ 625,000 Mark Valentine
Dominion Capital Fund Ltd. Mar. 26, 1998 $ 1,750,000 Mark Valentine
Sovereign Partners LP. Mar. 26, 1998 $ 2,875,000 Mark Valentine
* This document has been filed.
</TABLE>
<PAGE>
Exhibit 10.22
----------------------------------
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: $5,500,000
This offering consists of $5,500,000 of Convertible
Debentures of Swissray International, Inc.
-----------------------
SUBSCRIPTION AGREEMENT
----------------------
1
<PAGE> 2
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $5,500,000. 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:
2
<PAGE> 3
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
3
<PAGE> 4
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 dated March __, 1998, together with any
Exhibits thereto, relating to an offering (the "Offering") of up to $5,500,000
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 $ 625,000 of the Company's Debentures. The Debentures shall pay
an 6% 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
4
<PAGE> 5
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 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
5
<PAGE> 6
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
including Form 10-KSB for the fiscal year ended June 30, 1997 and Form
10-Q for the quarter ended September 30, 1997 (the "Disclosure Documents")
have been made available for inspection by the undersigned or the
undersigned has had 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.
6
<PAGE> 7
(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:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT INITIALLY FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION ON __________, 1998, AND MAY BE SOLD IN
ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED ___________, 1998,
WHICH FORMS A PART OF SUCH REGISTRATION STATEMENT, OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
(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,
7
<PAGE> 8
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
8
<PAGE> 9
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 7,500,000
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 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).
9
<PAGE> 10
(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, 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.
10
<PAGE> 11
(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, 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.
11
<PAGE> 12
(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 $5,848,285 in Regulation S and Regulation D
offerings.
(l) Current Authorized Shares. As of March 2, 1998, there were
50,000,000 authorized shares of Common Stock of which approximately 28,443,403
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. As of their
respective dates, 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-KSB for the year ended
June 30, 1997, which could make any of the disclosures contained therein
misleading. Excepting for the fact that the Company is in the process of
amending its Form 10-KSB due to the fact that its financial statement heretofore
filed for the fiscal years ended June 30, 1997 and 1996 have been restated 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 accounting for the value of stock options granted
during the years ended June 30, 1997 and 1996. The net effect of such
restatements on the Company's 1997 financial statements resulted in an increase
in total assets of $435,619, a decrease in total liabilities of $689,441, an
increase in stockholders' equity of $1,124,760, and an increase in the net loss
of $1,672,587 or ($.10) per common share. The restated net loss for 1997 of
$12,562,215 or ($.79) per common share compared to the previously reported loss
of $10,889,628 or ($.69) per common share. The net effect of such restatements
on the Company's 1996 financial statement resulted in no change in total assets,
total liabilities or total stockholders' equity and an increase in net loss of
$6,374,468 or ($.49) per common share. The restated net loss
12
<PAGE> 13
of $8,226,080 or ($.64) per common share compared to the previously reported net
loss of $1,891,612 or ($.15) per common share. There was no effect to the
Company's cash flows for either 1997 or 1996. Such changes already appear in the
Company's Registration Statement under SEC File No. 333-43401, as declared
effective March 12, 1998. For purposes of this document the full contents of
such Registration Statement are herewith incorporated by reference, which
incorporation necessarily includes financial changes necessitated by way of
restatement or revision to those subsequently unaudited financial statements
through December 31, 1997. 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 notes thereto or, in the case of
unaudited financial statements, only to normal recurring year-end 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 the funds being held in
escrow, less placement fees, 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, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or
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<PAGE> 14
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 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 used for working capital.
(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 10% of 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
and the original Debenture to be converted in whole or in part, 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 at the earlier of the effective date of the Registration Statement or
sixty (60) days 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
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<PAGE> 15
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, at the earlier
of the effective date of the Registration Statement or sixty (60) days following
the Closing 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.
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<PAGE> 16
(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,
without stop transfer instructions, 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.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- - ---------------------- ----------------------
<S> <C>
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
</TABLE>
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
16
<PAGE> 17
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 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 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.
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<PAGE> 18
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 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.
Other than the Mandatory Conversion provisions contained in this Agreement
which are not limited by the following, in no other event shall the Purchaser be
entitled to convert that 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 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 4.9% 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
18
<PAGE> 19
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.
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
19
<PAGE> 20
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.
20
<PAGE> 21
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 Delaware. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of Delaware 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 Delaware. 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 Delaware 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,
21
<PAGE> 22
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. C/O Gary B. Wolff, Esq., 747 Third
Avenue, 25th Floor, New York, NY 10017(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 Delaware, as such
laws are applied by Delaware courts to agreements entered into, and to be
performed in, Delaware by and between residents of Delaware, 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)
22
<PAGE> 23
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
INVESTOR NAME: Canadian Advantage Limited Partnership
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 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
Toronto, Canada.
/ / 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:
(a) the shareholder is a natural person whose individual net
worth* or joint net worth with his or her spouse exceeds
$1,000,000; or
(b) the shareholder is a natural person who had an
individual income* in excess of $200,000 in each of 1995
and 1996 and who reasonably expects an individual income
in excess of $200,000 in 1997; or
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<PAGE> 24
(c) 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 1995 and 1996 and who reasonably expects a
joint income in excess of $300,000 during 1997; 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.
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<PAGE> 25
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: Canadian Advantage Limited Partnership
Principal Place of Business: Toronto, Canada___________________________________
365 Bay Street, 10th Floor, Toronto Ontario M5H-2V2
- --------------------------------------------------------------------------------
Address for Correspondence (if different): SAME
--------------------------------------
(Number and Street)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:___________________(416) 860-8313______________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_______________Toronto, Canada____________________
Date of Formation:_________________________N/A__________________________________
Taxpayer Identification Number:_________________________________________________
Number of Shareholders:______________UNLIMITED__________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:_________________________________________Mark Valentine____________________
Position or Title:___________________________General Partner____________________
25
<PAGE> 26
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 Canadian Advantage Limited Partnership and, further, that Mark
Valentine has all requisite authority to purchase the Debentures and enter into
this Subscription Agreement.
$625,000 March 26, 1998
- ------------------------------- ------------------------------
Amount of Debentures subscribed for Date
Canadian Advantage Limited Partnership
------------------------------
(Purchaser)
By: _/s/ Mark Valentine________________
(Signature)
Name: ______Mark Valentine_____________
(Please Type or Print)
Title: _____General Partner____________
(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.
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COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of March, 1998
SWISSRAY INTERNATIONAL, INC.
BY__________/s/ Ruedi G. Laupper____________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
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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 NOVEMBER ____, 1997.
DATE OF CONVERSION_________________________________________
APPLICABLE CONVERSION PRICE_________________________________
NUMBER OF SHARES ISSUABLE UPON THIS CONVERSION______________
SIGNATURE___________________________________________________
[NAME]
ADDRESS_____________________________________________________
- ------------------------------------------------------------
PHONE______________________ FAX___________________________
28
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Atlantis Capital fund, Ltd. Mar. 26, 1998 Mark Valentine
Canadian Advantage Limited Partnership * Mar. 26, 1998 Mark Valentine
Dominion Capital Fund Ltd. Mar. 26, 1998 Mark Valentine
Sovereign Partners LP. Mar. 26, 1998 Mark Valentine
* This document has been filed.
<PAGE>
Exhibit 10.23
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 26 , 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 March 26, 1998, between the Initial Investor and the
Company (the "Subscription Agreement"), the Company has agreed to issue and sell
to the Initial Investor 6% 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
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<PAGE> 2
("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 thirty (30) 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 $5,500,000 of Debentures, plus accrued
interest, in the total offering would be convertible. In the event the
Registration Statement is not filed within thirty (30) 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
30 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
Form S-1 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.
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<PAGE> 3
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than thirty (30) 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 by June 15, 1998, 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 following June 15, 1998, 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.
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<PAGE> 4
The Company acknowledges that its failure to have the Registration
Statement declared effective by June , 1998, 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 thirty (30) days of the
Closing Date, an amendment to the Form S-1 Registration Statement, or a new
Registration Statement if required, 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 each 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,
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<PAGE> 5
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;
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<PAGE> 6
(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 NASDAQ Small Cap
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) an appropriate
instruction and opinion of such counsel; 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
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<PAGE> 7
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
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<PAGE> 8
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: (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof 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
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<PAGE> 9
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
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<PAGE> 10
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
or 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
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<PAGE> 11
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, C/O
Gary B. Wolff, Esq., 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 the interpreted in accordance with
the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of Delaware in
connection
11
<PAGE> 12
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. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(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)
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<PAGE> 13
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: ___/s/ Ruedi G. Laupper_________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
Canadian Advantage Limited Partnership
---------------------------------------
(Name of Initial Investor)
By: _/s/ Mark Valentine____________________________
Name: Mark Valentine
Title: General Partner
13
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ------------
<S> <C> <C> <C> <C>
Atlantis Capital fund, Ltd. Mar. 26, 1998 $ 250,000 Mar. 16, 2000 MARCH-1998-104
Canadian Advantage Limited Partnership * Mar. 26, 1998 $ 625,000 Mar. 16, 2000 MARCH-1998-103
Dominion Capital Fund Ltd. Mar. 26, 1998 $ 1,750,000 Mar. 16, 2000 MARCH-1998-102
Sovereign Partners LP. Mar. 26, 1998 $ 2,875,000 Mar. 16, 2000 MARCH-1998-101
* This document has been filed.
</TABLE>
<PAGE>
Exhibit 10.24
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 March 16, 1998
March 16, 2000
$625,000.00
Number MARCH-1998-103
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay to Canadian
Advantage LP. or registered assigns (the "Holder") on March 16, 2000,
(the "Maturity Date"), the principal amount of Six Hundred Twenty Five
Thousand Dollars ($625,000) 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 Six Percent (6.0%) 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
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<PAGE> 2
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 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.
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<PAGE> 3
(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 original Debenture to be converted in whole or in part, 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 this Debenture may be
converted at the earlier of the effective date of the Registration Statement or
sixty (60) days 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, at the earlier
of the effective date of the Registration Statement or sixty (60) days following
the Closing 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.
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<PAGE> 4
(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,
without stop transfer instructions, 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
4
<PAGE> 5
Late" is defined as the number of business days beyond the 8 business days
delivery period.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- - ---------------------- ----------------------
<S> <C>
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
</TABLE>
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 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
5
<PAGE> 6
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.
6
<PAGE> 7
(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.
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 November of 1997, to
permit the conversion of 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
7
<PAGE> 8
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
8
<PAGE> 9
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
9
<PAGE> 10
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
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<PAGE> 11
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 Delaware applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of Delaware.
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
irrevocably submits to the jurisdiction of the state and federal courts of the
State of Delaware 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 Delaware. The Company hereby expressly and the
courts of the State of Delaware. The Company hereby expressly and
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<PAGE> 12
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 Delaware 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_____/s/ Ruedi G. Laupper______________
Name: Ruedi G. Laupper
Title: Chairman and President
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<PAGE> 13
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 $_________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated November ____, 1997.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
13
<PAGE> 14
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
- --------------------------------------------------------------------------------
(name, address and SSN or EIN of assignee)
Dollars ($ )
- --------------------------------------------------------------------------------
(principal amount of Debenture, $10,000 or integral multiples of $10,000)
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:
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Canadian Advantage Limited Partnership * June. 16, 1998 $ 200,000 Mark Valentine
Dominion Capital Fund Ltd. June. 16, 1998 $ 1,200,000 Mark Valentine
Sovereign Partners LP. June. 16, 1998 $ 600,000 Mark Valentine
* This document has been filed.
</TABLE>
<PAGE>
Exhibit 10.26
-----------------------------
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: $2,000,000
This offering consists of $2,000,000 of Convertible
Debentures of Swissray International, Inc.
------------------------
SUBSCRIPTION AGREEMENT
------------------------
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<PAGE> 2
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $2,000,000. 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:
2
<PAGE> 3
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
3
<PAGE> 4
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 dated June __, 1998, together with any
Exhibits thereto, relating to an offering (the "Offering") of up to $2,000,000
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 0 promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $200,000 of the Company's Debentures. The Debentures shall pay an 6%
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
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<PAGE> 5
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 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
5
<PAGE> 6
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 nonoccurrence 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.
6
<PAGE> 7
(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
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<PAGE> 8
(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.
8
<PAGE> 9
(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 4,000,000
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 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
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<PAGE> 10
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, 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
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<PAGE> 11
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
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<PAGE> 12
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 $11,348,285 in Regulation S and Regulation D
offerings.
(l) Current Authorized Shares. As of June 5, 1998, there were
50,000,000 authorized shares of Common Stock of which approximately 38,123,179
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. 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 sussequently 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
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<PAGE> 13
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, 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
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<PAGE> 14
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 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 used for working capital.
(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 10% of 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 Purchasers signed Notice of Conversion
and the original Debenture to be converted in whole or in part, 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 at the earlier of the effective date of the Registration Statement or
sixty (60) days 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 Purchasers 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 Purchasers 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
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<PAGE> 15
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, at the earlier
of the effective date of the Registration Statement or sixty (60) days following
the Closing 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.
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<PAGE> 16
(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.
<TABLE>
<CAPTION>
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
- - ---------------------- ----------------------
<S> <C>
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
</TABLE>
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
16
<PAGE> 17
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
17
<PAGE> 18
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 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.
Other than the Mandatory Conversion provisions contained in this Agreement
which are not limited by the following, in no other event shall the Purchaser be
entitled to convert that 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 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 4.9% 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.
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
18
<PAGE> 19
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
19
<PAGE> 20
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
20
<PAGE> 21
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 to Gary B. Wolff, P.C., 747 Third
21
<PAGE> 22
Avenue, 25th Floor, New York, NY 10017 and (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)
22
<PAGE> 23
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: Canadian Advantage Limited Partnership
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
Toronto, Canada.
|-|
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:
(a) the shareholder is a natural person whose individual net
worth* or joint net worth with his or her spouse exceeds
$1,000,000; or
(b) 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
23
<PAGE> 24
(c) 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.
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<PAGE> 25
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)
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name: Canadian Advantage Limited Partnership
Principal Place of Business: Toronto, Canada___________________________________
365 Bay Street, 10th Floor, Toronto Ontario M5H-2V2
- --------------------------------------------------------------------------------
Address for Correspondence (if different): SAME
--------------------------------------
(Number and Street)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:___________________(416) 860-8313______________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_______________Toronto, Canada____________________
Date of Formation:_________________________N/A__________________________________
Taxpayer Identification Number:_________________________________________________
Number of Shareholders:______________UNLIMITED__________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:_________________________________________Mark Valentine____________________
Position or Title:___________________________General Partner____________________
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<PAGE> 26
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 CALD______________ and, further, that Mark Valentine has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
$200,000 June 16, 98
- ----------------------------------- --------------------------------
Amount of Debentures subscribed for Date
Canadian Advantage Limited Partnership
--------------------------------
(Purchaser)
By:_/s/ Mark Valentine________________
(Signature)
Name:______Mark Valentine_____________
(Please Type or Print)
Title:____General Partner_____________
(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.
26
<PAGE> 27
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this 12 day of June, 1998
SWISSRAY INTERNATIONAL, INC.
BY ______/s/ Ruedi G. Laupper______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
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<PAGE> 28
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 June __, 1998.
Date of Conversion_________________________________________
Applicable Conversion Price________________________________
Number of Shares Issuable upon this conversion_____________
Signature__________________________________________________
[Name]
Address____________________________________________________
- -----------------------------------------------------------
Phone____________________ Fax______________________________
28
<PAGE> 29
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
29
<PAGE> 30
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
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<PAGE> 31
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 5-3, 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: _________________
31
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Canadian Advantage Limited Partnership * June. , 1998
Dominion Capital Fund Ltd. June. , 1998
Sovereign Partners LP. June. , 1998
* This document has been filed.
<PAGE>
Exhibit 10.27
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June ______, 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 June ___, 1998, between the initial investor and the
Company (the "Subscription Agreement"), the Company has agreed to issue and sell
to the Initial Investor 6% 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:
1. 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
1
<PAGE> 2
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 sixty (60) 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 $2,000,000 of Debentures, plus accrued
interest, in the total offering would be convertible. In the event the
Registration Statement is not filed within sixty (60) 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
60 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
Form S-1 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.
2
<PAGE> 3
The Company acknowledges that its failure to file with the SEC, said
Registration Statement no later than sixty (60) 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 flied by the Company pursuant to Section
2(a) hereof is not declared effective by September ___, 1998, 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 following September ___, 1998, 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 by September ___, 1998, will cause the Initial
Investor to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the
3
<PAGE> 4
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 thirty (30) days of the
Closing Date, a Form S-1 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 each 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
4
<PAGE> 5
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
5
<PAGE> 6
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 NASDAQ Small Cap
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
6
<PAGE> 7
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 Investors 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")
7
<PAGE> 8
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
8
<PAGE> 9
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
9
<PAGE> 10
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
<PAGE> 11
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 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
11
<PAGE> 12
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. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(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)
12
<PAGE> 13
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:
/S/Ruedi G. Laupper
-----------------------------------
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By:
-----------------------------------
Name:
Title:
13
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C>
Canadian Advantage Limited Partnership * June 15, 1998 $ 200,000 June. 15, 2000 JUNE-1998-102
Dominion Capital Fund Ltd. June 15, 1998 $ 1,200,000 June. 15, 2000 JUNE-1998-101
Sovereign Partners LP. June 15, 1998 $ 600,000 June. 15, 2000 JUNE-1998-103
</TABLE>
<PAGE>
Exhibit 10.28
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 June 15 ,1998
June 15,2000
$200,000
Number JUNE-1998-102
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay to Canadian
Advantage Limited Partnership. or registered assigns (the "Holder") on
June 15, 2000, (the "Maturity Date"), the principal amount of Two
Hundred Thousand Dollars ($200,000) 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 Six Percent (6.0%) 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
1
<PAGE>
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 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.
2
<PAGE>
(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 original Debenture to be converted in whole or in part, 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 at the earlier of the effective date of the Registration Statement or
sixty (60) days 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) 212-644-6448, (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, at the earlier
of the effective date of the Registration Statement or sixty (60) days following
the Closing 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.
3
<PAGE>
(ii) 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
4
<PAGE>
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) 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
5
<PAGE>
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 any time 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.
6
<PAGE>
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.
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 June of 1998, to
permit the conversion of 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 "Acts") and is
being
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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 Delaware applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of Delaware.
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
11
<PAGE>
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
/s/Ruedi G. Laupper
-----------------------------
Name: Ruedi G. Laupper
Title: Chairman and President
12
<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 $__________________ of the Debentures into Shares of Common Stock (the
"Shares") of SWISSRAY INTERNATIONAL, INC. (the "Company") according to the
conditions set forth in the Subscription Agreement dated June, 1998.
Date of Conversion______________________________________________________________
Applicable Conversion Price_____________________________________________________
Number of Shares Issuable upon this conversion__________________________________
Signature_______________________________________________________________________
[Name]
Address_________________________________________________________________________
- --------------------------------------------------------------------------------
Phone_________________________________ Fax_____________________________________
13
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
- - ------------------------------------------------------------------------------
(name, address and SSN or EIN of assignee)
Dollars ($ )
- - ------------------------------------------------------------------------------
(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:
14
EXHIBIT 10.29
Subscription Agreement
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Atlantis Capital fund, Ltd. Mar. , 1998 $ 26,000 Mark Valentine
Canadian Advantage Limited Partnership * Mar. , 1998 $ 124,200 Mark Valentine
Dominion Capital Fund Ltd. Mar. , 1998 $ 315,400 Mark Valentine
Sovereign Partners LP. Mar. , 1998 $ 534,400 Mark Valentine
Atlantis Capital fund, Ltd. Aug. , 1998 $ 191,642 See Above
Canadian Advantage Limited Partnership Aug. , 1998 $ 421,613 See Above
Dominion Capital Fund Ltd. Aug. , 1998 $ 1,226,512 See Above
Dominion Capital Fund Ltd. Aug. , 1998 $ 1,155,500 See Above
Sovereign Partners LP. Aug. , 1998 $ 1,993,082 See Above
Sovereign Partners LP. Aug. , 1998 $ 1,155,500 See Above
</TABLE>
* This document has been filed.
<PAGE>
----------------------------------
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: Canadian Advantage Limited Partnership
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: Canadian Advantage Limited Partnership
Principal Place of Business: Toronto, Canada___________________________________
365 Bay Street, 10th Floor, Toronto Ontario M5H-2V2
- --------------------------------------------------------------------------------
Address for Correspondence (if different): SAME
--------------------------------------
(Number and Street)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:___________________(416) 860-8313______________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_______________Toronto, Canada____________________
Date of Formation:_________________________N/A__________________________________
Taxpayer Identification Number:_________________________________________________
Number of Shareholders:______________UNLIMITED__________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:_________________________________________Mark Valentine____________________
Position or Title:___________________________General Partner____________________
<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 ofCanadian Advantage Limited Partnership and, further, that Mark
Valentine has all requisite authority to purchase the Debentures and enter into
this Subscription Agreement.
$421,613
- ------------------------------- ------------------------------
Amount of Debentures subscribed for Date
Canadian Advantage Limited Partnership
------------------------------
(Purchaser)
By: _/s/ Mark Valentine________________
(Signature)
Name: ______Mark Valentine_____________
(Please Type or Print)
Title: _____General Partner____________
(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_/s/Ruedi G. Laupper_______________________________
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>
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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Atlantis Capital fund, Ltd. Mar. 16, 1998 Mark Valentine
Canadian Advantage Limited Partnership * Mar. 16, 1998 Mark Valentine
Dominion Capital Fund Ltd. Mar. 16, 1998 Mark Valentine
Sovereign Partners LP. Mar. 16, 1998 Mark Valentine
Atlantis Capital fund, Ltd. Aug. 31, 1998 See Above
Canadian Advantage Limited Partnership Aug. 31, 1998 See Above
Dominion Capital Fund Ltd. Aug. 31, 1998 See Above
Dominion Capital Fund Ltd. Aug. 31, 1998 See Above
Sovereign Partners LP. Aug. 31, 1998 See Above
Sovereign Partners LP. Aug. 31, 1998 See Above
<PAGE>
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: /s/Ruedi G. Laupper_______________________
Name: Ruedi G. Laupper
Title: Chairman and President
--Canadian Advantage Limited Partnership-----
(Name of Initial Investor)
By: __/s/ Mark Valentine___________
Name: Mark Valentine
Title: General Partner
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C>
Atlantis Capital fund, Ltd. Mar. , 1998 $ 26,000 Mar. 16, 2000 MARCH-1998-104A
Canadian Advantage Limited Partnership * Mar. , 1998 $ 124,200 Mar. 16, 2000 MARCH-1998-103A
Dominion Capital Fund Ltd. Mar. , 1998 $ 315,400 Mar. 16, 2000 MARCH-1998-102A
Sovereign Partners LP. Mar. , 1998 $ 534,400 Mar. 16, 2000 MARCH-1998-101A
Atlantis Capital fund, Ltd. Aug. , 1998 $ 191,642 Aug. 31, 2000 AUG-1998-104
Canadian Advantage Limited Partnership Aug. , 1998 $ 421,613 Aug. 31, 2000 AUG-1998-103
Dominion Capital Fund Ltd. Aug. , 1998 $ 1,226,512 Aug. 31, 2000 AUG-1998-102
Dominion Capital Fund Ltd. Aug. , 1998 $ 1,155,500 Aug. 31, 2000 AUG-1998-106
Sovereign Partners LP. Aug. , 1998 $ 1,993,082 Aug. 31, 2000 AUG-1998-101
Sovereign Partners LP. Aug. , 1998 $ 1,155,500 Aug. 31, 2000 AUG-1998-105
</TABLE>
* This document has been filed.
<PAGE>
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 August 31 , 1998
August 31 , 2000
$1,993,082
Number AUG-1998-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay Canadian
Advantage Limited Partnership or registered assigns (the
"Holder") on September 2000, (the "Maturity Date"), the
principal amount of One Million Nine HUNDRED NINETY-three
THOUSAND Eighty-two Dollars ($1,993,082) 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/s/Ruedi G. Laupper
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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Capital Fund Ltd.* Sept. 29, 1998 $ 1,440,000
Sovereign Partners LP. Sept. 29, 1998 $ 1,500,000
</TABLE>
* This document has been filed.
<PAGE>
----------------------------------
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 29 day of Sept. __, 1998
SWISSRAY INTERNATIONAL, INC.
BY_/s/_Ruedi G. Laupper___________________
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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Dominion Capital Fund Ltd. , 1998
Sovereign Partners LP. , 1998
* This document has been filed.
<PAGE>
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: _/s/Ruedi G. Laupper__________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C>
Dominion Capital Fund Ltd.* Oct. 5, 1998 $ 1,440,400 Oct. 5, 2000 OCT-1998-101
Sovereign Partners LP. Oct. 5, 1998 $ 1,500,000 Oct. 5, 2000 OCT-1998-102
</TABLE>
* This document has been filed.
<PAGE>
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 October 05, 1998
October 05, 2000
$ 1,440,000
Number OCT-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 ONE MILLION FOUR HUNDRED
FORTY THOUSAND Dollars ($ 1,440,000) 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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Capital Fund Ltd.* Dec. 14, 1998 $ 540,400 MAR. 14, 1999
Sovereign Partners LP. Dec. 14, 1998 $ 540,000 MAR. 14, 1999
</TABLE>
* This document has been filed.
<PAGE>
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/s/Ruedi G. Laupper________
Ruedi G. Laupper its Chairman
and President duly authorized
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Capital Fund Ltd.* Dec. , 1998 $ 559,800 Inter Caribean Services
(Bahamas) Ltd.
Sovereign Partners LP. Dec. , 1998 $ 559,800 Steven HIcks
</TABLE>
* This document has been filed.
<PAGE>
----------------------------------
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: Dominion Capital Fund Ltd
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 The Bahamas.
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:Dominion Capital Fund Ltd
Principal Place of Business: Bahamas Financial Centre 3rd Fl
Shwley & Charlole Streets, P.O.Box CB 13136
Nassau, Bahamas
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:__242-356-5928___________
(Area Code) (Number)
Jurisdiction of Incorporation:____Nassau, Bahamas_______
Date of Formation:_______Aug. 28, 1995_______________________
Taypayer Identification Number:____N/A_________________________
Number of Shareholders:_________50____________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:____Inter Caribean Services (Bahamas) Ltd.________________
Position or Title:_______________Director______________________
<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
Dominion Capital Fund Ltd_
(Purchaser)
By: ___/s/Illegible________
(Signature)
Name: _Inter Caribean Services (Bahamas) Ltd_
(Please Type or Print)
Title: Director_______
(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_/s/Ruedi G. Laupper___________
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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
<TABLE>
<CAPTION>
Name Dated Signatory
- --------------------------------------- ------------ ---------------
<S> <C> <C>
Dominion Capital Fund Ltd.* Dec. , 1998 Inter Caribean Services (Bahamas) Ltd.
Sovereign Partners LP. Dec. , 1998 Steven Hicks
</TABLE>
* This document has been filed.
<PAGE>
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: _/s/Ruedi G. Laupper__________________
Name: Ruedi G. Laupper
Title: Chairman and President
Dominion Capital Fund Ltd
(Name of Initial Investor)
By: /s/Inter Caribean Services (Bahamas) Ltd._____
Name:Inter Caribean Services (Bahamas) Ltd.
Title: Director
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Dominion Capital Fund Ltd.* May. 13, 1999 $ 559,800 May 13,2001 LN-1999-102
Sovereign Partners LP. May. 13, 1999 $ 559,800 May 13,2001 LN-1999-102
</TABLE>
* This document has been filed.
<PAGE>
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 May. 13, 1999
May. 13, 2001
$559,800
Number LN-1999-102
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 May.
13, 2001, (the "Maturity Date"), the principal amount of Five
Hundred and Fifty-nine Thousand Eight Hundred Dollars ($558,800)
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/s/Ruedi G. Laupper
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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Capital Fund Ltd.* Dec. 14, 1998 $ 25,000 May 13,2003
Sovereign Partners LP. Dec. 14, 1998 $ 25,000 May 13,2003
</TABLE>
* This document has been filed.
<PAGE>
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 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"), 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:/s_Ruedi G. Lauper______
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
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* 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.
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------
Dominion Capital Fund Ltd.* Jan. , 1999 $ 292,500
Dominion Investment Fund LLC. Jan. , 1999 $ 292,500
Sovereign Partners LP. Jan. , 1999 $ 585,000
* This document has been filed.
<PAGE>
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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_/s/Ruedi G. Laupper___________________
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: _____________________
Name Dated Signatory
- --------------------------------------- ------------ ---------
Dominion Capital Fund Ltd. Jan. 29, 1999
Dominion Investment Fund LLC. Jan. 29, 1999
Sovereign Partners LP. Jan. 29, 1999
* This document has been filed.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 29, 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 29, 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: /s/Ruedi G. Laupper__________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Dominion Capital Fund Ltd.* Jan. 29, 1999 $ 292,500 Jan 29,2001 JAN-1999-101
Dominion Investment Fund LLC. Jan. 29, 1999 $ 292,500 Jan 29,2001 JAN-1999-101
Sovereign Partners LP. Jan. 29, 1999 $ 585,000 Jan 29,2001 JAN-1999-103
</TABLE>
* This document has been filed.
<PAGE>
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 29, 1999
January 29, 2001
$292,500
Number JAN-1999-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay Dominion
Capital Fund Ltd or registered assigns (the "Holder") on January
__, 2001, (the "Maturity Date"), the principal amount of Two
Hundred Ninety Two Thousand Five Hundred Dollars ($ 292,500)
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/s/Ruedi G. Laupper
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:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Capital Fund Ltd.* Jan. 29, 1999 $ 14,625 Jan 29,2004
Dominion Investment Fund LLC. Jan. 29, 1999 $ 14,625 Jan 29,2004
Sovereign Partners LP. Jan. 29, 1999 $ 29,250 Jan 29,2004
</TABLE>
* This document has been filed.
<PAGE>
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 29, 1999;
Void after January 29, 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 29,
1999 and continuing up to 5:00 p.m. New York City time on January 29, 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:_/s/Ruedi G. Laupper___
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.
-------------------------
DOMINION CAPITAL FUND, LTD.
--------------------------
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Investment Fund LLC.* Mar. 3, 1999 $ 555,000 May 31,1999
Sovereign Partners LP. Mar. 3, 1999 $ 555,000 May 31,1999
</TABLE>
* This document has been filed.
<PAGE>
PROMISSORY NOTE
$555,000 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 Dominion Investment Fund LLC (the ?Lender?), the principal amount
of $555,000 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/s/Ruedi G. Laupper its Chairman___
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:
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Dominion Investment Fund LLC.* Mar. 3, 1999 $ 566,100
Sovereign Partners LP. Mar. 3, 1999 $ 566,100
</TABLE>
* This document has been filed.
<PAGE>
----------------------------------
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
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<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/s/Ruedi G. Laupper___________________
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: _____________________
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Dominion Investment Fund LLC.* Mar. 3, 1999
Sovereign Partners LP. Mar. 3, 1999
* This document has been filed.
<PAGE>
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
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 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, $1,100,000 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: /s/Ruedi G. Laupper__________________
Name: Ruedi G. Laupper
Title: Chairman and President
---------------------------------------
(Name of Initial Investor)
By: ____________________________________
Name:
Title:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Dominion Capital Fund Ltd.* May. 31, 1999 $ 566,100 May 31,2001 LN-1999-102
Sovereign Partners LP. May. 31, 1999 $ 566,100 May 31,2001 LN-1999-101
</TABLE>
* This document has been filed.
<PAGE>
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 May. 31, 1999
May. 31, 2001
$566,100
Number LN-1999-102
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 May 31_, 2001, (the
?Maturity Date?), the principal amount of Five Hundred Sixty-six
Thousand One Hundred Dollars ($566,100 ) 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/s/Ruedi G. Laupper
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:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Dominion Capital Fund Ltd.* Mar. 3, 1999 $ 25,000 Mar 3,2004 LN-1999-102
Sovereign Partners LP. Mar. 3, 1999 $ 25,000 Mar 3,2004 LN-1999-102
</TABLE>
* This document has been filed.
<PAGE>
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 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?), 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 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:_/s/Ruedi G. Laupper
Ruedi G. Laupper its Chairman and President
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.
PROMISSORY NOTE
$550,000 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 ABERDEEN AVENUE LLC (the "Lender"), the principal amount of
$550,000 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 27,500 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/s/Ruedi G. Laupper_____________
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: $561,000
This offering consists of $561,000 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 $ 570,166.67 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_/s/Ruedi G. Laupper___________________
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:\S\Ruedi G. Laupper__________________
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 March 26, 1999
March 26, 2001
$561,000.00
Number LN-1999-102
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 March 26, 2001, (the
"Maturity Date"), the principal amount of FIVE HUNDRED SIXTY ONE
THOUSAND AND NO CENTS Dollars ($561,000.00) 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/s/Ruedi G. Laupper
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:_/s/_Ruedi G. Laupper__________
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.
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Endeavour Capital Fund SA. * May 17, 1999 $ 500,000 Shmuli Margulies
Excalber Capital Fund SA May. , 1999 $ 200,000 William Hechter
Carbon Mesa Partners, LLC June 5, 1999 $ 150,000 Michael S. Rosenblum
</TABLE>
* This document has been filed.
<PAGE>
----------------------------------
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: $1,100,000
This offering consists of $500,000 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 $1,100,000 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 $1,100,000 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 $500,000 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.The Debentures shall pay an 5% cumulative
interest, payable 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 interest 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 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-K for the fiscal year ended June
30, 1998 (inclusive of any and all amendments thereto) and Form 10-Q for the
quarters ended 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 there 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 90 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). In the event the Company's shareholder's meeting does not
result in the necessary authorization, the Company shall redeem the outstanding
Debentures for an amount equal to (x) the sum of the principal of the
outstanding Debentures plus accrued interest thereon multiplied by (y) 125%.
(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
thirteen months the Company raised $16,068,649 in Regulation S and Regulation D
offerings, including redemptions and rollovers inclusive of contingent
convertible debentures.
(l) Current Authorized Shares. As of April 26, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 11,712,379
shares of Common Stock were deemed issued and outstanding.
(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, 1998, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreements. 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-K for the year ended June 30, 1998 (or the filing of necessary
amendments thereto) 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-K for the fiscal year ending June 30, 1998, 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 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, 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 and other corporate
purposes.
(s) The Company hereby represents that it shall be paying a consultant
fee and other legal fees $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
preceded by, together with or 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 except as otherwise set
forth herein in this Article 4. 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 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"). 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)The Purchaser shall not be allowed to convert any
portion of the Debentures for 120 days from the Closing Date, unless the
closing bid price of the Company's common stock on the day prior to the
Conversion Date is greater than $5.50. Every 30-day period after the Closing
Date, until the expiration of 300 days following the Closing Date, the Purchaser
shall be allowed to convert and sell based upon the following terms: So long
as the closing bid price of the Company's common stock on the day prior to the
Conversion Date is over $1.50, the Purchaser shall be allowed to convert up to
15% of the original face amount of its Debentures; so long as the closing bid
price of the Company's common stock on the day prior to the Conversion Date is
over $7.50, the Purchaser shall be allowed to convert up to 20% of the original
face amount of its Debentures. The Purchaser shall not be allowed to convert any
of its Debentures for 300 days from the Closing Date if the bid price of the
Company's common stock is below $1.50. None of the foregoing restrictions shall
apply after the 300th day following the Closing Date.
(iii) 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 5 business days after delivery of the Notice of Conversion or,
if later, 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 5 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 5 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 5 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation) 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.
Deliberately Deleted.
(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. In the event
the Company exercises such right of redemption it shall pay the Purchaser, in
U.S. currency One Hundred Twenty Percent (120%) 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 advance notice of its intent to redeem and shall honor all Conversion
Notices received by the Company prior to the time that the Purchaser receives a
redemption notice from the Company. If the Company does not timely pay the
redemption amount, then the Purchaser shall be entitled to cancel the redemption
and the Company shall not have the right to redeem under this section (j)
anytime thereafter.
(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 on maturity of the Debentures 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.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: Endeavour Capital Fund SA
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:Endeavour Capital Fund SA
Principal Place of Business: B. V. I.
- ----------------------------------------------------------------
Address for Correspondence (if different): c/o Endeavour Management Inc.
14/14 Divrei Chaim
(Number and Street)
- ---Jerusalem---------------------------------------Israel 94479
(City) (State) (Zip Code)
Telephone Number:_______972-2-582-4433________
(Area Code) (Number)
Jurisdiction of Incorporation:_____B.V.I.________________
Date of Formation:___________2-21-97__________________________
Taypayer Identification Number:_____N/A_____________________________
Number of Shareholders:______20+____________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:_______Shmuli Margulies________________________________
Position or Title:__Director________________________________________
<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.
- --$500,000----- --------------------------
Amount of Debentures subscribed for Date
Endeavour Capital Fund SA
(Purchaser)
By: /s/Illegible__________
(Signature)
Name: ___Shmuli Margulies__
(Please Type or Print)
Title:_Director________
(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_/s/Ruedi G. Laupper___________________
Ruedi G. Laupper, its Chairman and President
duly authorized
<PAGE>
Exhibit C
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).
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.
<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 May____, 1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
- ------------------------------------------------------------
Phone______________________ Fax___________________________
Name Dated Signatory
- --------------------------------------- ------------ ---------------
Endeavour Capital Fund SA. * May 17, 1999 Shmuli Margulies
Excalber Capital Fund SA May. , 1999 William Hechter
Carbon Mesa Partners, LLC June 5, 1999 Michael S. Rosenblum
* This document has been filed.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 15, 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 May 15, 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 issued to the
Investor by the Company and any shares which might be issued to the Investor in
lieu of interest through the maturity date of the Debentures.
(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, an
amendment to the Registration Statement on Form S-1 filed by the Company but not
yet declared effective (hereinafter referred to as the "Registration Statement")
covering a sufficient number of shares of Common Stock for the Initial Investor
into which the 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 excepting S-8 Registration Statement. 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 permissible under applicable 1933 Act Rules and Regulations. 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 or, if after the effective date Investor's right
to sell is suspended, 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 or such suspension is released.
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 or such suspension is released. 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 or to permit the suspension of the effectiveness of the Registration
Statement, 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 (or amendment to any existing but
not yet declared effective Registration Statement; hereinafter collectively
referred to as "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 without volume or other limitation 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 and the Company shall give
Investor's counsel a copy of any amendments or supplements at least three (3)
business days prior to the date of filing and the Company shall not file any
amendments or supplements in a form to which the Investor's counsel reasonable
objects;
(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 and a fee for a single counsel for the Investor not exceeding $3,500,
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 the Registrable Securities 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 75% 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: /s/_Ruedi G. Laupper_______________
Name: Ruedi G. Laupper
Title: Chairman and President
--Endeavour Capital Fund SA----------------
(Name of Initial Investor)
By: _/s/_Shmuli Margulies____________
Name:Shmuli Margulies
Title:Director
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- --------
<S> <C> <C> <C>
Endeavour Capital Fund SA. * May 14, 1999 $ 500,000 May 14, 2001 MAY-1999-101
Excalber Capital Fund SA May. , 1999 $ 200,000 May 21, 2001 MAY-1999-102
Carbon Mesa Partners, LLC June 5, 1999 $ 150,000 June 9, 2001 MAY-1999-103
</TABLE>
* This document has been filed.
<PAGE>
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.
ISSUANCE DATE MAY 14, 1999
CONVERTIBLE DEBENTURE DUE MAY 14, 2001
$ 500,000
Number MAY-1999-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay
Endeavour Capital Fund SA or registered assigns (the "Holder")
on May __, 2001, (the "Maturity Date"), the principal amount of Five
HUNDRED THOUSAND Dollars ($500,000) 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 time of each conversion until the principal
amount hereof is paid in full or has been converted. The Debentures shall pay 5%
cumulative interest, 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 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 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
preceded by, together with or followed by 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 excepting as hereinafter set
forth in this Article 3. 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 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 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) The Holder shall not be allowed to convert any portion of
the Debentures for 120 days from the Closing Date, unless the closing bid price
of the Company's common stock on the day prior to the Conversion Date is greater
than $5.50. Every 30-day period after the Closing Date, until the expiration of
300 days following the Closing Date, the Holder shall be allowed to convert and
sell based upon the following terms: So long as the closing bid price of the
Company's common stock on the day prior to the Conversion Date is over $1.50,
the Holder shall be allowed to convert up to 15% of the original face amount of
its Debentures; so long as the closing bid price of the Company's common stock
on the day prior to the Conversion Date is over $7.50, the Holder shall be
allowed to convert up to 20% of the original face amount of its Debentures. The
Holder shall not be allowed to convert any of its Debentures for 300 days from
the Closing Date if the bid price of the Company's common stock is below $1.50.
None of the foregoing restrictions shall apply after the 300th day following the
Closing Date.
(iii) 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 5 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 5 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 5 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 5 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 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 on maturity of the Debentures 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. In the event
the Company exercises such right of redemption it shall pay the Holder, in U.S.
currency One Hundred Twenty Percent (120%) 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 and shall honor all Conversion Notices received by the Company prior to
the time that the Holder receives a redemption notice from the Company. If the
Company does not timely pay the redemption amount, then the Holder shall be
entitled to cancel the redemption and the Company shall not have the right to
redeem under this section (k) anytime thereafter.
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 May of 1999, to permit
the conversion of 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 orits 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/s/Ruedi G. Laupper
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 o2 face of Debenture)
Signature Guaranteed:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date
- --------------------------------------- ------------ ---------- ---------------
<S> <C> <C> <C>
Southshore Capital, Ltd.* July 9, 1999 $1,100,000 August 23, 1999
* This document has been filed.
</TABLE>
<PAGE>
PROMISSORY NOTE
$1,100,000.00 Switzerland
July, 9, 1999
FOR VALUE RECEIVED, the undersigned, SWISSRAY INTERNATIONAL INC., a New
York corporation (the "Borrower"), hereby promises to pay to the order of
SOUTHSHORE CAPITAL, LTD. (the "Lender"), the principal amount of $1,100,000.00
in lawful money of the United States of America in same day or other immediately
available funds, together with interest, payable on or before August 23, 1999.
In the event that this note is paid off on or before August 9, 1999, then the
Borrower shall pay the principal amount of 1,100,000 together with accrued
interest of three percent (3.0%) for a total of $1,133,000.
In the event that this note is paid off after August 9, 1999, the
Borrower shall still be responsible for the $33,000 of accrued interest. Also,
any principal amount still outstanding on August 23, 1999, shall bear interest
at a rate equal to three percent (3.0%) per thirty calendar period on a pro rata
basis until August 23, 1999.
The obligations of Borrower under this Note are secured under the
provisions of that certain Security Agreement dated July 9, 1999, by the
"Collateral" and all "proceeds" as those terms are defined in the Security
Agreement. The Collateral shall be purchase orders copies of which are attached
hereto as Exhibit A.
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 August 23, 1999.
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 no 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 expressly (a) 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, and (b) consent that the Lender may release or surrender,
exchange or substitute any property or other collateral or security now held or
which may hereafter be held as security for the payment of this Promissory Note,
or may release any guarantor, or may extend the time for payment or otherwise
modify the terms of payment of any part or the whole of the debt evidenced
hereby.
Borrower hereby grants to Lender a security interest in the Collateral
to secure the payment of the entire Note balance. As to any Collateral, Lender
shall have the rights of a secured party under the Uniform Commercial Code as in
effect in the State of New York.
SECURED CREDITORS. Borrower represents and warrants that 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. 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.
AFFIRMATIVE COVENANTS. 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 solely for working capital and/or costs related to assembly and delivery of
Borrower's ddR-Multi System.
(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, except as may be indicated in Borrower's
current Registration Statement on Form S-1 as filed with the SEC under File No.
333-59829.
DEFAULT. If any of the following events occur (a "default"), Lender may declare
the entire Note balance, together with any other amounts that Borrower owes
Lender, to be immediately due and payable:
(a) Borrower fails to pay when due any principal or interest under
the terms of 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; or
(g) Any written representation or written statement made herein
or any other written representation or written 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 federal courts of the State of New
York. The parties hereby expressly and irrevocably submit to the jurisdiction of
the 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 Borrower
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 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,
statements (whether oral or written) 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 747 Third Avenue, 25th Floor, New York, NY 10017 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 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 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
Name Dated Amount
- --------------------------------------- ------------ ----------
Southshore Capital, Ltd.* July 9, 1999 $1,100,000
* This document has been filed.
<PAGE>
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is made between Swissray
International Inc., as borrower ("Borrower"), and Southshore Capital. Ltd.
("Secured Party").
For good and valuable consideration, receipt of which is hereby
acknowledged, Borrower and Secured Party hereby agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Secured Party
a security interest in each of those items as described in Exhibit A attached
hereto and made a part hereof (cumulatively being referred to as the
"Collateral") and all proceeds (as that term is defined in the New York Uniform
Commercial Code) of any and all of the property referred to in Exhibit A.
Borrower and Secured Party acknowledge their mutual intent that all
security interests contemplated herein are given as a contemporaneous exchange
for new value to Borrower.
2. Debts Secured.The security interest granted by this Agreement shall
secure the following obligation, which is a full recourse obligation of the
Borrower: Promissory Note of Swissray International, Inc. issued in favor of
Secured Party dated July 9, 1999 in the principal amount of not more than One
Million One Hundred Thousand Dollars ($1,100,000) (the "Note"), any and all
renewals, extensions, replacements, modifications and amendments thereof
(including any which increase the original principal amount).
3. Perfection and Enforcement of Assignment and Security Interest.
Borrower agrees to deliver any and all documents or similar instruments
evidencing the Collateral, to Secured Party or Secured Party's counsel, at the
time of execution of this Agreement. Borrower agrees to give good faith,
diligent cooperation to Secured Party and to perform such other acts as
reasonably requested by Secured Party for perfection and enforcement of said
security interest, including the filing of a UCC-1 Financing Statement with the
New York Secretary of State's Office, if applicable. Borrower will promptly
deliver to Secured Party all written notices, or other documents constituting or
relating to the Collateral and will promptly give Secured Party written notice
of any other notices which are received in the future by Borrower with respect
to the Collateral.
4. Secured Creditors. Borrower represents and warrants that it does not
have any outstanding security interests relating to the collateral other than
those set forth in Exhibit B 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 in the Collateral until payment and performance in full
of the obligations hereunder, unless Secured Party otherwise consents in
writing, which consent shall not be unreasonably withheld.
5. Representations and Warranties Concerning Collateral. Borrower
represents and warrants that:
a. Borrower is the sole owner of the Collateral.
b. The Collateral is 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 and Agreement and except
as may be indicated in Exhibit B heteto.
c. Borrower's attorney shall prepare and have forwarded
by overnight courier a UCC-1 financing statement (See copy off UCC-1 attached
hereof as Exhibit C) in favor of Secured Party placing Secured Party in a first
lien position concerning the Collateral.
d. The Borrower has been duly organized, is validly
existing and is in good standing under the laws of the State of New York and is
duly qualified and in good standing in each other state in which the nature of
its activities requires it to be so qualified.
e. The Borrower has not changed its name or been the
subject of any merger, consolidation or other corporate reorganization during
the four month period immediately prior to the date of this Agreement.
f. The Borrower has all requisite power and authority to
transact the business that it now transacts and to own or lease the properties
and assets that it purports to own or lease.
g. The execution performance and delivery of this
Agreement and any promissory note or other instrument or agreement contemplated
herein by Borrower has been duly authorized by all requisite corporate action on
behalf of Borrower.
h. The Borrower will notify Secured Party in writing
not fewer than 30 days in advance of any change in the Borrower's principal
place of business or other business locations.
i. The execution, delivery and performance of this
Agreement and any promissory note or other instrument or agreement contemplated
herein by Borrower will not result in a breach of any terms or conditions of
any other contract or agreement or in the acceleration of any other obligation
of Borrower.
j. No consent or approval of any other person or entity
that has not been obtained by Borrower is required before Borrower may execute,
deliver and perform its obligations under this Agreement.
6. Covenants Concerning Collateral. Borrower covenants that:
a. Borrower covenants, represents and warrants that
there are presently no other secured creditors that are able to obtain priority
over Secured Party concerning the Collateral or any proceeds of the Collateral
except as may be indicated in Exhibit B hereto.
b. Borrower agrees to promptly execute and deliver any
UCC Financing Statements reasonably requested by Secured Party for perfection
or enforcement of this Agreement and the security interests created hereby, and
to give good faith, diligent cooperation to Secured Party and to perform such
other acts reasonably requested by Secured Party for perfection and enforcement
of said security interests.
c. Borrower will defend the Collateral against all claims and
demands of all persons. Borrower will keep the Collateral free from any lien,
security interest, assignment or other encumbrances except for the security
interest granted herein. Borrower will take all steps necessary or advisable to
preserve rights against account debtors and other parties. Borrower will
promptly and fully inform Secured Party of any matter or information that may
come to its attention which might impair the validity or collectability of the
Collateral or proceeds thereof. Borrower will not sell, transfer or further
encumber or lien the Collateral in any way whatsoever except as may be
contemplated by this Agreement.
d. Borrower will execute and deliver to Secured Party, at such
times and in such form and containing such terms as Secured Party may require,
instruments, documents and agreements evidencing all or any part of the
indebtedness and such certificates of title, financing and continuation
statements and other instruments as Secured Party may deem necessary or
desirable to protect, perfect and preserve the security interest created herein.
Borrower will pay all reasonable costs of filing and recording incurred by
Secured Party in connection with the protection, perfection and preservation of
the security interest. Furthermore, Borrower irrevocably appoints Secured Party
its attorney-in-fact in Borrower's name and on its behalf to make, execute,
deliver and file any instruments or documents and to take any action as Secured
Party deems necessary or appropriate to protect and preserve the Collateral on
behalf of and for the benefit of Secured Party.
e. Borrower will be responsible for all risk of loss and any
damage to the Collateral. Borrower will (if applicable to the type of collateral
indicated in Exhibit A) have and maintain insurance at all times with respect to
the collateral against risks of fire (including so-called extended coverage),
theft and such other risks as Secured Party may require and in the case of motor
vehicles, collision insurance. All insurance with respect to the Collateral
shall be written by such companies, on such terms, in such form and for such
periods and amounts as may be satisfactory to Secured Party, and shall be
payable to Secured Party and Borrower as their interests may appear on such
policies, with annual premiums prepaid by Borrower. Borrower shall deliver the
insurance policies to Secured Party upon request. Borrower hereby irrevocably
appoints Secured Party as its agent to collect, compromise and settle any loss
or claim payable under such policies and to endorse any loss payment or return
premium check in Borrower's name and to apply the proceeds thereof to the
satisfaction of the indebtedness in such manner as Secured Party shall
determine.
Borrower shall give immediate written notice to Secured Party and to insurers of
loss or damage to the Collateral and will promptly file proofs of loss with
insurers.
f. Borrower will permit Secured Party or its agent to
inspect and audit the Collateral, during normal business hours (or at other
times, if Secured Party shall have notified Borrower in advance). Borrower will
furnish to Secured Party copies of all records, documents and instruments which
Secured Party may reasonably request solely as same relates to the Collateral.
g. Borrower shall pay its debts promptly as they become
due.
h. Borrower shall not change its name without giving
Secured Party notice not fewer than 30 days in advance. The notice shall set
forth Borrower's new name and the date on which the new name shall first be
used.
i. Borrower shall immediately deliver to Secured Party
all certificates of title, or other such similar documents, to any Collateral
for which such certificates are used.
7. Right to Perform for Borrower. Secured Party may, in its sole
discretion and without any duty to do so, elect to discharge taxes, tax liens,
security interests, or any other encumbrance upon the Collateral, perform any
duty or obligation of Borrower, pay filing, recording, insurance and other
charges payable by Borrower, or provide insurance as provided herein if Borrower
fails to do so. Any such payments advanced by Secured Party shall be repaid by
Borrower upon demand, together with interest thereon from the date of advance
until repaid at the rate of ten percent (10%) per annum.
8. Default. Time is of the essence of thi s Agreement. The
occurrence of any of the following events shall constitute a default under this
Agreement:
a. Any representation, warranty or covenant made by or
on behalf of Borrower in this Agreement is materially false or materially
misleading when made;
b. Borrower fails in the payment or performance of any
obligation, covenant, agreement or liability created by or contemplated by this
Agreement or secured by this Agreement;
c. Any default in the payment or performance of any
amounts, obligation, covenant, agreement or liability under the Note; or
d. Any default, as that term is defined in the Note.
No course of dealing or any delay or failure to assert any default
shall constitute a waiver of that default or of any prior or subsequent default.
9. Remedies. Upon the occurrence of any default under this
Agreement, Secured Party shall have the following rights and remedies, in
addition to all other rights and remedies existing at law, in equity, or by
statute or provided in the Note:
a. Secured Party shall have all the rights and remedies
available under the Uniform Commercial Code:
b. If Borrower fails to cure any default within fifteen
(15) days after Borrower's receipt of written notice of default from Secured
Party, Secured Party may sell, assign, deliver or otherwise dispose of any or
all of the Collateral for cash and/or credit and upon such terms and at such
place or places, and at such time or times, and to such person, firms, companies
or corporation as Secured Party reasonably believes expedient, without any
advertisement whatsoever, and, after deducting the reasonable costs and
out-of-pocket expenses incurred by Secured Party, including, without limitation,
(1) reasonable attorneys fees and legal expenses, (2) advertising of sale of the
Collateral, (3) sale commissions, (4) sales tax, and (5) costs for preservation
and protection of the Collateral, apply the remainder to pay, or to hold as a
reserve against, the obligations secured by this Agreement.
c. The rights and remedies herein conferred are cumulative and
not exclusive of any other rights and remedies and shall be in addition to every
other right, power and remedy herein specifically granted or hereafter existing
at law, in equity, or by statute which Secured Party might otherwise have, and
any and all such rights and remedies may be exercised from time to time and as
often and in such order as Secured Party may deem expedient. Such remedies may
be exercised singularly or concurrently. No delay or omission in the exercise of
any such right, power or remedy or in the pursuance of any remedy shall impair
any such right, power or remedy or be construed to be a waiver thereof or of any
default or to be an acquiescence therein.
d. In the event of breach or default under the terms of this
Agreement by Borrower, Borrower agrees to pay all reasonable attorneys fees and
legal expenses incurred by or on behalf of Secured Party in enforcement of this
Agreement, in exercising any remedy arising from such breach or default, or
otherwise related to such breach or default. Borrower additionally agrees to pay
all reasonable costs and out-of-pocket expenses, including, without limitation,
(1) reasonable attorneys fees and legal expenses, (2) advertising of sale of the
Collateral, (3) sale commissions, (4) sales tax, and (5) costs for preservation
and protection of the Collateral, incurred by Secured Party in obtaining
possession of Collateral, preparation for sale, sale or other disposition, and
otherwise incurred in foreclosing upon the Collateral. Any and all such costs
and out-of-pocket expenses shall be payable by Borrower upon demand, together
with interest thereon at ten percent (10.0%) per annum.
e. Regardless of any breach or default, Borrower agrees to pay
all expenses, including reasonable attorneys fees and legal expenses, incurred
by Secured Party in any bankruptcy proceeding of any type involving Borrower,
the Collateral, or this Agreement, including, without limitation, expenses
incurred in modifying or lifting the automatic stay, determining adequate
protection, use of cash collateral, or relating to any plan of reorganization.
f. If Borrower shall be in default under this Agreement,
Secured Party, immediately and at any time thereafter, may declare all of the
indebtedness secured pursuant to this Agreement immediately due and payable,
shall have all rights available in law or at equity, including, without
limitation, specific performance of this Agreement or for an injunction against
violations of any of the terms hereof, and the rights and all the remedies of a
secured party under the New York UCC and any other applicable law.
10. Notices. All notices or demands by any party hereto shall be in
writing and may be sent by regular mail. Notices shall be deemed received when
deposited in a United States post office box, postage prepaid, properly
addressed to Borrower or Secured Party at the mailing addresses stated below or
to such other addresses as Borrower or Secured Party may from time to time
specify in writing. Any notice otherwise delivered shall be deemed to be given
when actually received by the addressee. Additionally, copies of all notices or
demands made by one party shall be faxed by such party to the other parties
attorney on the same date as mailed.
If to Borrower to:
c/o Gary B. Wolff, Esq.
747 Third Avenue, 25th Floor
New York, NY 10017
(f) 212-644-6498
If to Secured Party to:
c/o Joseph B. LaRocco, Esq.
49 Locust Avenue - Suite 107
New Canaan, CT 06840
(f) 203-966-0363
11. Indemnification. Borrower agrees to indemnify Secured Party for any
and all claims and liabilities, and for damages which may be awarded against
Secured Party and for all reasonable attorneys fees, legal expenses, and other
out-of-pocket expenses incurred in defending such claims, arising from or
related in any manner to the negotiation, execution, or performance of this
Agreement, excluding any claims and liabilities based upon breach or default by
Secured Party under this Agreement or upon the negligence or misconduct of
Secured Party. Secured Party shall have sole and complete control of the defense
of any such claims, and is hereby given the authority to settle or otherwise
compromise any such claims as Secured Party in good faith determines shall be in
its best interests.
12. Litigation. Borrower represents that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
validity or enforceability of the Note or this Agreement, any guaranty or any
instrument, document or agreement concerning the Collateral or of which, if
adversely determined, would have a material adverse effect on the financial
condition, operations, business or properties of the Borrower, 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 except as may be
indicated in Borrower's current Registration Statement on Form S-1 as filed with
the SEC under File Number 333-59829 or in Exhibit D attached hereto.
13. Miscellaneous.
a. This Agreement is made for the sole and exclusive
benefit of Borrower and Secured Party and is not intended to benefit any third
party. No such third party may claim any right or benefit or seek to enforce any
term or provision of this Agreement.
b. In recognition of Secured Party's right to have all
its attorneys fees and expenses incurred in connection with this Agreement
secured by the Collateral, notwithstanding payment in full of the obligations
secured by the Collateral, Secured Party shall not be required to release,
reconvey, or terminate any security interest in the Collateral unless and until
Borrower and all Guarantors, if any, have executed and delivered to Secured
Party general release in form and substance satisfactory to Secured Party.
c. Secured Party and its officers, directors, employees,
representatives, agents and attorneys, shall not be liable to Borrower or any
Guarantor, if any, for consequential damages arising from or relating to any
breach of contract, tort, or other wrong in connection with or relating to this
Agreement or the Collateral.
d. Borrower waives presentment, demand for payment, notice of
dishonor, protest and any other notices or demands in connections with the
delivery, acceptance, performance, default and enforcement of any promissory
note or instrument representing all or any part of the indebtedness.
e. The provisions of this Agreement are binding on the heirs,
executors, administrators, successors and assigns of Borrower and shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
f. [Deliberately deleted.]
g. Borrower will pay to Secured Party on demand any costs,
expenses, reasonable attorneys' fees and their reasonable disbursements incurred
or paid by Secured Party in protecting or enforcing its rights in the Collateral
and in collecting any part of the indebtedness and such amounts extended
pursuant to this section shall be added to the indebtedness.
h. Any delay, failure or waiver by Secured Party to exercise
any right it may have under this Agreement is not a waiver of Secured Party's
right to exercise the same or any other right at any other time.
i. If any provision of this Agreement or the application of
any provision to any person or circumstance shall be invalid or unenforceable,
neither the balance of this Agreement nor the application of the provision to
other persons or circumstances shall be affected. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction only, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
j. In the interest of a speedy resolution of any lawsuit
which may arise hereunder, Borrower and Secured Party waive a trial by jury in
any action with respect to this Agreement and as to any issues arising relating
to this Agreement.
k. If the incurring of any debt by Borrower or the payment of
any money or transfer of property to Secured Party by or on behalf of Borrower
or any Guarantor, if any, should for any reason subsequently be determined to be
"voidable" or avoidable" in whole or in part within the meaning of any state or
federal law of the United States, (collectively "voidable transfers"),
including, without limitation, fraudulent conveyances or preferential transfers
under the United States Bankruptcy Code or any other federal or state law, and
Secured Party is required to repay or restore any voidable transfers or the
amount or any portion thereof, or upon the advise of Secured Party's counsel is
advised to do so, then, as to any such amount or property repaid or restored,
including all reasonable costs, expenses, and attorneys fees of Secured Party
related thereto, the liability of Borrower and Guarantor, if any, and each of
them, and this Agreement, shall automatically be revived, reinstated and
restored and shall exist as though the voidable transfers had never been made.
l. The parties hereto expressly agree that this Agreement
shall be governed by, interpreted under, and construed and enforced in
accordance of the laws of the State of New York. Any action to enforce, arising
out of, or relating in any way to, any provisions of this Agreement shall be
brought exclusively, in the federal courts for the State of New York.
m. All references in this Agreement to the singular shall be
deemed to include the plural if the context so requires and vice versa.Reference
in the collective or conjunctive shall also include the disjunctive unless the
context otherwise clearly requires a different interpretation.
n. All agreements, representations, warranties and covenants
made by Borrower shall survive the execution and delivery of this Agreement, the
filing and consummation of any bankruptcy proceedings, and shall continue in
effect so long as any obligation to Secured Party contemplated by this Agreement
is outstanding and unpaid, notwithstanding any termination of this Agreement.
All agreements, representations, warranties and covenants in this Agreement
shall bind the party making the same and its heirs and successors, and shall be
to the benefit of and be enforceable by each party for whom made their
respective heirs, successors and assigns.
o. This Agreement constitutes the entire agreement between
Borrower and Secured Party as to the subject matter hereof and may not be
altered or amended except by written agreement signed by Borrower and Secured
Party. All other prior and contemporaneous understandings between the parties
hereto as to the subject matter hereof are rescinded.
Dated: July 9, 1999
Secured Party: Borrower:
SWISSRAY INTERNATIONAL, INC.
________________________ By: ________________________
Ruedi G. Laupper its Chairman
and President duly authorized
<PAGE>
SCHEDULE "A"
TO FINANCING STATEMENT AND SECURITY AGREEMENT
This FINANCING STATEMENT and SECURITY AGREEMENT covers, and the undersigned
("Debtor") hereby grants Southshore Capital, Ltd. ("Secured Party") a security
interest in, the following types or items of property, as collateral for the
payment and performance of all present and future indebtedness, liabilities,
guarantees and obligations of Debtor to Secured Party: All "Receivables" and
"Inventory", (as those terms are defined below), including packaging, raw
materials and finished goods, and all money, and all property now or at any time
in the future in Secured Party's possession (including claims and credit
balances), and all proceeds of any of the foregoing, as that term is defined in
the New York Uniform Commercial Code, (including proceeds of any insurance
policies, proceeds of proceeds, and claims against third parties), all products
of any of the foregoing, and all books and records related to any of the
foregoing. Debtor agrees that said security interest may be enforced by Secured
Party in accordance with the terms and provisions of all security and other
agreements between Secured Party and Debtor, the New York Uniform Commercial
Code, or both, but this document shall be fully effective as a security
agreement, even if there is no other security or other agreement between Secured
Party and Debtor.
For purposes of this Schedule A, the following terms have the following
meanings:
"Inventory" means, with respect only to the Purchase Orders for Debtor's
Products, listed on Schedule AA, all of Debtor's now owned and hereafter
acquired goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and goods
in transit, and including without limitation all materials and supplies of every
kind, nature and description which are or might be used or consumed in Debtor's
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise or other personal
property, and all warehouse receipts, documents of title and other documents
representing any of the foregoing.
"Receivables" means, with respect only to the Purchase Orders for Debtor's
Products, listed on Schedule AA, all of Debtor's now owned and hereafter
acquired accounts (whether or not earned by performance), letters of credit,
contract rights, chattel paper, instruments, securities, documents and all other
forms of obligations at any time owing to Debtor, all guaranties and other
security therefor, all merchandise returned to or repossessed by Debtor, an all
rights of stoppage in transit and other rights or remedies of an unpaid vendor,
lienor or secured party.
SWISSRAYINTERNATIONAL, INC.
By:_______________________________
Ruedi G. Laupper its Chairman and
President duly authorized
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ---------
Southshore Capital, Ltd.* July , 1999 $1,148,000
* This document has been filed.
<PAGE>
----------------------------------
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: $1,148,400
This offering consists of $1,148,400 of Convertible Debentures of Swissray
International, Inc.
--------------------
CONTINGENT SUBSCRIPTION AGREEMENT
-------------------
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $2,000,000 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 comple 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 $1,148,400 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 $1,148,400 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 July 9, 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 August
24, 1999. 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 ha 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 July 9, 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 $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 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 refe 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):
(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___/s/Ruedi G. Lauppe__________________
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: _____________________
Name Dated Signatory
- --------------------------------------- ------------ ----------
Southshore Capital, Ltd.* July , 1999
* This document has been filed.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 9, 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 July 9, 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 (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 August 23, 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 200% of the number of shares of Common Stock for
the Initial Investors into which the $1,148,400 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:/s/Ruedi G. Laupper__________________
Name: Ruedi G. Laupper
Title: Chairman and President
SOUTHSHORE CAPITAL, LTD.
By: ____________________________________
Name:
Title:
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- -------
<S> <C> <C> <C> <C>
Southshore Capital, Ltd.* Aug 23, 1999 $1,148,000 August 23, 2001 AUG-1999-101
Assigned to Parkdale LLC
</TABLE>
* This document has been filed.
<PAGE>
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 AUGUST 23, 1999
AUGUST 23, 2001
$ 1,148,400
Number AUG-99-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York
corporation (the "Company"), hereby promises to pay Parkdale LLC
or registered assigns (the "Holder") on August 23, 2001, (the
"Maturity Date"), the principal amount of One Million One Hundred
Forty-Eight Thousand Four Hundred Dollars ($ 1,148,400) 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 July 9, 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 August 23, 1999.
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 out-
standing 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 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/s/Ruedi G. Laupper
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 on face of Debenture)
Signature Guaranteed:
EXHIBIT 10.62(A)
Assignment of Promissory Note and Security Agreement
Maturity
Name Dated Amount Date
- ---- ----- ------ ----
Southshore Capital, Ltd. * Aug. 11, 1999 $1,400,000 Nov. 11, 1999
Assigned to Parkdale LLC Oct. 28, 1999
* This document has been filed.
<PAGE>
ASSIGNMENT OF PROMISSORY NOTE AND SECURITY AGREEMENT
This Assignment of Promissory Note and Security Agreement, (the
"Assignment") is made this 28th day of October, 1999, by SOUTHSHORE CAPITAL FUND
LTD. (herein referred to as "Assignor") and PARKDALE LLC (herein referred to as
"Assignee").
W I T N E S S E T H:
WHEREAS, by Promissory Note dated August 11, 1999 (hereinafter referred to
as the "Note") Assignor loaned to SWISSRAY INTERNATIONAL, INC., (herein referred
to as "SRMI") $1,400,000;
WHEREAS, SRMI executed a Security Agreement, (hereinafter referred to as
the "Security Agreement") also dated August 11, 1999 to secure the loan of
$1,400,000 which security interest has not yet been perfected;
WHEREAS, said Note is due and payable on November 11, 1999 and if not paid
in full on or before November 11, 1999, then the unpaid principal balance with
accrued interest rolls into a debenture convertible into SRMI common stock
pursuant to certain terms and conditions; and
WHEREAS, Assignee in order to accomplish the transfer of all right, title
and interest of the Note and Security Agreement to Assignee has required
Assignor to make this Assignment;
NOW, THEREFORE, in consideration of the payment by Assignee to Assignor of
$1.00, the receipt of which is hereby acknowledged, and for such other good and
valuable consideration the parties hereto hereby agree as follows:
I. ASSIGNMENT.
(a) Assignor does hereby give, grant, bargain, sell, transfer, assign,
convey and deliver to Assignee all right, title and interest in, to and under
the following: Note and Security Agreement, together with all of Assignor's
rights and privileges with respect thereto, which Assignee represents it has
received copies of and has carefully reviewed the same. Assignee also represents
it has received copies of the Contingent Subscription Agreement, Registration
Rights Agreement and Debenture and has carefully reviewed the same.
(b) Assignor appoints Assignee its true and lawful attorney to demand,
receive and enforce any rights, interests and benefits accruing to Assignor
under the terms of the Agreement, and all amendments thereto, and to sue, either
in
1
<PAGE>
the name of Assignor or in the name of Assignee, in connection with said rights,
interests and benefits.
(c) Beginning on the effective date of this Assignment, Assignee may
demand, receive and enforce said rights, interests and benefits under and in
accordance with the terms of the Note and Security Agreement and all amendments
thereto.
(d) Assignee, by virtue of this Assignment, hereby agrees to assume,
observe and perform any and all of Assignor's duties, responsibilities or future
liabilities imposed upon Assignor under the terms of the Note and Security
Agreement and any and all amendments thereto. Accordingly, upon this Assignment
all the rights and interests in the Note and Security Agreement shall be
transferred from Assignor to Assignee and Assignor shall no longer have any
rights or obligations with respect thereto.
(e) Assignor warrants and covenants that it has full right and authority to
make this Assignment, and that it will not execute or permit any other
assignment of any interest assigned to Assignee hereunder.
(f) Except as otherwise provided herein, this Assignment made by Assignor
hereunder is irrevocable, is without recourse to or warranty by the Assignor and
shall remain in full force and effect until the expiration of the terms of the
Note and Security Agreement and all amendments thereto.
(g) This Assignment, together with the agreements and warranties contained
herein shall inure to the benefit of Assignee, its successors and assigns, and
shall be binding upon Assignor and its assigns.
II. FACSIMILE AS ORIGINAL.
(a) This Assignment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Assignment shall be effective as
an original.
IN WITNESS WHEREOF, Assignor and Assignee have hereunto caused to be set
their hand and seal as of the date first mentioned.
ASSIGNEE: ASSIGNOR:
PARKDALE LLC SOUTHSHORE CAPITAL FUND LTD.
/s/ ILLEGIBLE /s/ ILLEGIBLE
- ------------------------- ----------------------------
Navigator Management Ltd. Navigator Management Ltd.
Director Director
2
<PAGE>
CONSENT
SWISSRAY INTERNATIONAL, INC. acting herein by Ruedi G. Laupper, its
Chairman and President, dully authorized, hereby acknowledges and consents to
the above-described Assignment.
SWISSRAY INTERNATIONAL, INC.
By: /s/ Ruedi G. Laupper
-----------------------------------------------------
Ruedi G. Laupper, its Chairman and President duly authorized
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement"), effective as of March 29, 1999 is
entered into by and between Swissray International, Inc., a New York corporation
with principal offices located in Hochdorf, Switzerland (herein referred to as
the "Company") and LIVIAKIS FINANCIAL COMMUNICATIONS, INC., a California
corporation (herein referred to as the "Consultant").
RECITALS
WHEREAS, Company is a publicly held corporation with its common stock
traded on the OTC Bulletin Board; and
WHEREAS, Consultant has experience In the area of corporate finance,
investor communications and financial and investor public relations; and
WHEREAS, Company desires to engage the services of Consultant to assist
and consult with the Company in matters concerning corporate finance and to
represent the Company in investor's communications and public relations with
existing shareholders, brokers, dealers and other investment professionals as to
the Company's current and proposed activities.
NOW THEREFORE, in consideration of the promises and the mutual covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. Term of Consultancy. Company hereby agrees to retain the Consultant to
act in a consulting capacity to the Company, and the Consultant hereby agrees to
provide services to the Company commencing March 29, 1999 and ending on March
28, 2000.
2. Duties of Consultant. The Consultant agrees that it will generally
provide the following specified consulting services through its officers and
employees during the term specified in Section 1.:
(a) Advise and assist the Company in developing and
implementing appropriate plans and materials for presenting
the Company and its business plans, strategy and personnel
to the financial community, establishing an image for the
Company in the financial community, and creating the
foundation for subsequent financial public relations efforts:
(b) Introduce the Company to the financial community;
(c) With the cooperation of the Company, maintain an awareness
during the term of this Agreement of the Company's plans,
strategy and personnel, as they may evolve during such period,
and advise and assist the Company in communicating appropriate
information regarding such plans, strategy and personnel to
the financial community;
(d) Assist and advise the Company with respect to its
(i) stockholder and investor relations, (ii)
relations with brokers, dealers, analysts and
other investment professionals, and (iii)
financial public relations generally;
(e) Perform the functions generally assigned to
investor / stockholder relations and public
relations departments in major corporations,
including responding to telephone and written
inquiries (which may be referred to the Consultant
by the Company); preparing press releases for the
Company with the Company's involvement and
approval or reviewing press releases, reports and
<PAGE>
other communications with or to shareholders,
the investment community and the general public;
advising, with respect to the timing, form,
distribution and other matters related to such
releases, reports and communications; and the
consulting with respect to corporate symbols,
logos, names, the presentation of such symbols,
logos and names, and other matters relating to
corporate image.
(f) Upon the Company's approval, disseminate information regarding
the Company to shareholders, brokers, dealers, other Investment
community professionals and the general Investing public;
(g) Upon the Company's approval, conduct meetings, in person or by
telephone, with brokers, dealers, analysts and other investment
professionals to advisd them of the Company's plans, goals and
activities, and assist the Company in preparing for press
conferences and other forums Involving the media, investment
professionals and the general investment public;
(h) At the Company's request, review business plans, strategies,
mission statements budgets, proposed transactions and other plans
for the purpose of advising the Company of the investment community
implications thereof; and
(i) Otherwise perform as the Company's financial relations and
public relations consultant.
3. Allocation of Time and-Energies. The Consultant hereby promises to
perform and discharge well and faithfully the responsibilities which may
be assigned to the Consultant from time to time by the officers and duly
authorized representatives of the Company in connection with the conduct
of its financial and investor public relations and communications
activities, so long as such activities are in compliance with applicable
securities laws and regulations. Consultant and staff shall diligently and
thoroughly provide the consulting services required hereunder. Although no
specific hours-per-day requirement will be required, Consultant and the
Company agree that Consultant will perform the duties set forth herein
above in a diligent and professional manner. The parties acknowledge and
agree that a disproportionately large amount of the effort to be expended
and the costs to be incurred by the Consultant and the benefits to be
received by the Company are expected to occur upon and shortly after, and
in any event, within two months of the effectiveness of this Agreement. It
is explicitly understood that Consultant's performance of its duties
hereunder will in no way be measured by the price of the Company's common
stock, nor the trading volume of the Company's common stock. It is also
understood that the Company in entering into this Agreement with Liviakis
Financial Communications, Inc. ("LFC"), a corporation and not any
Individual member of LFC, and with such, Consultant will not be deemed to
have breached this Agreement if any member, officer or director of LFC
leaves the firm or dies or becomes physically unable to perform any
meaningful activities during the term of the Agreement, provided the
Consultant otherwise performs its obligations under this Agreement.
4. Remuneration. As full and complete compensation for services
described in this Agreement, the Company shall compensate LFC
(herein referred to as "Consultants") as follows:
4.1 For undertaking this engagement and for other good and
valuable consideration, the Company agrees to issue and deliver
to the Consultants a "Commencement Bonus" payable in the form of
3,000,000 shares of the Company's common stoqk ('Common Stock").
This Commencement Bonus shall be issued to the Consultants
immediately following execution of this Agreement and shall,
when issued and delivered to Consultants, be fully paid and
non-assessable. The Company understands and agrees that
Consultants have foregone significant opportunities to accept
this engagement and that the Company derives substantial benefit
from the execution of this Agreement and the ability to announce
its relationship with Consultant. The 3,000,000 shares of Common
Stock issued as a Commencement Bonus, therefore, constitutes
payment for Consultant's agreement to consult to the Company and
are a nonrefundable, nonapportionable, and non-ratable retainer;
such shares of Common stock are not a prepayment for future
services. If the Company decides to terminate this Agreement
prior to March 28, 2000 for any reason whatsoever, it is agreed
and understood that Consultants will not be requested or
demanded by the Company to
<PAGE>
return any of the shares of Common Stock paid to it hereunder,
The shares of Common Stock issued pursuant to this Agreement
shall be issued in the name of Liviakis Financial
Communications, Inc.
4.2 Consultants acknowledge that the shares of Common Stock to be
issued pursuant to this Agreement (collectively, the "Shares')
have not been registered under the Securities Act of 1933, and
accordingly are "restricted securities" within the meaning of
Rule 144 of the Act. As such, the Shares may not be resold or
transferred unless the Company has received an opinion of counsel
reasonably satisfactory to the Company that such resale or
transfer is exempt from the registration requirements of that
Act.
4.3 In connection with the acquisition of Shares hereunder, the
Consultants, represent and warrant to the Company as follows:
(a)Consultants acknowledge that the Consultants have been
afforded the opportunity to ask questions of and receive answers
from duly authorized officers and other representatives of the
Company concerning an investment in the Shares, and any
additional information which the Consultants have requested.
(b) Consultants' investment in restricted securities is
reasonable in relation to the Consultants' net worth, which is in
excess often (10) times the Consultants' cost basis in the
Shares. Consultants have had experience in investments In
restricted and publicly traded securities, and Consultants have
had experience in investments in speculative securities and other
investments which involve the risk of loss of investment.
Consultants acknowledge that an investment in the Shares is
speculative and involves the risk of loss. Consultants have the
requisite knowledge to assess the relative meets and risks of
this investment without the necessity of relying upon other
advisors, and Consultants can afford the risk of loss of his
entire investment in the Shares. Consultants are (i) accredited
investors, as that term is defined in Regulation D promulgated
under the Securities Act of 1933, and (ii) a purchaser described
In Section 25102(f)(2) of the California Corporate Securities Law
of 1968, as amended.
(c) Consultants are acquiring the Shares for the Consultants' own
account for long-term investment and not with a view toward resale
or distribution thereof except in accordance with applicable
securities laws.
(d) Consultant agrees that throughout the period of time that it
retains beneficial ownership of all or any portion of the 3,000,000
shares of Common Stock referred to above that Consultant 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. Consultant further
agrees to sign a Voting Trust Agreement so as to effectuate the
terms and intent of this paragraph.
5. Financing "Finder's Fee". It is understood that in the event Consultant
introduces Company, or its nominees, to a lender or equity purchaser, not
already having a preexisting relationship with the Company, with whom
Company, or its nominees, ultimately finances or causes the completion of
such financing, Company agrees to compensate Consultant for such services
with a finder's fee in the amount of 2.5% of total gross funding provided
by such lender or equity purchaser, such fee to be payable in cash. This
will be in addition to any fees payable by Company to any other
intermediary, if any, which shall be per separate agreements negotiated
between Company and such other intermediary. It is also understood that in
the event Consultant introduces Company, or its nominees, to an
acquisition candidate, either directly or indirectly through another
intermediary,
<PAGE>
not already having a preexisting relationship with the Company, with whom
Company, or its nominees, ultimately acquires or causes the completion of
such acquisition, Company agrees to compensate Consultant for such
services with a "finder's fee" in the amount of 2% of total gross
consideration provided by such acquisition, such fee to be payable in
cash. This will be in addition to any fees payable by Company to any other
intermediary, if any, which shall be per separate agreements negotiated
between Company and such other intermediary. It is specifically understood
that Consultant is not or does it hold itself out be a Broker/Dealer, but
is rather merely a "Finder" in reference to the Company procuring
financing sources and acquisition candidates. (Total fee for Liviakis and
other commission not to exceed ten (10) percent).
5.1 It is further understood that Company, and not Consultant, is
responsible to perform any and all due diligence on such lender,
equity purchaser or acquisition candidate introduced to it by
Consultant under this Agreement, prior to Company receiving funds
or closing on any acquisition. However, Consultant will not
introduce any parties to Company about which Consultant has any
prior knowledge of questionable, unethical or illicit activities.
5.2 Company agrees that said compensation to Consultant shall be
paid in full at the time said financing or acquisition is closed.
Moreover, said compensation, will be a condition precedent to the
closing of such financing or acquisition and Company shall
execute any and all documents necessary to effect said
compensation.
5.3 As further consideration to Consultant, Company, or its
nominees, agrees to pay with respect to any financing or
acquisition candidate provided directly or indirectly to the
Company by any lender or equity purchaser covered by this Section
5. during the period of one year from the date of this Agreement,
a fee to Consultant equal to that outlined in Section "5" herein.
5.4 Consultant will notify Company of introductions it makes for
potential sources of financing or acquisitions in a timely manner
(within approximately 3 days of introduction) via facsimile memo.
If Company has a preexisting relationship with such nominee and
believes such party should be excluded from this Agreement, then
Company will notify Consultant within 5 days or sooner if possible
of such circumstances via facsimile memo.
6. Expenses. Consultant agrees to pay for all its expenses (phone,
mailing, labor, etc.), other than extraordinary items (travel required by/or
specifically requested by the Company, luncheons or dinners to large groups
of investment professionals mass faxing to a sizable percentage of the
Company's constituents, investor conference calls, print advertisements in
publications, etc.) approved by the Company prior to its incurring an
obligation for reimbursement.
7. Indemnification The Company warrants and represents that all oral
communications, written documents or materials furnished to Consultant by
the Company with respect to financial affairs, operations, profitability and
strategic planning of the Company are accurate and Consultant may rely upon
the accuracy thereof without independent investigation. The Company will
protect, indemnify and hold harmless Consultant against any claims or
litigation including any damages, liability, cost and reasonable attorney's
fees as incurred with respect thereto resulting from Consultant's
communication or dissemination of any said information, documents or
material not designated by the Company to the Consultant as "confidential"
or "Company private", excluding any such claims or litigation resulting from
Consultant's communication or dissemination of information not provided or
authorized by the Company.
<PAGE>
8. Consultant represents that it Is not required to maintain any licenses
and registrations under federal or any state regulations necessary to
perform the services set forth herein. Consultant acknowledges that, to the
best of its knowledge, the performance of the services set forth under this
Agreement will not violate any rule or provision of any regulatory agency
having jurisdiction over Consultant. Consultant acknowledges that, to the
best of its knowledge, Consultant and its officers and directors are not the
subject of any investigation, claim, decree or judgment involving any
violation of the SEC or securities laws. Consultant further acknowledges
that it is not a securities Broker Dealer or a registered investment
advisor. Company acknowledges that, to the best of its knowledge, that it
has not violated any rule or provision of any regulatory agency having
jurisdiction over the Company. Company acknowledges that, to the best of its
knowledge, Company is not the subject of any investigation, claim, decree or
judgment involving any violation of the SEC or securities laws.
9. Legal Representation. The Company acknowledges that it has been
represented by independent legal counsel with respect to this
Agreement. Consultant represents that they have consulted with
independent legal counsel and/or tax, financial and business
advisors, to the extent the Consultant deemed necessary.
10Status of Independent Contractor. Consultant's engagement
pursuant to this Agreement shall be as independent contractor, and not as an
employee, officer or other agent of the Company. Neither party to this
Agreement shall represent or hold itself out to be the employer or employee
of the other. Consultant further acknowledges the consideration provided
herein above is a gross amount of consideration and that the Company will
not withhold from such consideration any amounts as to income taxes, social
security payments or any payroll taxes. All such income taxes and other such
payments shall be made or provided for by Consultant and the Company shall
have no responsibility or duties regarding such matters. Neither the Company
or the Consultant possess the authority to bind each other in any agreements
without the express written consent of the entity to be bound.
11.Attorney's Fee. If any legal action or any arbitration or
other proceeding is brought for the enforcement or interpretation of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with or related to this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorney's fees and other costs in connection with that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
12. Waiver The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach by such other party.
13. Notices, All notices, requests, and other communications hereunder
shall be deemed to be duly given if sent by U.S. mail, postage prepaid,
addressed to the other party at the address as set forth herein below-.
To the Company: Swissray International, Inc.
Ruedi G. Laupper, CEO
200 East 32@ Street, Suite 34-B
New York, NY 10016
<PAGE>
To the Consultant; Liviakis Financial Communications, Inc.
John M. Liviakis, President
2420 ""K" Street, Suite 220
Sacramento, CA 95816
It is understood that either party may change the address to which
notices for it shall be addressed by providing notice of such change to
the other party in the manner set forth in this paragraph.
14. Choice of Law, Jurisdiction of Venue.. This Agreement shall be
governed by, construed and enforced in accordance with the laws of the
State of California. The parties agree that Sacramento County, CA, will be
the venue of any dispute and will have jurisdiction over all parties.
15. Arbitration Any controversy or claim arising out of or relating to
this Agreement, or the alleged breach thereof or relating to Consultant's
activities or remuneration under this Agreement, shall be settled by
binding arbitration in New York in accordance with the applicable rules of
the American Arbitration Association, and judgment on the award rendered
by the arbitrator(s) shall be binding on the parties and may be entered in
any court having jurisdiction thereof. The provisions of Title 9 of Part 3
of the California Code of Civil Procedure, including section 1283.05, and
successor statutes, permitting expanded discovery proceedings shall be
applicable to all disputes that are arbitrated under this paragraph.
16. Definition of Company, Wherever the term Company appears insofar as
same relates to Company approvals and/or Company requests, such term shall
refer to the approval and/or request of Ruedi G. Laupper, President and
CEO of the Company or his designee (as must be evidenced by document
executed by Ruedi G. Laupper).
17. Option to Extend Term of Consultancy Consultant grants to Company the
option (in Company's sole discretion) to extend this Consulting Agreement
for an additional period of one year commencing March 29, 2000 and
terminating March 28, 2001 under the same terms, conditions,
responsibilities, warranties and agreements as are contained herein with
the sole exception being that paragraph 4.1 to the section entitled
"Remuneration" shall be revised so as to reflect the agreement of the
parties hereto that the remuneration to be provided for such second year
shall be $630,000. Such remuneration shall be paid in restrictive shares
of Common Stock with the number of shares to be determined based upon the
ten (10) day average closing bid price for the 10 consecutive trading days
preceding March 29, 2000. In order for the Company to extend this
Agreement in accordance with the terms and conditions of this paragraph,
notification must be sent by the Company to Consultant within no less than
two (2) weeks prior to the termination of this Agreement.
18. Complete Agreement This Agreement contains the entire agreement of the
parties relating to the subject matter hereof. This Agreement and its
terms may not be changed orally but only by an agreement in writing signed
by the party against whom enforcement of
<PAGE>
any waiver, change, modification, extension or discharge is sought.
AGREED TO:
"Company" SWISSRAY INTERNATIONAL, INC.
Date: ___________ By: ___________________________
Ruedi G. Laupper, Chief Executive Officer
"Consultant" LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
Date: ______________ By: ____________________________________
John M. Liviakis, President
<PAGE>
VOTING TRUST AGREEMENT
This Agreement is made as of March 29, 1999 by and among SWISSRAY
International, Inc., a New York corporation ("Company"'), Liviakis Financial
Communications, Inc., a California corporation (""Stockholder"), said
Stockholder being the holder of an aggregate of 3,000,000 outstanding shares of
Common Stock of the Company, and Ruedi G. Laupper (the "Voting Trustee") - all
in accordance with the terms, conditions and intent expressed in a March 29,
1999 Consulting Agreement between the Company and Stockholder.
In consideration of the covenants hereinafter contained, it is agreed as
follows:
1. Applicable to Holder of Common Stock. Stockholder shall
immediately assign, transfer and deliver to the Voting
Trustee at the Company's office in New York, New York all of its right, title
and interest in and to the 3,1000,000 shares of Company's Common Stock (the "LFC
Common Stock") issued to it in accordance with terms and conditions of March 29,
1999 Consulting Agreement referred to above. Stockholder shall accept in return
therefor a trust certificate issued under Section 2 hereof.
Neither the Stockholder nor any other person who becomes the
holder of Trust Certificates hereunder shall withdraw shares of LFC Common Stock
from the Voting Trust pursuant to Section 8 hereof other than in connection with
sales and other transfers of beneficial ownership of shares of LFC Common Stock
that, pursuant to the provisions of Rule 144 promulgated under the Securities
Act of 1933, as amended (or any successor rule or regulation), would be deemed
not to be part of a distribution of such securities by an underwriter.
2. Trust Certificates to be Issued. The Voting Trustee shall hold
pursuant to the terms of this Agreement all LFC Common Stock which shall be
delivered to him hereunder. In exchange for the LFC Common Stock delivered to
him hereunder, the Voting Trustee will cause to be issued and delivered to the
Stockholder Common Stock trust certificates ("Trust Certificates") in
substantially the form set forth in Annex I hereto.
3. Stock in Name of Voting Trustee. The Voting Trustee
shall cause the LFC Common Stock deposited with him hereunder to be recorded on
the books of the Company in the name of the Voting Trustee as Voting Trustee
under this Agreement.
<PAGE>
4. Power to Vote and to Consent. Until the earlier of (a) the
actual delivery of stock certificates or other securities to the holders of
Trust Certificates in exchange for Trust Certificates or (b) such time as the
stock certificates or other securities deposited hereunder shall have been
transferred out of the name of the Voting Trustee as holder of record, the
Voting Trustee shall have the full and unqualified right and power to vote and
to execute consents with respect to all shares of stock and other securities
having voting power held by him at all meetings of stockholders or security
holders for any purpose.
5. Cash Dividends. (a) Until the actual delivery of stock
certificates or other securities to the holders of Trust Certificates in
exchange for Trust Certificates, the holder of each Trust Certificate shall be
entitled to receive from time to time payment of any dividends or distributions
of cash or property (other than securities subject to Section 11 hereof)
collected by the Voting Trustee upon the number of shares at the time held in
trust hereunder. The Voting Trustee may in his discretion, from time to time,
instead of receiving and distributing any such dividends or distributions,
authorize the Company to make payment or delivery thereof directly to the
holders of Trust Certificates and (b) notwithstanding anything to the contrary
as may be contained herein, Stockholder shall not bear any costs associated with
this Agreement. Further, in addition to dividend rights, Stockholder shall also
retain all other rights and benefits of share ownership with the sole exception,
as heretofore indicated, of voting rights which shall pass through the Voting
Trustee to the Voting Trust Certificate holder.
6. Transfer. The Trust Certificates issued by the Voting Trustee
hereunder may be transferred on the books of the Voting Trustee upon the
surrender of such certificates properly endorsed by, the registered holders
thereof, in person or by attorney duly authorized, according to the rules
established for such purpose by the Voting Trustee.
Every transferee of a Trust Certificate or Certificates issued
hereunder shall by the acceptance of such Trust Certificate or Certificates
become a party hereto with like effect as though an original party fiereto, and
shall be included within the meaning of the term "Stockholder" wherever used
herein.
In connection with, and as a condition of, making or permitting
any transfer or delivery of stock certificates or other securities or Trust
Certificates under any provision of this Agreement, the Voting Trustee may
require the payment of a sum sufficient to pay or reimburse him for any stamp
tax or other governmental charge in connection therewith. Such sums shall be
paid by the Company. The transfer books for Trust Certificates may be closed by
the Voting Trustee at any time prior to the setting of a record date for the
payment or distribution of dividends, or
<PAGE>
for any other purpose; or the Voting Trustee, in his discretion, in lieu of
closing the transfer books, may fix a date as the day as of which the holders of
Trust Certificates entitled to such payment or distribution or for such other
purpose shall be determined.
7. Authority and Liability of Voting Trustee. The Voting Trustee
shall be fully authorized and empowered to construe this Agreement, and his
construction of the same made in good faith shall be final, conclusive and
binding upon all holders of Trust Certificates and on all other parties
interested.
The Voting Trustee shall not incur any responsibility as
Stockholder, trustee or otherwise by reason of any error of judgment or mistake
of law or other mistake, or for any act or omission of any agent or attorney, or
for any misconstruction of this Agreement, or for any action of any sort taken
or omitted hereunder which is believed by him to be in accordance with the
provisions and intent hereof and is otherwise made or taken in good faith,
except for wilful misconduct or gross negligence.
The Voting Trustee may employ counsel (who may be counsel for the
Company) and agents, whose reasonable expenses and compensation shall be paid by
the Company.
The Voting Trustee may act as, and receive compensation as, a
director, officer, agent or member of any committee of the Company, or of any
affiliated entity; and he, or any firm of which he may be a member, or any
corporation or association of which he may be a stockholder, director or
officer, or any such firm, corporation or association in which he may be
otherwise directly or indirectly interested, may to the extent permitted by law,
and without liability in any way or under any circumstances by reason thereof,
contract with the Company, or be or become pecuniarily interested in any matter
or transactions to which the Company may be a party or in which the Company may
be a party or in which the Company may in any way be concerned, as fully as
though he were not the Voting Trustee.
The Voting Trustee shall not be required to give any bond or
security for the discharge of his duties.
The Voting Trustee may at any time resign by delivering to the
-3-
Company his resignation in writing to take effect immediately.
The Voting Trustee may be a party to this Agreement as a
Stockholder, and to the extent of the stock deposited by him or of Trust
Certificates held by him, he shall
<PAGE>
be entitled in all respects to the same rights and benefits as Stockholder.
The Voting Trustee may execute any or all Trust Certificates
personally or by an agent constituted the agent of the Voting Trustee for such
purpose. The Voting Trustee, under such regulations with respect to indemnity
and otherwise as he may, in his absolute discretion, prescribe, may provide for
the issue and delivery of Trust Certificates in lieu of lost, stolen or
destroyed Trust Certificates or in exchange for mutilated Trust Certificates.
8. Transfers. The Stockholder and any transferees of Trust
Certificates relating to the LFC Common Stock (in such connection, a
""Transferor") may at any time in connection with the bona fide transfer of
beneficial ownership of shares of LFC Common Stock exchange Trust Certificates
for the corresponding shares of LFC Common Stock. In theevent a Transferor
proposes to transfer beneficial ownership of shares of LFC Common Stock to one
or more third parties, the Transferor shall provide the Voting Trustee with a
written notice certifying such intention, stating the number of shares proposed
to be transferred, and indicating the names of the proposed transferee or
transferees or the name or the name of the brokerage firm through which the sale
of such shares of LFC Common Stock is to be effected. The Voting Trustee shall
by the end of the third business day following the date on which such notice is
received by the Voting Trustee deliver to the Transferor or the Transferor's
designee a certificate representing the LFC Common Stock proposed to be
transferred (i) registered in the name of the Voting Trustee and endorsed in
blank for transfer with the signature of the Voting Trustee guaranteed by an
'eligible guarantor institution" as that term is defined in Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended, (ii)
registered in the name of the Transferor, (iii) registered in the name or names
of the transferee or transferees specified by the Transferor in its notice, or
(iv) registered in the name of the brokerage firm specified by Transferor in its
notice. In the event the proposed transfer is not effected within thirty (30)
days of the date the certificate representing the shares of LFC Common Stock
proposed to be transferred is delivered by the Voting Trustee, the Transferor
shall cause the certificates representing the shares of LFC Common Stock that
were to have been the subject of the transfer to be delivered to the Voting
Trustee for re-registration in the name of the Voting Trustee in exchange for
Trust Certificates pursuant to this Voting Trust
Agreement.
9. Compensation, Indemnity and Expenses. The Voting Trustee
shall not be entitled to compensation for services but shall be entitled to
indemnity
<PAGE>
against any and all expenses and liabilities incurred by him in connection with
or growing out of this Agreement or the bona fide discharge of his duties
hereunder; and he shall be entitled to receive such indemnity from the Company
against all such claims, expenses and liabilities. The Company shall be deemed
to be fully entitled, by action of the board of directors of the Company, to
assume or provide otherwise for payment of any and all expenses and liabilities
incurred by the Voting Trustee in connection with or arising out of this
Agreement.
10. Taxes. If at any time the Voting Trustee is of the opinion
that any tax or governmental charge is payable in respect of any shares of stock
or other securities held by him hereunder, or in respect of any dividends,
distributions or other rights arising from or appurtenant to the subject matter
of this Agreement, the Voting Trustee may, but shall not be required to, pay
such tax or governmental charge, and the Voting Trustee shall be entitled to
reimbursement for such payments solely from the Company.
11. Applicability to Other Securities. The terms of this
Agreement shall apply to shares of any class of voting securities issued by the
Company, including shares issued as a stock dividend or stock split, or in
exchange for shares subject to the terms and conditions of this Agreement,
whether by way of reorganization, reclassification or other means. Such
securities shall be deposited with the Voting Trustee and Trust Certificates
therefor shall be issued to the Stockholder. 1
12. Duration and Termination. This Agreement shall continue in
force throughout the period of time that Stockholder remains thel'beneficial
owner of any portion of the 3,000,000 shares of Common Stock of the Company
issued to it pursuant to the aforesaid Consulting Agreement but the Agreement
shall only apply to such portion of the 3,000,000 shares retained by
Stockholder. In addition, this Agreement shall terminate in the event that the
Voting Trustee at any time resigns under Section 7 hereof or otherwise ceases to
serve as Voting Trustee hereunder.
On the termination of this Agreement, the Voting Trustee (or his
executor, conservator or other personal representative if he is unable to
perform personally his responsibilities hereunder), in exchange for and upon
surrender of Trust Certificates then outstanding, will deliver or czfuse to be
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delivered to the holders thereof the shares of stock and any other securities
then held by the Voting Trustee which are represented by guch Trust
Certificates.
<PAGE>
13. Acceptance. The Voting Trustee hereby accepts the trust
hereunder subject to all the terms, conditions and reservations herein contained
and agrees that he will exercise the powers and perform the duties of Voting
Trustee as herein set forth; provided, however, that nothing herein contained
shall be construed to prevent the Voting Trustee from at any time resigning and
discharging himself from the trust aforesaid in accordance with Section 7
hereof.
14. Continuation of Rights as Record Holder. Nothing in this
agreement contained shall be construed to deprive the Voting Trustee of the
right as record holder of any of the shares of stock or other securities at any
time held hereunder to vote the same and to execute consents with respect
thereto, notwithstanding the termination of this Agreement, so long as he shall
be or shall continue to be record holder of such shares of stock or other
securities.
15. Definition of "Company". The term "Company" for the purposes
of this Agreement and of all rights hereunder, including the issue and delivery
of stock, shall be taken to mean SWISSRAY International, Inc., a corporation
organized and existing under the laws of the State of New York, or any
corporation or corporations successor to it, and in the event of such
succession, the shares of the successor corporation received by the Voting
Trustee shall be held by him in lieu of the shares of stock of SWISSRAY
International, Inc. deposited hereunder and in all respects subject to the terms
and conditions of this Agreement. If the Company is acquired by another
corporation or other entity, this Agreement shall terminate. For purposes of
this Agreement, the Company will be considered to have been acquired when as a
result of a business combination the shareholders of the Company, in their
capacity as such, own less than fifty percent of the outstanding equity interest
in the surviving or successor entity.
16. Notices. All notices to the Company, the Voting Trustee and the
holders of Trust Certificates shall be deemed given (i) when personally
delivered, (ii) one business day after delivered to an overnight delivery
service of national reputation for delivery pursuant to its "next day"
service,'(iii) three business days after deposit in the United States mail
(registered or certified, prepaid, return receipt requested), or (iv)
upon receipt of answer-back confirmation of delivery of a facsimile
transmission. Any notice so " iven shall 9
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<PAGE>
be taken and considered as though personally served on the parties to which it
was directed, including the Company, the Voting Trustee, the Stockholder and any
other holder of a Trust Certificate, and notice given utilizing one or more of
the methods specified above shall be the only notice required tc5 be given under
any provision of this Agreement. Notice to the Company and to the Voting Trustee
shall be directed to them, respectively, at the principal executive offices of
the Company (and to any facsimile number maintained at such offices), and
notices to the registered holders of Trust Certificates. shall be directed to
them at the addresses furnished by such holders respectively, to the Voting
Trustee (and to any facsimile number maintained by such holders at such
locations);. Any party may change the address or facsimile number to which
notices to such party shall be directed by giving notice of such change to the
other parties hereto in the manner aforesaid.
17. Copies and Inspection. Copies of this Agreement shall be
filed in the principal office of the Company and in the registered office of the
Company in the State of New York, and shall be open to the inspection of any
Stockholder of the Company or of any Trust Certificate holder hereunder daily
during business hours.
18. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or this Agreement.
19. Counterparts. This Agreement may be executed in
counterparts, each of which so executed shall be deemed to be an original, and
such counterparts shall together constitute one and the same instrument.
20. Amendment. This Agreement may be amender by the
written consent of the Voting Trustee and the holders of record of Trust
Certificates representing all of the shares then deposited with the Voting
Trustee pursuant to said agreement.
21. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
22. Controlling Terms. If and to the extent that there
are any discrepancies or differences between this Voting Trust Agreement and the
Consulting Agreement entered into between SWISSRAY International, Inc. and
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<PAGE>
shares of Company Common Stock being issued, then in that event, and in that
event only, the terms and conditions contained in such Consulting Agreement
and the intent expressed therein shall take precedence over those conflicting
(if any) terms and conditions as are contained in this Voting Trust Agreement.
IN WITNESS WHEREOF,, the Voting Trustee and the Company have
executed this Agreement as of the date first written above, and Stockholder
has signed a counterpart of this Agreement and transferred and delivered its
shares of stock to the Voting Trustee.
VOTING TRUSTEE
Dated: March 29, 1999
-----------------
Ruedi G. Laupper
SWISSRAY International, Inc.
By:____________________
Its: Josef Laupper, Secretary
By: ___________________
Its-Michael Laupper, Interim
Chief Financial Officer
<PAGE>
STOCKHOLDER:
Each party hereto signing as a Stockholder hereby assigns and
transfers unto the Voting Trustee the shares of the Common Stock of the
Company owned by it and identified as to the number of shares in the
appropriate place opposite its signature.
Number of Shares
Name Signature Deposited Hereunder
- -LIVIAKIS FINANCIAL
COMMUNICATIONS,INC. By: _______________ 3,000,000
John L. Liviakis, President
<PAGE>
ANNEX I
FORM OF VOTING TRUST'CERTIFICATE
Voting Trust Certificate
SWISSRAY International, Inc.
No. I of I Livia.kis Financial Communications, Inc. 3,000,000 Shares
Stockholder
This is to certify that there have been deposited with the Voting
Trustee under the Voting Trust Agreement hereinafter mentioned, certificates for
the number of shares, $.0l par value per share, of the Common Stock of SWISSRAY
International, Inc., a New York corporation (hereinafter Failed the "Company"),
set out above, and that the person named above is entitled to all benefits and
interest specified in said Voting Trust Agreement arising from the deposit of
such shares thereunder.
Subject to Agreement. This certificate is issued under and
pursuant to, and the rights of the holder hereof are subject to and are limited
by, the terms and conditions of a certain Voting Trust Agreement, dated as of
March 29, 1999, copies of which are on file at the registered office of the
Company in the State of New York and at the Company's office in New York, New
York.
Term. The Voting Trust Agreement shall continue in force
throughout the period of time that Stockholder remains the beneficial owner of
any portion of the 3,000,000 shares of Common Stock of the Company issued to it
pursuant to the aforesaid Consulting Agreement but the Agreement shall only
apply to such portion of the 3,000,000 shares retained by Stockholder.
Amendment. The Voting Trust Agreement may be amended by the
written consent of the Voting Trustee and the holders of record of Trust
Certificates representing all of the shares then deposited with the Voting
Trustee pursuant to said agreement.
SEE REVERSE SIDE FOR RESTRICTIONS ON TRANSFER AND
CIRCUMSTANCES UNDER WHICH THIS CERTIFICATE MAY BE CANCELLED.
IN WITNESS WHEREOF., the Voting Trustee has executed this
certificate as of the 29th day of March, 1999.
By:______________________
Ruedi G. Laupper
<PAGE>
(The following legend is to appear on the
reverse side of the certificate.)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE SECURITIES LAW AND MAY
NOT BE SOLD, TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAW. THE TRUSTEE RESERVES THE RIGHT TO REFUSE
THE TRANSFER, OF SUCH SECURITIES UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS THE TRUSTEE HAS
RECEIVED A SATISFACTORY LEGAL OPINION TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED.
Swissray [LOGO]
----------------
Swissray Medical Systems, Inc.
a company of Swissray International, Inc.
AUTHORIZED DISTRIBUTOR AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective the day of, 19, by and
between Swissray America, Inc. an ______________ corporation, having its
principal place of business at 5801 Soundview Drive, Suite 50, Gig Harbor,
Washington 98335 (which with its successors and assigns is hereinafter called
"Swissray") and
MEDIKA EQUIPOS MEDICOS, INC.
- -------------------------------------------------------------------
(Distributor's Full Legal Name)
Corporation
- -------------------------------------------------------------------
(state whether an individual, partnership or corporation)
Puerto Rico
- -------------------------------------------------------------------
(if a corporation, show name of state in which incorporated)
__________________, having its principal place of business at
(DBA, if different from legal name)
PO Box 360888
- -------------------------------------------------------------------
(Street Address)
San Juan PR 00936-0888
- -------------------------------------------------------------------
(City/Town) (State) (Zip)
(which, with its successors and permitted assigns, is hereinafter called
"Distributor").
BACKGROUND
A. Swissray is engaged in, among other things, the design, development,
manufacture, sale and distribution of high quality diagnostic imaging equipment
to the medical profession, hospitals, clinics, national accounts and government
purchasers and has established a quality image and goodwill among consumers in
the diagnostic imaging marketplace.
B. Swissray desires to appoint a limited number of Distributors to sell
certain Swissray products and accessories thereto (hereinafter individually and
collectively called "Swissray Products" or "Products"). Distributor desires to
be appointed as an authorized Swissray Distributor, and hereby warrants and
represents to Swissray that it shall at all times meet each of its requirements
and obligations set forth in this Agreement.
C. Based upon the foregoing, and in reliance thereon, Swissray and
Distributor agree as follows:
Swissray Medical Systems, Inc.
5801 Soundview Drive. Suite 50
Gig Harbor, WA 98335, USA
Phone 353 858 3330
Fax 253 858 2777
<PAGE>
2.6 Consumer Relations and Trade Practices.
2.6.1 Distributor shall conduct its business operations in such manner
so as to promote good customer relations.
2.6.2 Distributor shall at no time engage in "bait and switch" or any
other unfair or deceptive trade practice with respect to Swissray Products,
and shall make no false, misleading or disparaging representations
concerning Swissray or the Products in advertisements or otherwise.
2.6.3 Distributor shall make no representations to customers or to the
trade with respect to the specifications or features of Swissray Products,
except such as may be approved in writing or published by Swissray.
2.6.4 Distributor shall advise Swissray promptly concerning any
information that may come to its attention as to charges, complaints or
claims about Swissray Products by Distributor's customers or other persons.
2.6.5 Distributor will not imitate Swissray products or infringe in
any way upon Swissray's trademarks, trade dress or other intellectual
property, and will not involve itself in any way in the sale of imitations
of Products or the sale of any Swissray-brand products not intended for
sale in the United States (i.e., gray market goods).
2.7 Distributor Reports.
From time to time Swissray may ask Distributor to prepare and forward to
Swissray reports relevant to Distributor's business regarding Swissray Products.
All reports submitted by Distributor will become the property of Swissray.
Swissray will use reports submitted by Distributor only for Swissray's internal
purposes in connection with this Agreement and for no other purpose. Swissray
shall not disclose such reports to third parties except its professional
advisors and then only in connection with this Agreement.
2.8 Compliance with Laws.
Distributor and Swissray shall comply with all applicable federal, state
and local laws and regulations in performing its duties hereunder and in any of
its dealings with Swissray Products.
3 SUPPORT BY SWISSRAY
Swissray shall provide Distributor with support, as follows:
3.1 Swissray shall maintain such promotional programs as it believes in its
sole, absolute judgment will enhance the sale of the Products.
3.2 Swissray shall, from time to time, make sales literature and other
promotional materials available to Distributor.
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<PAGE>
3.3 Swissray shall maintain a network of authorized service centers, which
shall provide both in-warranty and out-of-warranty services to consumers.
3.4 Swissray shall, as may be necessary or appropriate from time to time,
provide technical assistance to Distributor concerning Swissray Products.
3.5 From time to time Swissray may suggest the level of resale pricing of
Products. However, Distributor's resale prices, and its sales policies, shall be
established solely by Distributor, and Swissray, its employees and agents retain
no control of such resale prices or sales policies.
4 GOVERNING TERMS AND CONDITIONS; PRICES, ORDERING AND FINANCIAL REQUIREMENTS
4.1 For purposes of this Agreement, "Terms of Sale" shall mean the terms
set forth in Exhibit C, annexed hereto, and found on the reverse side of each
Swissray invoice, as such Terms of Sale may be replaced, supplemented or
modified, and "Price Schedules" shall mean the Swissray Confidential Price
Schedules as are issued and replaced, supplemented or modified from time to time
by Swissray. The Terms of Sale, Price Schedules are collectively referred to as
the "Terms and Prices." The terms and conditions solely and exclusively
governing the relationship of the parties to this Agreement and the sale of
Products to Distributor will be as set forth in this Agreement and in both the
Swissray Terms of Sale, and Price Schedules, as applicable. The provisions of
this Agreement and the Terms and Prices are cumulative. Nevertheless, except as
specifically stated in this Agreement to the contrary, and except with respect
to this paragraph 4.1 which shall be paramount, in the event of any
irreconcilable conflict between this Agreement and the Terms and Prices, the
latter will prevail.
4.2 From time to time, Swissray may issue policies relating to the sale of
Products including, without limitation, policies covering credit matters,
product repair or replacement or product returns; it may also issue from time to
time special programs containing terms and conditions of sale which temporarily
add to or deviate in part or in whole from the Terms and Prices. Such additional
or different terms and conditions, while in effect, supersede the Terms and
Prices to the extent of any conflict with them. Upon their issuance, and as
replaced, supplemented or modified, such policies and such additional or
different terms and conditions will be deemed a part of the Terms and Prices and
will be binding upon Swissray and Distributor with respect to orders accepted
after their issuance.
4.3 Distributor will, purchase Products at Swissray's standard prices as
set forth in the Price Schedules in effect at the time the order is placed, less
all applicable discounts and allowances as set forth in the Terms and Prices.
Prices, less such discounts and allowances, shall be set forth on Swissray's
invoice to Distributor. Notwithstanding anything to the contrary, all prices,
discounts and allowances are subject to change by Swissray upon their issuance
and without advance notice.
4.4 Distributor will order Products from Swissray in accordance with
ordering procedures established by Swissray from time to time. All purchase
orders must be submitted by Distributor in writing to Swissray's sales
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<PAGE>
representative or, if a sales representative is not involved, directly to
Swissray. Telephone purchase orders must be confirmed in writing. All orders are
subject to acceptance in writing at Swissray's principal place of business. Any
shipment of Products to Distributor in whole or in partial fulfillment of any
purchase order of Distributor will not be deemed to constitute an acceptance by
Swissray of any of the terms and conditions of such purchase order, except as to
identification of Products and the quantities involved, unless otherwise
expressly agreed to in writing by Swissray. Swissray reserves the right to
accept or reject orders in whole or in part in its sole, absolute discretion.
Swissray shall also have the right in its sole, absolute discretion to cancel
any backorders even if such orders have been accepted previously by
acknowledgment, partial shipment or otherwise.
4.5 Distributor represents and warrants to Swissray that it is in good and
substantial financial condition and is able to pay all bills when due. At
Swissray's request, Distributor shall furnish financial statements or additional
information as may be necessary or appropriate to enable Swissray to determine
Distributor's creditworthiness.
4.6 Sales will be made on the credit terms in effect at the time that an
order is accepted. Swissray shall have the right to establish credit limits for
Distributor. If Distributor becomes delinquent in payment obligations or other
credit or financial requirements established by Swissray, or, if in the opinion
of Swissray, Distributor's credit becomes impaired, Swissray may from time to
time at its sole, absolute discretion, in addition to any rights or remedies
provided by applicable law or the Terms of Sale, alter Distributor's credit
limits (or other financial requirements established by Swissray) and take such
actions as it may deem necessary to protect its financial position.
4.7 Swissray's standard terms and conditions shall apply to all
transactions. (See attached Swissray Terms and Conditions)
5 CHANGES IN PRODUCTS, PARTS OR POLICIES
Unless otherwise provided by applicable laws, Swissray may at any time add,
change or cease making available any of the Products or parts without advance
notice to Distributor, and Swissray shall not be liable to Distributor for
failure to furnish the Products or parts of the model, design or type previously
sold.
6 DURATION OF AGREEMENT AND TERMINATION
6.1 Unless earlier terminated as provided below, this Agreement shall
remain in effect from one (1) year next following the date upon which this
Agreement becomes effective as set forth on the first page of this Agreement.
This Agreement may be renewed for one or more one-year periods if each party
hereto gives written notice of such intent to the other party not less than
sixty (60) days prior to the expiration of the initial or any renewal term. If,
after the expiration of the initial or any renewal term, the Agreement has not
been renewed as above provided, and if the parties nonetheless continue to
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<PAGE>
do business, then the Agreement will continue in effect subject to all of its
terms and conditions except that either party shall have the right to terminate
the Agreement with or without cause, for any reason or for no reason, upon
thirty (30) days written notice to the other party.
6.2 This Agreement may be terminated prospectively as follows:
6.2.1 Distributor may terminate this Agreement at any time, with or
without cause, for any reason of for no reason, on 30 days prior written
notice to Swissray or upon 15 days prior written notice as provided in
paragraphs 1.01, 2.04(c), above, or 11.07, below.
6.2.2 Swissray may terminate this Agreement as follows:
6.2.2.1 Swissray may terminate this Agreement by giving Distributor 30
days prior written notice in the event Distributor will have failed to
fulfill or perform any one or more of the duties, obligations or
responsibilities undertaken by it pursuant to paragraphs 2, 5.06 and 11.01
of this Agreement and paragraphs 2, 5 (except with respect to non-payment
provided for in paragraph 7.02(b)(ii)(4), below] and 6(c) of the Terms of
Sale, or in the event of any change of which Distributor is required to
notify Swissray pursuant to paragraph 11.09 of this Agreement, except that
Swissray may terminate this Agreement upon 15 days prior written notice as
provided in paragraph 2.04(c), above.
6.2.2.2 Swissray may terminate this Agreement by giving Distributor
written notice, effective immediately, in any of the following events:
6.2.2.2.1 If Distributor has continued in default of any duty,
obligation or responsibility (other than as provided for in paragraph
7.02(b)(i), above, or other than as provided for in this paragraph 7.02(b)
(ii)] imposed on it by this Agreement, for 30 days after Swissray gives
written notice to Distributor of such default;
6.2.2.2.2 Any assignment or attempted assignment by Distributor of any
interest in this Agreement, or any violation of paragraph 8, below in
connection with a bulk sale or transfer;
6.2.2.2,3 If Distributor becomes insolvent, files or has filed against
it a petition in bankruptcy, makes a general assignment for the benefit of
its creditors or has a receiver or trustee appointed for its business or a
substantial portion of its properties;
6.2.2.2.4 If Distributor defaults in the payment of any indebtedness
to Swissray when and as the same becomes due and payable, if such default
has continued for a period of 10 days after written notice of such default
is given to Distributor; or
6.2.2.2.5 If Distributor makes a material false representation, report
or claim in connection with the business relationship of the parties, or
engages in fraud or criminal misconduct.
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<PAGE>
6.3 Termination of this Agreement by Swissray for cause or termination by
Distributor with or without cause shall automatically accelerate the due date of
all invoices for Swissray Products so that they shall become immediately due and
payable as set forth in paragraph 5 of the Terms of Sale on the effective date
of termination, even if longer terms had been previously agreed to.
6.4 Termination of this Agreement by either party shall automatically
cancel all open orders without liability. In the event of termination of this
Agreement by either party with advance notice, Swissray shall, at its sole
option, be entitled to reject all or part of any orders received from
Distributor after notice but prior to the effective date of termination.
Notwithstanding any credit terms made available to Distributor prior to that
time, any Swissray Products shipped during said final period shall be paid for
by certified or cashier's check prior to shipment.
6.5 Within ten (10) days following the effective date of termination of
this Agreement, Distributor shall submit to Swissray a list of all new,
undamaged and current Swissray Products owned by Distributor as of the effective
date of termination. Swissray shall have the option in its sole, absolute
discretion to repurchase (but shall not be obligated to repurchase) any or all
of the Products upon providing written notice of its intention to Distributor
within thirty (30) days after receipt of the list of the Products from
Distributor. Upon receipt of notice that Swissray intends to exercise its
repurchase option, Distributor will cause the Products selected by Swissray for
repurchase to be delivered to such place(s) in the United States as Swissray may
designate, freight pre-paid. Swissray shall have the right to inspect all
returned merchandise before establishing final disposition. Upon inspection,
Swissray shall be entitled to reject and return to Distributor, freight collect,
any of the Products which, in Swissray's sole, absolute judgment, are in
unacceptable condition. Distributor shall be credited for any accepted Swissray
Products at the lower of: (i) the net invoice prices at which the Products were
originally purchased by Distributor, less any allowances which Swissray may have
given Distributor on account of the Products; or (ii) the price for such
Products prevailing at the effective date of termination of this Agreement, and,
in both cases, less the costs of repair, refurbishing or repackaging, as may be
necessary, and a minimum fee for restocking equal to 15% of the net invoice
price credited to Distributor for returned Products.
6.6 Neither Swissray nor Distributor shall be liable to the other because
of the termination of this Agreement (regardless of the circumstances thereof)
for compensation, reimbursement or damages of any kind, including, without
limitation, damages because of loss of prospective profits or because of
expenditures, investments, leases or any other types of commitments made in
connection with the business of either of them. In the event of termination,
Distributor shall remain liable for all outstanding invoices and unpaid accounts
and Swissray shall remain liable for all credits due to Distributor with respect
to requests for credit submitted by Distributor prior to termination or within
ninety (90) days thereafter.
6.7 Upon termination of this Agreement, each party shall immediately:
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<PAGE>
6.7.1 Discontinue any and all use of the trademark of the other party,
including such use in advertising or business materials of the other party
(except as necessary to sell Products remaining in Distributor's inventory
after termination, but in no event more than one hundred twenty (120) days
after termination; and
6.7.2 Remove or obliterate any and all signs which designate
Distributor as an authorized Swissray Distributor or which include any
trademark of Swissray, and cease holding itself out, in any other manner,
as an authorized Swissray Distributor; and
6.7.3 Notify and instruct publications and others which may list or
publish Distributor's name as an authorized Swissray Distributor (including
telephone directories, yellow pages and other business directories) to
discontinue such listings.
7 ASSIGNMENT
7.1 Distributor is appointed as an authorized Swissray Distributor because
of Swissray's confidence in Distributor, which confidence is personal in nature.
Distributor may not assign, transfer or sell its rights under this Agreement (or
delegate its obligations hereunder) without the prior written consent of
Swissray, and any attempted assignment, transfer or sale (whether by transfer of
stock, assets or otherwise), absent such written consent, shall be null and
void. Subject to these restrictions, the provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties and their permitted
assigns.
7.2 Distributor shall not sell or otherwise transfer a major part of its
materials, supplies, merchandise or other inventory or a substantial part of its
equipment in connection with a sale or transfer of inventory without first
giving Swissray prior written notice as required by the Uniform Commercial Code
and other applicable law.
7.3 Distributor shall not consummate any sale or transfer as set forth in
paragraph 7.2, above, unless contemporaneously therewith Distributor pays all
sums due and payable to Swissray as determined in accordance with paragraph 5 of
the Terms of Sale, even if longer payment terms had been previously agreed to.
7.4 If Distributor shall fail to pay to Swissray all monies due to Swissray
as provided in paragraph 7.3, above, then proceeds or other consideration,
tangible or intangible, received by Distributors in connection with the transfer
described in paragraph 7.2, above, shall be deemed to be held by the recipient
of such proceeds in trust for the benefit of Swissray to the extent of the
amount due and payable to Swissray as provided in paragraph 7.3, above. If the
aforesaid proceeds or other consideration from such sale or transfer are not
received directly by Distributor, then Distributor shall cause the person or
other legal entity receiving such proceeds or consideration to hold such
proceeds or consideration in trust for the benefit of Swissray to the extent of
the amount due and payable to Swissray as provided in paragraph 7.3,
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<PAGE>
above. Such trust shall be subordinate to a prior security interest held by a
person financing all or substantially all of Distributor's inventory. In the
event that a trust arises hereunder, Distributor shall give written notice of
such trust to the buyer or transferee of the materials, supplies, merchandise or
other inventory or equipment described in paragraph 7.2, above, and to Swissray.
7.5 If Distributor breaches any of its obligations under this paragraph 7
and Swissray is not paid the monies due as provided in paragraph 7.3, above,
then, in the event that Swissray chooses to pursue any rights it may have in any
forum in any jurisdiction to collect such monies from the aforesaid buyer or
transferee of Distributor, Distributor will indemnify and hold Swissray harmless
from and against any and all costs and expenses, including, without limitation,
reasonable attorneys' fees in connection with such pursuit.
7.6 Swissray retains the right to assign this contract in the event the
Swissray is sold or merged.
8 MUTUAL RELEASE AND LIMITATIONS ON FUTURE CLAIMS
8.1 Except as reserved in this paragraph 9.01, upon the mutual execution of
this Agreement, and any renewal thereof, Swissray and Distributor hereby do and
shall release each other of and from all manner of action and actions, cause and
causes of action, suits, contracts, controversies, damages, claims and demands
whatsoever, known or unknown, in law or in equity, whether under laws and
regulations of federal, state or municipal governments, under the common law or
otherwise, which such parties or their respective successors or assigns ever
had, now have, or which they or any of them hereafter can, shall or may have
against the other party by reason of any matter, cause or thing whatsoever from
the beginning or time until the date hereof. Swissray reserves its rights
against Distributor for payment with respect to any outstanding invoices and
open accounts and with respect to the protection of its trademarks, other
intellectual property rights and goodwill, and Distributor reserves its right
against Swissray for any unissued credits, for prior accruals for cooperative
advertising, if applicable, for matters regarding the protection of
Distributor's trademarks and other intellectual property and for matters arising
out of Swissray's Product liability. All cooperative advertising claims must be
submitted in accordance with Swissray's cooperative advertising policy.
8.2 Except as provided below in this paragraph 8.2, both Swissray and
Distributor agree that any cause of action or claim hereafter arising out of the
relationship between Swissray and Distributor, including any cause of action or
claim for alleged breach of this Agreement, shall be barred unless arbitration
(as provided in paragraph 10, below) or other action (if permitted by this
Agreement) is commenced by the aggrieved party within one (1) year after the
cause of action or claim first accrues. The aforesaid one (1) year limitation is
in lieu of all other applicable statutes of limitation which may be longer in
duration; however, such one (1) year period shall not apply to any
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<PAGE>
causes of action or claim asserted against Distributor by Swissray arising from
any delinquencies in payment for Swissray Products or asserted by Distributor
with respect to third-party claims arising out of Swissray's Product liability.
9 ARBITRATION AND GOVERNING LAW
Except with respect to each party's indemnity and the other rights of each
party set forth in paragraph 10.5, below, the Arbitration and Governing Law
provisions of paragraph 10 of the Terms of Sale attached as Exhibit C shall also
govern any controversy or claim .arising out of or relating to this Agreement,
to the breach thereof, to the relationship created thereby or to the termination
thereof, with the additional provision that if Distributor shall breach the
provisions of paragraph 7 of this Agreement, it shall pay all of the costs and
expense of Swissray, including, without limitation, reasonable attorneys' fees,
in connection with such arbitration. The arbitrators award shall include such
costs and expenses. The provisions of paragraph 9(d) of the Terms of Sale
attached as Exhibit C shall govern any controversy or claim covered by paragraph
10.5, below.
9.1 The internal law of the State of New York, exclusive of its
conflict-of-laws principles shall govern claims or controversies that are not
the subject of arbitration under these Terms, for this purpose, both DISTRIBUTOR
and SWISSRAY hereby.
10 MISCELLANEOUS PROVISIONS
10.1 Swissray and Distributor agree that their relationship is that of
buyer and seller only, and Distributor shall be considered an independent
contractor at all times with respect to its relationship with Swissray. Nothing
in this Agreement shall be construed as creating the relationship of employer
and employee, master and servant, franchisor and franchisee, principal and agent
or joint venturers between the parties hereto. The relationship created by this
Agreement does not create the grant by Swissray of a franchise to Distributor,
and no federal or state franchise statute, law, regulation or rule will be
deemed or construed to apply to the formation, operation, administration,
expiration or termination of this Agreement. Except as authorized in writing
neither party shall have any express or implied right or authority to assume or
create any obligation on behalf of the other party, and shall not attempt to do
so. This Agreement does not grant to either party a license to use any trade
name, trademark, service mark or trade dress of the other party. Under no
circumstance shall either party, its agents or employees, be considered the
agent of the other party, its agents and employees, and neither party shall
represent themselves directly or by implication as such.
10.2 The failure or refusal by Swissray either to insist upon the strict
performance of any provision of this Agreement or to exercise any right in any
one or more instances or circumstances shall not be construed as a waiver or
relinquishment of such provision or right, nor shall such failure or refusal be
deemed a custom or practice contrary to such provision or right. A waiver of any
provision of this Agreement must be in writing, signed by the waiving party to
be effective.
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<PAGE>
10.3 In the event that any of the provisions of this Agreement or the
application of any such provisions to the parties hereto with respect to their
obligations hereunder shall be held by a court or other tribunal of competent
jurisdiction to be unlawful, invalid, or void or unenforceable, the remaining
provisions of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated. In the event, however, that any
law, order, regulation, direction, restriction or limitation, or interpretation
thereof, shall in the judgment of either party substantially alter the
relationship between the parties under this Agreement, or the advantages derived
from such relationship, such party may request the other party hereto to modify
this Agreement, and, if, within thirty (30) days subsequent to the making of
such request, the parties hereto are unable to agree upon a mutually
satisfactory modification hereof, then either party may terminate this Agreement
without further cause on fifteen (15) days prior written notice to the other
party.
10.4 The paragraph headings contained herein are for reference only and
shall not be considered as substantive parts of this Agreement. The use of the
singular or plural form shall include the other form, and the use of masculine,
feminine or neuter gender shall include the other genders.
10.5 Each party agrees to and does hereby indemnify and hold harmless the
other party and will, at the other party's request, defend the other party, its
employees and agents, with respect to any claim, demand or liability asserted by
a third party against such other party which is based upon any act or omission
by the indemnifying party including, without limitation, any breach of this
Agreement, and from any and all expenses and liabilities resulting therefrom
(including, without limitation, reasonable attorneys' fees). Each party
acknowledges that, should it breach any of its covenants with respect to
trademarks or other intellectual property rights of the other party in this
Agreement or in the Terms of Sale attached as Exhibit C, the otter party will be
irreparably harmed and will be entitled to an injunction preventing the other
party from further breaching the Agreement or the Terms of Sale attached as
Exhibit C without any further or more particularized showing of irreparable
injury. Such an injunction may be applied for before any Court having
jurisdiction thereof. In any such proceeding, the aggrieved party will be
entitled to recover any damages it suffers as a result of the other's breach,
including, without limitation, the recovery of any costs and reasonable
attorneys' fees incurred in enforcing its rights under this Agreement or the
Terms of Sale attached to Exhibit C.
10.6 Neither party shall be liable under the provisions of this Agreement
for direct or indirect damages (except with respect to Distributor's obligations
to pay for Products) on account of its failure to perform its obligations under
this Agreement on account of reasons beyond its absolute, exclusive and
unconditional control, and in no event shall either party be liable for any
indirect, special, incidental, punitive or consequential damages, or loss of
profits or financial investments, under any legal theory, sustained by the other
party (or any person transacting business with such other party) in connection
with its obligations under this Agreement or the relationship of the parties
hereunder.
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<PAGE>
10.7 Nothing contained herein shall be deemed to limit or affect Swissray's
rights to modify, amend or change, in any way it deems to be necessary or
appropriate, any of its Terms and Prices or its policies or procedures,
regardless of whether or not such modifications, amendments or changes relate to
matters contained in this Agreement; provided that, such modification, amendment
or change is prospective in nature and Distributor has received notice of such
modification, amendment or change prior to submitting its purchase order. In the
event that Distributor objects to any such modification, amendment or change, it
may so notify Swissray in writing, and if within ten (10) days after such
notice, Swissray and Distributor do not reach agreement with regard to such
modification, amendment or change, Distributor may terminate this Agreement upon
fifteen (15) days' prior written notice to Swissray
10.8 Unless otherwise specified in this Agreement, all notices and demands
of any kind, which either Swissray or the Distributor may be required or desire
to serve upon the other under the terms of this Agreement, shall be in writing
and shall be served by personal delivery or by mail at their respective
addresses set forth in this Agreement or at such other addresses as may be
designated by the parties in writing. If by personal delivery, service shall be
deemed complete upon such delivery. If by mail, service shall be deemed complete
upon the expiration of the third day after the date of mailing, postage prepaid.
10.9 This Agreement has been entered into by Swissray with Distributor in
reliance upon:
10.9.l Distributor's representation that the following person(s)
substantially participate(s) in the ownership of Distributor:
Name Address % Interest
- ---- ------- ----------
Whiyie Sang Guaynabo, P.R.
- ----------- -------------- ----------
- ----------- -------------- ----------
- ----------- -------------- ----------
l0.9.2 Distributor's representation that the following person(s) will
have full managerial authority and responsibility for the operating
management of Distributor in the performance of this Agreement:
Name Position
- ---- --------
Whiyie Sang President
- ----------- --------------
- ----------- --------------
- ----------- -------------- and
<PAGE>
10.9.3 In the event of any contemplated change of controlling
ownership, Distributor will give Swissray prior written notice thereof
(except in the
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<PAGE>
event of a change caused by the death of any such person(s), in which case
Distributor will give Swissray immediate written notice thereof), but no
such change or notice thereof will act as a waiver of any right of Swissray
under this Agreement or at law unless and until embodied in an appropriate
written waiver duly executed by the Vice President-Sales of Swissray.
10.10 This Agreement shall be effective only after its execution by
Distributor and its subsequent execution by an officer of Swissray at the
principal office of Swissray. No other employee or representative of Swissray
shall have any right or authority to execute this Agreement or any modification
or waiver of this Agreement or to bind Swissray to any other agreement.
11.11 This Agreement, together with its Exhibits and any other documents
incorporated herein by reference, constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof. Any and all written or
oral agreements heretofore or contemporaneously existing between the parties
pertaining to the subject matter of this Agreement are expressly canceled.
Except as otherwise provided by this Agreement, this Agreement may not be
altered, modified, amended or otherwise changed, except by a written instrument
executed by both parties.
11.12 The rights and remedies of the parties under this Agreement and the
Terms, attached as Exhibit C, and Prices are cumulative with rights and remedies
provided at law or in equity. Even if not expressly provided in the provisions
of this Agreement, the obligations of a party which, if they are to have their
stated effect must survive the termination of this Agreement, shall so survive
for the period necessary to give full effect to their stated purpose.
11.13 This Agreement has been executed in multiple counterparts, each of which
shall be deemed enforceable without production of the others.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first hereinabove written.
DISTRIBUTOR Swissray America, Inc.
Medika Equipos Medicos, Inc. By: /s/ ILLEGIBLE
- -------------------------------- -----------------------------
Distributor's Full Legal Name
/s/ Whiyie Sang Title: /s/ ILLEGIBLE
- -------------------------------- ---------------------------
Signature
President, Whiyie Sang
- --------------------------------
Name--print or type
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<PAGE>
Title: President
------------------------
Corporate Officer
(indicate office)
Partner, Proprietor
Dated: October 16, 1998 Dated:
------------------------- ---------------------------
EXHIBIT 10.67
Subscription Agreement
Name Date Amount Signatory
- ---- ---- ------ ---------
Parkdale LLC * Sept., 1999 $1,000,000
* This document has been filed.
<PAGE>
--------------------------------
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: $1,000,000
This offering consists of $1,000,000 shares of Swissray International, Inc.
common stock
-----------------------------
SUBSCRIPTION AGREEMENT
-----------------------------
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SUBSCRIPTION PROCEDURES
A total of 1,000,000 shares (the "Shares") of the common stock of SWISSRAY
INTERNATIONAL, INC., (the "Company") are being offered in an aggregate amount
not to exceed $1,000,000. The Shares 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 "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 Shares. 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 Attorney. 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 Offering or the rejection of this subscription, all
subscription funds will be returned without interest. The wire instructions are
as follows:
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<PAGE>
First Union Bank of Connecticut
Executive Office
300 Main Street, P. 0. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct. Name: Joseph B. LaRocco, Esq. Trustee Account
3
<PAGE>
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 shares of
common stock (the "Shares"). The Shares being offered will be separately
transferable, to the extent that any such transfer is permitted by law. 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 1,000,000 Shares.
This Offering is comprised of an offering of the Shares to accredited investors
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 1,000,000 Shares for $1,000,000. The Purchaser entering into this
Subscription Agreement shall pay the purchase price for the Shares by delivering
immediately available good funds in United States Dollars per the written
instructions of the Company or it's attorney. The closing shall be deemed to
have occurred on the date the funds are wired out per the Company or its
attorney's written instructions, which date the parties agree was September 7,
1999.
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<PAGE>
(b) Upon receipt by the Company of the requisite payment for the Shares
being purchased the Shares so purchased will be forwarded by the Company to the
Purchaser and the name of such Purchaser will be registered on the Shares
transfer books of the Company as the record owner of such Shares. 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 Registration Rights Agreement annexed hereto as Exhibit A
(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 Shares, 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
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<PAGE>
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 Shares without
registration under the Act or applicable state securities laws or an exemption
therefrom. The Shares have not been registered under the Act or under the
securities laws of any states. The Shares are to be registered by the Company
pursuant to the terms of the Registration Rights Agreement attached hereto as
Exhibit A and incorporated herein and made a part hereof. The undersigned
represents that the undersigned is purchasing the Shares 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 Shares being acquired nor does the undersigned have any present intention
of dividing the Shares with others or of selling, distributing or otherwise
disposing of any portion of the Shares either currently or after the passage of
a fixed or determinable period of time or upon the occurrence or nonoccurrence
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 Shares.
(e) The undersigned recognizes that an investment in the `Shares involves
substantial risks, including loss of the entire amount of such investment.
(f) Legends.
(i) The undersigned acknowledges that each certificate representing
the Shares 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, THESE SECURITIES ARE ALSO SUBJECT
TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT CERTAIN
SUBSCRIPTION AGREEMENT AND
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<PAGE>
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 Shares shall contain the following legend until the
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) After the effective date of the Registration Statement the
Shares 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 Shares and (b) to purchase and hold the Shares: (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 Shares, 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 Shares 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,
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<PAGE>
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 Shares 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 Shares and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Shares 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 Shares or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Shares.
(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
Shares 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.
(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
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<PAGE>
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 Shares, 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 B, 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
9
<PAGE>
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 Shares or would be
reasonably likely to render this Subscription Agreement or the Shares, or any
portion thereof invalid or unenforceable.
(f) Issuance of the Shares. 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 Shares; 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 Shares
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 Shares or render the Subscription Agreement or the Shares,
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 Shares 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
10
<PAGE>
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. Shares, 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 or Regulation D. In the past nine months the
Company raised $7,081,200 in Regulation D offerings, including redemptions and
rollovers.
(l) Current Authorized Shares. As of September 1, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 14,540,737
shares were issued and outstanding.
(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 agreements. 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
11
<PAGE>
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 Shares 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) Non-contravention. The execution and delivery of this Agreement by the
Company, the issuance of the Shares, and the consummation by the Company of the
other transactions contemplated by this Agreement, 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.
(p) 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
Shares, 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
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<PAGE>
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.
(q) Use of Proceeds. The Company represents that the net proceeds of this
offering will be primarily used for working capital.
(r) The Company hereby represents that it shall be paying consultant a fee
of _____________.
4. ISSUANCE OF SHARES AND REGISTRATION.
(a) Legend. Upon registration of the Shares, the Company shall deliver to
the Purchaser, or per the Purchaser's instructions, the shares of Common Stock,
subject to the following restrictive legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT INITIALLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON ______________, 1999, AND
MAY BE SOLD IN ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED
_______, 1999, WHICH FORMS A PART OF SUCH REGISTRATION STATEMENT,
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Opinion Letter. 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 date of issuance. Upon surrender of any
Share certificates that are to be sold in part, the Company shall issue to the
Purchaser new Share Certificates equal to the unsold amount.
(c) Once the Common Stock has been registered, if the Common Stock is not
delivered per the written instructions of the Purchaser, within 5 (five)
business days after the Company receives the Share certificates from the
Purchaser, then in such event the Company shall pay to Purchaser one-half of one
percent (.50%) in cash, of the purchase price of the Shares delivered to the
Company per each day after the fifth business day following the receipt by the
Company that the Common Stock is not delivered. The Company acknowledges that
its failure to deliver the Common Stock within said five (5) business days 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
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<PAGE>
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 and the Subscription Agreement.
The Company shall make any payments incurred under this Section 4(c) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Purchaser within five (5) business days after
registration and after the Company receives the Share certificates from the
Purchaser.
(d) The Company shall at all times reserve and have available all Common
Stock necessary for registration of all the Shares purchased by all Purchasers
of the Shares. It at any time the Company does not have sufficient authorized
but unissued shares of Common Stock available for registration ("Default", the
date of such default being referred to herein as the "Default Date"), the
Company shall issue to the Purchaser all of the shares of Common Stock which are
available. The Company shall provide notice of such Default ("Notice of
Default") to all Purchasers, within one (1) business day of such default (with
the original delivered by overnight or two day courier).
The Company agrees to pay to all Purchasers of outstanding Shares payments
for a Default ("Default Payments") in the amount of (N/365) x (.24) x the
initial issuance price of the outstanding Shares held by each Purchaser where N
= the number of days from the Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect of all remaining Shares. The Company shall send notice ("Authorization
Notice") to each Purchaser of outstanding Shares that additional shares of
Common Stock have been authorized, the Authorization Date and the amount of
Purchaser's accrued Default Payments. The accrued Default shall be paid in cash
which payments shall be made to such Purchaser of outstanding Shares by the
fifth day of the following calendar month following registration of all the
Shares.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof, in no event except with respect to a
conversion pursuant to redemption by the Company 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,
14
<PAGE>
shall the Purchaser be entitled to own the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates, and, would result in
beneficial ownership by the Purchaser and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to be
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 (15 of such proviso.
The Purchaser further agrees that if the Purchaser transfers or assigns any of
the Shares 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 C. 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 A.
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 Shares.
(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 Shares, 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 Shares.
15
<PAGE>
(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 SHARES 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 SHARES 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
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<PAGE>
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 Purchaser 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 Purchaser 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 Purchaser 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.
17
<PAGE>
(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 10017 and (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, and C
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)
18
<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
Shares 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 Shares 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
Shares 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:
(a) the shareholder is a natural person whose individual net worth*
or joint net worth with his or her spouse exceeds $1,000,000; or
(b) 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 $206,000 in 1999; or
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<PAGE>
(c) 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.
20
<PAGE>
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Shares 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: _____________________________________________________________
Taxpayer Identification Number: ________________________________________________
Number of Shareholders: ________________________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name: __________________________________________________________________________
Position or Title: _____________________________________________________________
21
<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 Shares and sign is Subscription Agreement on behalf
of Parkdale LLC and, further, that Parkdale LLC has all requisite authority to
purchase the Shares and enter into this Subscription Agreement.
- ------------------------------- ---------------------------------------
Number of Shares subscribed for Date
/s/ Parkdale LLC
---------------------------------------
(Purchaser)
By: /s/ [ILLEGIBLE]
---------------------------------------
(Signature)
Name: Navigator Management Ltd.
Director
---------------------------------------
(Please Type or Print)
Title:
---------------------------------------
(Please Type or Print)
THE SHARES 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.
22
<PAGE>
23
<PAGE>
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of September, 1999
SWISSRAY INTERNATIONAL, INC.
BY /s/ Ruedi G. Laupper
--------------------------------
Ruedi G. Laupper, its Chairman and President
duly authorized
24
EXHIBIT 10.68
Registration Rights Agreement
Name Date Signatory
Parkdale LLC * Sept. 1999
* This document has been filed.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September ____, 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").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions, of the Subscription
Agreement between the Initial Investor and the Company (the "Subscription
Agreement"), the Company has agreed to issue and sell to the Initial Investor
1,000,000 shares of the company's common stock, $.01 par value (the "Shares"),
of the Company upon the terms and subject to the conditions set forth in the
Subscription Agreement; 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:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meaning:
(i) "Closing Date" means the date the funds are wired out per the Company
or its attorney's written instructions, which the parties agree was September
7,1999.
(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
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Statement by the United States Securities and Exchange Commission (the "SEC").
(iv) "Registrable Securities" means the 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 hereby grants to the Initial
Investor piggy-back registration rights in the Company's most recent
Registration Statement. The Company shall include in its current Registration
Statement the Registrable Securities. 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.
(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
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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
following 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 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 and the Subscription Agreement.
3. Obligation of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Either include the Registrable Securities in the Company's current
Registration Statement or file an amendment to the Company's current
Registration Statement to include the Registrable Securities, 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
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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
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<PAGE>
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
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<PAGE>
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.
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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
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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
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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(1) 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
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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., 320 West 77th Street, Suite IA, New York, New York 10024
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,
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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.
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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: /s/ Ruedi G. Laupper
--------------------------
Name: Ruedi G. Laupper
Title: Chairman and President
PARKDALE LLC
By:__________________________
Name:
Title:
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
officers thereunto duly Agreement to be duly executed by their respective
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: _________________________
Name: Ruedi G. Laupper
Title: Chairman and President
PARKDALE LLC
By: /s/ ILLEGIBLE
---------------------------
Name: Navigator Management Ltd.
Title: Director
12
EXHIBIT 10.69
Subscription Agreement
<TABLE>
<CAPTION>
Name Date Amount Signatory
- ---- ---- ------ ---------
<S> <C> <C> <C>
Alfred Hahnfeldt * Oct 01. 1999 $ 250,000 Alfred Hahnfeldt
Southridge Capital Management LLC Oct 01. 1999 $ 250,000
Striker Capital Ltd. Oct 01. 1999 $ 250,000
Alfred Hahnfeldt * Nov 01. 1999 $ 250,000 Alfred Hahnfeldt
Southridge Capital Management LLC Nov 01. 1999 $ 250,000
Striker Capital Ltd. Nov 01. 1999 $ 250,000
</TABLE>
* This document has been filed.
<PAGE>
--------------------------------
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: $1,500,000
This offering consists of 1,000,000 shares of Swissray International, Inc.
common stock
-----------------------------
SUBSCRIPTION AGREEMENT
-----------------------------
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SUBSCRIPTION PROCEDURES
A total of 1,000,000 shares (the "Shares") of the common stock of SWISSRAY
INTERNATIONAL, INC., (the "Company") are being offered in an aggregate amount
not to exceed $1,500,000. The Shares 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 "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 Shares. 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 Attorney. 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 Offering or the rejection of this subscription, all
subscription funds will be returned without interest. The wire instructions are
as follows:
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First Union Bank of Connecticut
Executive Office
300 Main Street, P. 0. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct. Name: Joseph B. LaRocco, Esq. Trustee Account
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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 shares of
common stock (the "Shares"). The Shares being offered will be separately
transferable, to the extent that any such transfer is permitted by law. 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 1,000,000 Shares.
This Offering is comprised of an offering of the Shares to accredited investors
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 _________ Shares for __________. The Purchaser entering into this
Subscription Agreement shall pay the purchase price for the Shares by delivering
immediately available good funds in United States Dollars per the written
instructions of the Company or it's attorney. The closing shall be deemed to
have occurred on the date the funds are wired out per the Company or its
attorney's written instructions, which date the parties agree was October 19,
1999.
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(b) Upon receipt by the Company of the requisite payment for the Shares
being purchased the Shares so purchased will be forwarded by the Company to the
Purchaser and the name of such Purchaser will be registered on the Shares
transfer books of the Company as the record owner of such Shares. 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 Registration Rights Agreement annexed hereto as Exhibit A
(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 Shares, 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-K for the fiscal year ended June 30, 1999 and Forms 10-Q for the three
preceding quarters ended (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
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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 Shares without
registration under the Act or applicable state securities laws or an exemption
therefrom. The Shares have not been registered under the Act or under the
securities laws of any states. The Shares are to be registered by the Company
pursuant to the terms of the Registration Rights Agreement attached hereto as
Exhibit A and incorporated herein and made a part hereof. The undersigned
represents that the undersigned is purchasing the Shares 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 Shares being acquired nor does the undersigned have any present intention
of dividing the Shares with others or of selling, distributing or otherwise
disposing of any portion of the Shares either currently or after the passage of
a fixed or determinable period of time or upon the occurrence or nonoccurrence
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 Shares.
(e) The undersigned recognizes that an investment in the `Shares involves
substantial risks, including loss of the entire amount of such investment.
(f) Legends.
(i) The undersigned acknowledges that each certificate representing
the Shares 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, THESE SECURITIES ARE ALSO SUBJECT
TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT CERTAIN
SUBSCRIPTION AGREEMENT AND
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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 Shares shall contain the following legend until the
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) After the effective date of the Registration Statement the
Shares 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 Shares and (b) to purchase and hold the Shares: (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 Shares, 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 Shares 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,
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<PAGE>
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 Shares 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 Shares and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Shares 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 Shares or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Shares.
(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
Shares 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.
(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
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<PAGE>
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 Shares, 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 B, 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
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<PAGE>
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 Shares or would be
reasonably likely to render this Subscription Agreement or the Shares, or any
portion thereof invalid or unenforceable.
(f) Issuance of the Shares. 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 Shares; 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 Shares
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 Shares or render the Subscription Agreement or the Shares,
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 Shares 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
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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. Shares, 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 or Regulation D. In the past nine months the
Company raised $12,841,200 in Regulation D offerings, including redemptions and
rollovers.
(l) Current Authorized Shares. As of October 1, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 14,576,031
shares were issued and outstanding.
(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 agreements. 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 for the year ended June 30, 1999 which could
make any of the disclosures contained therein (as
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<PAGE>
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 Shares 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) Non-contravention. The execution and delivery of this Agreement by the
Company, the issuance of the Shares, and the consummation by the Company of the
other transactions contemplated by this Agreement, 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.
(p) No Default. Except as may be set forth in the Company's report on form
10-K for the fiscal year ending June 30, 1999, 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
Shares, 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
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<PAGE>
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.
(q) Use of Proceeds. The Company represents that the net proceeds of this
offering will be primarily used for working capital.
4. ISSUANCE OF SHARES AND REGISTRATION.
(a) Legend. Upon registration of the Shares, the Company shall deliver to
the Purchaser, or per the Purchaser's instructions, the shares of Common Stock,
subject to the following restrictive legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT INITIALLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON ______________, 1999, AND
MAY BE SOLD IN ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED
_______, 1999, WHICH FORMS A PART OF SUCH REGISTRATION STATEMENT,
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Opinion Letter. 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 date of issuance. Upon surrender of any
Share certificates that are to be sold in part, the Company shall issue to the
Purchaser new Share Certificates equal to the unsold amount.
(c) Once the Common Stock has been registered, if the Common Stock is not
delivered per the written instructions of the Purchaser, within 5 (five)
business days after the Company receives the Share certificates from the
Purchaser, then in such event the Company shall pay to Purchaser one-half of one
percent (.50%) in cash, of the purchase price of the Shares delivered to the
Company per each day after the fifth business day following the receipt by the
Company that the Common Stock is not delivered. The Company acknowledges that
its failure to deliver the Common Stock within said five (5) business days 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
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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 and the Subscription Agreement.
The Company shall make any payments incurred under this Section 4(c) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Purchaser within five (5) business days after
registration and after the Company receives the Share certificates from the
Purchaser.
(d) The Company shall at all times reserve and have available all Common
Stock necessary for registration of all the Shares purchased by all Purchasers
of the Shares. It at any time the Company does not have sufficient authorized
but unissued shares of Common Stock available for registration ("Default", the
date of such default being referred to herein as the "Default Date"), the
Company shall issue to the Purchaser all of the shares of Common Stock which are
available. The Company shall provide notice of such Default ("Notice of
Default") to all Purchasers, within one (1) business day of such default (with
the original delivered by overnight or two day courier).
The Company agrees to pay to all Purchasers of outstanding Shares payments
for a Default ("Default Payments") in the amount of (N/365) x (.24) x the
initial issuance price of the outstanding Shares held by each Purchaser where N
= the number of days from the Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect of all remaining Shares. The Company shall send notice ("Authorization
Notice") to each Purchaser of outstanding Shares that additional shares of
Common Stock have been authorized, the Authorization Date and the amount of
Purchaser's accrued Default Payments. The accrued Default shall be paid in cash
which payments shall be made to such Purchaser of outstanding Shares by the
fifth day of the following calendar month following registration of all the
Shares.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof, in no event except with respect to a
conversion pursuant to redemption by the Company 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,
14
<PAGE>
shall the Purchaser be entitled to own the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates, and, would result in
beneficial ownership by the Purchaser and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to be
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 (15 of such proviso.
The Purchaser further agrees that if the Purchaser transfers or assigns any of
the Shares 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 C. 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 A.
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 Shares.
(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 Shares, 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 Shares.
15
<PAGE>
(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 SHARES 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 SHARES 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
16
<PAGE>
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 Purchaser 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 Purchaser 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 Purchaser 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.
17
<PAGE>
(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., 320 West 77th Street, Suite 1A, New York, New
York 10024 with a copy by facsimile and mail to Gary B. Wolff, P.C., 747 Third
Avenue, 25th Floor, New York, NY 10017 and (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, and C
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.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
18
<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
Shares 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 Shares 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
Shares 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:
(a) the shareholder is a natural person whose individual net worth*
or joint net worth with his or her spouse exceeds $1,000,000; or
(b) 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
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<PAGE>
(c) 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.
20
<PAGE>
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Shares 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: _____________________________________________________________
Taxpayer Identification Number: ________________________________________________
Number of Shareholders: ________________________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name: __________________________________________________________________________
Position or Title: _____________________________________________________________
21
<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 Shares and sign is Subscription Agreement on behalf
of Parkdale LLC and, further, that Parkdale LLC has all requisite authority to
purchase the Shares and enter into this Subscription Agreement.
- ------------------------------- ---------------------------------------
Number of Shares subscribed for Date
---------------------------------------
(Purchaser)
By:
---------------------------------------
(Signature)
Name:
---------------------------------------
(Please Type or Print)
Title:
---------------------------------------
(Please Type or Print)
THE SHARES 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.
22
<PAGE>
<COPY MISSING>
23
<PAGE>
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of October, 1999
SWISSRAY INTERNATIONAL, INC.
BY /s/ Ruedi G. Laupper
--------------------------------
Ruedi G. Laupper, its Chairman and President
duly authorized
24
EXHIBIT 10.70
Registration Rights Agreement
<TABLE>
<CAPTION>
Name Date Signatory
<S> <C> <C>
Alfred Hahnfeldt * Oct 01. 1999 Alfred Hahnfeldt
Southridge Capital Management LLC Oct 01. 1999
Striker Capital Ltd. Oct 01. 1999
Alfred Hahnfeldt * Nov 01. 1999 Alfred Hahnfeldt
Southridge Capital Management LLC Nov 01. 1999
Striker Capital Ltd. Nov 01. 1999
</TABLE>
* This document has been filed.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 19, 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").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions, of the Subscription
Agreement between the Initial Investor and the Company (the "Subscription
Agreement"), the Company has agreed to issue and sell to the Initial Investor
1,000,000 shares of the company's common stock, $.01 par value (the "Shares"),
of the Company upon the terms and subject to the conditions set forth in the
Subscription Agreement; 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:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meaning:
(i) "Closing Date" means the date the funds are wired out per the Company
or its attorney's written instructions, which the parties agree was October
19,1999.
(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
1
<PAGE>
Statement by the United States Securities and Exchange Commission (the "SEC").
(iv) "Registrable Securities" means the 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 hereby grants to the Initial
Investor piggy-back registration rights in the Company's most recent
Registration Statement. The Company shall include in its current Registration
Statement the Registrable Securities. 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.
(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
2
<PAGE>
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
following 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 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 and the Subscription Agreement.
3. Obligation of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Either include the Registrable Securities in the Company's current
Registration Statement or file an amendment to the Company's current
Registration Statement to include the Registrable Securities, 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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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(1) 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
9
<PAGE>
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., 320 West 77th Street, Suite 1A, New York, New York 10024
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,
10
<PAGE>
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.
11
<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: /s/ Ruedi G. Laupper
--------------------------
Name: Ruedi G. Laupper
Title: Chairman and President
By:__________________________
Name:
Title:
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
officers thereunto duly Agreement to be duly executed by their respective
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: _________________________
Name: Ruedi G. Laupper
Title: Chairman and President
PARKDALE LLC
By: /s/ ILLEGIBLE
---------------------------
Name: Navigator Management Ltd.
Title: Director
12
<TABLE>
<CAPTION>
Name Dated Amount Signatory
- --------------------------------------- ------------ ---------- ----------------
<S> <C> <C> <C>
Parkdale LLC.* Nov. 15, 1999 $1,526,000 Navigator Management Ltd.
* This document has been filed.
</TABLE>
<PAGE>
----------------------------------
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: $1,526,000
This offering consists of $1,526,000 of Convertible Debentures of Swissray
International, Inc.
--------------------
CONTINGENT SUBSCRIPTION AGREEMENT
-------------------
SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $1,526,000 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 comple 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 $1,148,400 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 $1,526,000 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 August 11, 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 August
24, 1999. 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 ha 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 August ,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 $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 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 refe 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: Parkdale LLC
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:Parkdale LLC
Principal Place of Business: Corporate Center West Bay Road
P.O. Box 31106-SMB, Grand Cayman, Cayman Islands
- ----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:____Cayman Islands______________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:_______Jarid (Illegible) for Navigator Management Ltd.________________
Position or Title:_Director________
<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 Parkdale LLC and, further, that Parkdale LLC has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
- -$1,526,000---------- -----Nov 15, 1999-------
Amount of Debentures subscribed for Date
Parkdale LLC
(Purchaser)
By: /s/_(Illegible)_______
(Signature)
Name: _Navigator Management Ltd.____
(Please Type or Print)
Title: __Director_________
(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__/s/Ruedi G. Laupper_________________
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: _____________________
<TABLE>
<CAPTION>
Name Dated Signatory
- --------------------------------------- ------------ ----------
<S> <C> <C>
Southshore Capital, Ltd. Aug. , 1999
Assigned to Parkdale LLC * Nov. 5, 1999 Navigator Management Ltd.
* This document has been filed.
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 11, 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 August 11, 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 (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 August 23, 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 200% of the number of shares of Common Stock for
the Initial Investors into which the $1,148,400 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: ____/s/ Ruedi G. Laupper___
Name: Ruedi G. Laupper
Title: Chairman and President
Parkdale LLC
By: ___/s/ Illegible_________________________________
Name: Navigator Management Ltd.
Title: Director
<TABLE>
<CAPTION>
Name Dated Amount Maturity Date Deb. No.
- --------------------------------------- ------------ ---------- --------------- -------
<S> <C> <C> <C> <C>
Parkdale LLC.* Nov 11, 1999 $1,526,000 Nov 11, 2001 LN-1999-101
* This document has been filed.
</TABLE>
<PAGE>
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.
ISSUANCE DATE November 11, 1999
CONVERTIBLE DEBENTURE DUE November 11, 1999
AMMOUNT $ 1,526,000 Number LN-1999-101
FOR VALUE RECEIVED, SWISSRAY INTERNATIONAL, INC., a New York corporation
(the "Company"), hereby promises to pay Parkdale LLC, LLC or registered
assigns (the "Holder") on November 11, 2001, (the "Maturity Date"), the
principal amount of One Million Five Hundred Twenty-Six Thousand ($
1,526,000) 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. 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 August 11, 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 November 11, 1999.
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 out-
standing 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 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 /s/ Ruedi G. Laupper
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 on face of Debenture)
Signature Guaranteed:
EXHIBIT 10.77
Subscription Agreement
<TABLE>
<CAPTION>
Name Date Amount Signatory
- ---- ---- ------ ---------
<S> <C> <C>
Greenfield Investment Consultants * Dec. , 1999 $ 250,000
Striker Capital Ltd. Dec. , 1999 $ 750,000
</TABLE>
* This document has been filed.
<PAGE>
--------------------------------
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: $1,000,000
This offering consists of 666,667 shares of Swissray International, Inc.
common stock
-----------------------------
SUBSCRIPTION AGREEMENT
-----------------------------
1
<PAGE>
SUBSCRIPTION PROCEDURES
A total of 666,667 shares (the "Shares") of the common stock of SWISSRAY
INTERNATIONAL, INC., (the "Company") are being offered in an aggregate amount
not to exceed $1,000,000. The Shares 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 "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 Shares. 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 Attorney. 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 Offering or the rejection of this subscription, all
subscription funds will be returned without interest. The wire instructions are
as follows:
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First Union Bank of Connecticut
Executive Office
300 Main Street, P. 0. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct. Name: Joseph B. LaRocco, Esq. Trustee Account
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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 shares of
common stock (the "Shares"). The Shares being offered will be separately
transferable, to the extent that any such transfer is permitted by law. 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 666,667 Shares.
This Offering is comprised of an offering of the Shares to accredited investors
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 _________ Shares for __________. Joseph B. LaRocco, Esq. shall act
as escrow agent and notify the Purchaser when he has received the signed
Subscription Agreement (and Exhibits thereto), signed Registration Rights
Agreeent and Common Stock from the Company, at which time the Purchaser shall
wire the Purchase Price to the escrow agent. The Purchaser entering into this
Subscription Agreement shall pay the purchase price for the Shares by delivering
immediately available good funds in United States Dollars per the wire
instructions set forth on page three (3) of this Subscription Agreement.
Once the escrow agent is in receipt of the Common Stock and Purchase Price he
shall deliver the Common Stock to the Purchaser and wire the funds, less
consulting fees and escrow fees, to the Company. the closing shall be deemed to
have occurred on the date the Purchase Price is wired to the Company per the
Company's written instructions (the "Closing Date"), which date the parties
agree shall be December 13, 1999.
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(b) Upon receipt by the Company of the requisite payment for the Shares
being purchased the Shares so purchased will be forwarded by the Company to the
Purchaser and the name of such Purchaser will be registered on the Shares
transfer books of the Company as the record owner of such Shares. 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 Registration Rights Agreement annexed hereto as Exhibit A
(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 Shares, 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-K for the fiscal year ended June 30, 1999 and Forms 10-Q for the three
preceding quarters ended (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
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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 Shares without
registration under the Act or applicable state securities laws or an exemption
therefrom. The Shares have not been registered under the Act or under the
securities laws of any states. The Shares are to be registered by the Company
pursuant to the terms of the Registration Rights Agreement attached hereto as
Exhibit A and incorporated herein and made a part hereof. The undersigned
represents that the undersigned is purchasing the Shares 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 Shares being acquired nor does the undersigned have any present intention
of dividing the Shares with others or of selling, distributing or otherwise
disposing of any portion of the Shares either currently or after the passage of
a fixed or determinable period of time or upon the occurrence or nonoccurrence
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 Shares.
(e) The undersigned recognizes that an investment in the `Shares involves
substantial risks, including loss of the entire amount of such investment.
(f) Legends.
(i) The undersigned acknowledges that each certificate representing
the Shares 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, THESE SECURITIES ARE ALSO SUBJECT
TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT CERTAIN
SUBSCRIPTION AGREEMENT AND
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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 Shares shall contain the following legend until the
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) After the effective date of the Registration Statement the
Shares 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 Shares and (b) to purchase and hold the Shares: (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 Shares, 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 Shares 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,
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<PAGE>
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 Shares 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 Shares and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Shares 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 Shares or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Shares.
(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
Shares 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.
(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
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<PAGE>
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 Shares, 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 B, 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
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<PAGE>
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 Shares or would be
reasonably likely to render this Subscription Agreement or the Shares, or any
portion thereof invalid or unenforceable.
(f) Issuance of the Shares. 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 Shares; 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 Shares
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 Shares or render the Subscription Agreement or the Shares,
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 Shares 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
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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. Shares, 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 or Regulation D. In the past nine months the
Company raised $13,591,200 in Regulation D offerings, including redemptions and
rollovers.
(l) Current Authorized Shares. As of October 5, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 14,576,031
shares were issued and outstanding.
(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 agreements. 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 for the year ended June 30, 1999 which could make any of the
disclosures contained therein (as
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<PAGE>
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 Shares 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) Non-contravention. The execution and delivery of this Agreement by the
Company, the issuance of the Shares, and the consummation by the Company of the
other transactions contemplated by this Agreement, 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.
(p) No Default. Except as may be set forth in the Company's report on form
10-K for the fiscal year ending June 30, 1999, 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
Shares, 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
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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.
(q) Use of Proceeds. The Company represents that the net proceeds of this
offering will be primarily used for working capital.
4. ISSUANCE OF SHARES AND REGISTRATION.
(a) Legend. Upon registration of the Shares, the Company shall deliver to
the Purchaser, or per the Purchaser's instructions, the shares of Common Stock,
subject to the following restrictive legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT INITIALLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON ______________, 1999, AND
MAY BE SOLD IN ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED
_______, 1999, WHICH FORMS A PART OF SUCH REGISTRATION STATEMENT,
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Opinion Letter. 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 date of issuance. Upon surrender of any
Share certificates that are to be sold in part, the Company shall issue to the
Purchaser new Share Certificates equal to the unsold amount.
(c) Once the Common Stock has been registered, if the Common Stock is not
delivered per the written instructions of the Purchaser, within 5 (five)
business days after the Company receives the Share certificates from the
Purchaser, then in such event the Company shall pay to Purchaser one-half of one
percent (.50%) in cash, of the purchase price of the Shares delivered to the
Company per each day after the fifth business day following the receipt by the
Company that the Common Stock is not delivered. The Company acknowledges that
its failure to deliver the Common Stock within said five (5) business days 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
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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 and the Subscription Agreement.
The Company shall make any payments incurred under this Section 4(c) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Purchaser within five (5) business days after
registration and after the Company receives the Share certificates from the
Purchaser.
(d) The Company shall at all times reserve and have available all Common
Stock necessary for registration of all the Shares purchased by all Purchasers
of the Shares. It at any time the Company does not have sufficient authorized
but unissued shares of Common Stock available for registration ("Default", the
date of such default being referred to herein as the "Default Date"), the
Company shall issue to the Purchaser all of the shares of Common Stock which are
available. The Company shall provide notice of such Default ("Notice of
Default") to all Purchasers, within one (1) business day of such default (with
the original delivered by overnight or two day courier).
The Company agrees to pay to all Purchasers of outstanding Shares payments
for a Default ("Default Payments") in the amount of (N/365) x (.24) x the
initial issuance price of the outstanding Shares held by each Purchaser where N
= the number of days from the Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect of all remaining Shares. The Company shall send notice ("Authorization
Notice") to each Purchaser of outstanding Shares that additional shares of
Common Stock have been authorized, the Authorization Date and the amount of
Purchaser's accrued Default Payments. The accrued Default shall be paid in cash
which payments shall be made to such Purchaser of outstanding Shares by the
fifth day of the following calendar month following registration of all the
Shares.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof, in no event except with respect to a
conversion pursuant to redemption by the Company 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,
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shall the Purchaser be entitled to own the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates, and, would result in
beneficial ownership by the Purchaser and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to be
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 (15 of such proviso.
The Purchaser further agrees that if the Purchaser transfers or assigns any of
the Shares 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 C. 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 A.
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 Shares.
(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 Shares, 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 Shares.
15
<PAGE>
(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 SHARES 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 SHARES 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
16
<PAGE>
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 Purchaser 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 Purchaser 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 Purchaser 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.
17
<PAGE>
(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., 320 West 77th Street, Suite 1A, New York, New
York 10024 with a copy by facsimile and mail to Gary B. Wolff, P.C., 747 Third
Avenue, 25th Floor, New York, NY 10017 and (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, and C
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.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
18
<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
Shares 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 Shares 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
Shares 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:
(a) the shareholder is a natural person whose individual net worth*
or joint net worth with his or her spouse exceeds $1,000,000; or
(b) 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
19
<PAGE>
(c) 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.
20
<PAGE>
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Shares 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: _____________________________________________________________
Taxpayer Identification Number: ________________________________________________
Number of Shareholders: ________________________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name: __________________________________________________________________________
Position or Title: _____________________________________________________________
21
<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 Shares and sign is Subscription Agreement on behalf
of Parkdale LLC and, further, that Parkdale LLC has all requisite authority to
purchase the Shares and enter into this Subscription Agreement.
- ------------------------------- ---------------------------------------
Number of Shares subscribed for Date
---------------------------------------
(Purchaser)
By:
---------------------------------------
(Signature)
Name:
---------------------------------------
(Please Type or Print)
Title:
---------------------------------------
(Please Type or Print)
THE SHARES 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.
22
<PAGE>
23
<PAGE>
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of October, 1999
SWISSRAY INTERNATIONAL, INC.
BY /s/ Ruedi G. Laupper
--------------------------------
Ruedi G. Laupper, its Chairman and President
duly authorized
24
EXHIBIT 10.78
Registration Rights Agreement
<TABLE>
<CAPTION>
Name Date Signatory
<S> <C> <C>
Alfred Hahnfeldt * Oct 01. 1999 Alfred Hahnfeldt
Southridge Capital Management LLC Oct 01. 1999
Striker Capital Ltd. Oct 01. 1999
Alfred Hahnfeldt * Nov 01. 1999 Alfred Hahnfeldt
Southridge Capital Management LLC Nov 01. 1999
Striker Capital Ltd. Nov 01. 1999
</TABLE>
* This document has been filed.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 19, 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").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions, of the Subscription
Agreement between the Initial Investor and the Company (the "Subscription
Agreement"), the Company has agreed to issue and sell to the Initial Investor
1,000,000 shares of the company's common stock, $.01 par value (the "Shares"),
of the Company upon the terms and subject to the conditions set forth in the
Subscription Agreement; 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:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meaning:
(i) "Closing Date" means the date the funds are wired out per the Company
or its attorney's written instructions, which the parties agree was October
19,1999.
(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
1
<PAGE>
Statement by the United States Securities and Exchange Commission (the "SEC").
(iv) "Registrable Securities" means the 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 hereby grants to the Initial
Investor piggy-back registration rights in the Company's most recent
Registration Statement. The Company shall include in its current Registration
Statement the Registrable Securities. 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.
(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
2
<PAGE>
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
following 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 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 and the Subscription Agreement.
3. Obligation of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Either include the Registrable Securities in the Company's current
Registration Statement or file an amendment to the Company's current
Registration Statement to include the Registrable Securities, 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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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(1) 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
9
<PAGE>
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., 320 West 77th Street, Suite 1A, New York, New York 10024
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,
10
<PAGE>
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.
11
<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: /s/ Ruedi G. Laupper
--------------------------
Name: Ruedi G. Laupper
Title: Chairman and President
By:__________________________
Name:
Title:
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
officers thereunto duly Agreement to be duly executed by their respective
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: _________________________
Name: Ruedi G. Laupper
Title: Chairman and President
PARKDALE LLC
By: /s/ ILLEGIBLE
---------------------------
Name: Navigator Management Ltd.
Title: Director
12
EXHIBIT 10.79
Agreement to Purchase
Name Date Amount Signatory
- ---- ---- ------ ---------
Parkdale LLC Sept. 2, 1999 $4,000,000 David Sims
This document has been filed.
<PAGE>
AGREEMENT TO PURCHASE SHARES
THIS AGREEMENT TO PURCHASE SHARES (the "Agreement") is entered into as of
this 2nd day of September, 1999, by and between Swissray International, Inc.
(hereinafter "Swissray"), and Parkdale LLC (hereinafter "Parkdale"), based on
the following premises.
PREMISES
WHEREAS, Swissray and Parkdale have been discussing various financing
alternatives involving straight common stock rather than convertible securities;
and
WHEREAS, Swissray and Parkdale have decided to reduce their agreement to
writing concerning purchases of Swissray's common stock (the "Shares"), which
purchases shall be made from time to time by Parkdale and/or its assigns.
AGREEMENT
NOW, THEREFORE, based on the mutual covenants and agreements hereinafter
set forth, which are incorporated herein by reference, and for other good and
valuable consideration, all of which the receipt and adequacy of are hereby
acknowledged by Swissray and Parkdale, the parties hereby agreed as follows:
1. PRICE AND NUMBER OF SHARES.
(a) Parkdale agrees to purchase the Shares as follows:
1,000,000 shares at $1.00 per share for $1,000,000
2,000,000 shares at $1.50 per share for $3,000,000
Parkdale shall have until March 1, 2000, to purchase the 3,000,000 Shares
and pay to Swissray $4,000,000, less agreed upon fees. Each closing shall be
deemed to have occurred on the date the purchase price, less fees, is wired to
Swissray or its attorney (the "Closing Date").
(b) The undersigned acknowledges that each certificate representing the
Shares unless registered pursuant to the Registration Rights Agreement, shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
1
<PAGE>
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, THESE SECURITIES 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 Shares shall contain the following legend
until the effectiveness of the 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) After the effective date of the Registration
Statement the Shares shall not bear any restrictive legend.
2. PARKDALE REPRESENTATIONS.
Parkdale hereby represents and warrants to, and agrees with, Swissray as
follows:
(a) Concerning the Securities. The purchase of the Shares has been duly
authorized by all required corporate action on the part of Parkdale, 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.
2
<PAGE>
(b) Authority to Enter Agreement. This Agreement has been duly authorized,
validly executed and delivered on behalf of Parkdale 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) This Agreement is not the result of, or being entered into 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.
(d) Parkdale and its representatives, as the case may be, has such
knowledge and experience in financial, tax and business matters so as to enable
the Parkdale to utilize the information made available to Parkdale in connection
with the terms of this Agreement to evaluate the merits and risks of an
investment in the Shares and to make an informed investment decision with
respect thereto.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. This Agreement has been duly authorized by
all required corporate action on the part of Swissray, 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.
(b) Authority to Enter. Agreement This Agreement has been duly authorized,
validly executed and delivered on behalf of Swissray 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 by
Swissray, the issuance of the Shares, and the consummation by Swissray of the
other transactions contemplated by this Agreement, do not and will not conflict
with or result in a breach by Swissray of any of the terms or provisions of, or
constitute a default under, the (i) certificate of incorporation or by-laws of
Swissray, (ii) any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Swissray 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 Swissray 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.
3
<PAGE>
(d) Issuance of the Shares. 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 Shares; 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 Shares
in any jurisdiction; and no action, suit or proceeding is pending against or, to
the best knowledge of Swissray, threatened against or affecting, Swissray, any
of its subsidiaries or, to the best knowledge of Swissray, 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 Shares or render this Agreement or the Shares, or any
portion thereof, invalid or unenforceable.
4. ISSUANCE OF SHARES AND REGISTRATION.
(a) Subscription Agreement. The parties shall enter into Subscription
Agreements from time to time concerning the Shares to be purchased which
Subscription Agreements shall set forth the respective rights and obligations of
the parties as well as certain representations and warranties.
(b) Registration. The parties shall enter into a Registration Rights
Agreement whereby Swissray agrees to file a registration statement covering the
Shares within thirty (30) calendar days of the Closing Date on each purchase of
the Shares and if the registration statement is not declared effective within
ninety (90) calendar days of each applicable Closing Date, Swissray shall pay
Parkdale liquidated damages as later agreed upon between the parties. Swissray
represents that it shall at all times reserve and have available all Common
Stock necessary for registration of all the Shares purchased by Parkdale
pursuant to the terms of this Agreement.
5. LIMITS ON AMOUNT OF OWNERSHIP.
Notwithstanding the provisions hereof, in no event except with respect to a
conversion pursuant to redemption by Swissray if there is (a) a public
announcement that 50% or more of Swissray is being acquired, (b) a public
announcement that Swissray is being merged, or (c) a change in control, shall
the Parkdale be entitled to own the number of shares of Common Stock
beneficially owned by the Parkdale and its affiliates, and, would result in
beneficial ownership by the Parkdale and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. 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 Parkdale further agrees that if the Parkdale transfers or assigns any of the
Shares 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
4
<PAGE>
specific agreement to be bound by the provisions of this Section as if such
transferee or assignee were a signatory to this Agreement.
6. 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 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 Swissray, at
SWISSRAY International, Inc., 320 West 77th Street, Suite IA, New York, New York
10024 with a copy by facsimile and mail to Gary B. Wolff, P.C., 747 Third
Avenue, 25th Floor, New York, NY 10017 and (ii) if to the undersigned, at the
address for correspondence set forth on the signature page, or at such other
address as may have been specified by written notice given in accordance with
this paragraph 6(c).
(d) This 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 Swissray, its successors and
assigns. If any provision of this 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 Agreement constitutes 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 this
Agreement shall be effective as an original.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE>
SIGNATURE PAGE
Name: Parkdale LLC
Attention: David Sims
Address: Corporate Center, Widward One
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
(p) 345-945-7566
(f)
Name: _____________________
Title:_____________________
SWISSRAY ACCEPTANCE
This Agreement to Purchase Shares is accepted
and agreed to this 2nd day of September, 1999
SWISSRAY INTERNATIONAL INC.
BY /s/ Ruedi G. Laupper
------------------------------------------------
Ruedi G. Laupper, its Chairman and President
duly authorized
ON LETTERHEAD
EXHIBIT 23.3(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated August 6, 1999 of our audit of
the financial statement of Swissray International, Inc. for the year ended June
30, 1999 in Swissray International, Inc.'s Amendment No. 4 to Form S-1 filed
February 8 , 2000.
/S/Feldman Sherb Horowitz & Co., P.C./
FELDMAN SHERB HOROWITZ & CO., P.C.
New York, New York
February 8 , 2000.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001002137
<NAME> SWISSRAY INTERNATIONAL, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,171,949
<SECURITIES> 0
<RECEIVABLES> 2,805,792
<ALLOWANCES> 212,166
<INVENTORY> 7,240,734
<CURRENT-ASSETS> 12,756,106
<PP&E> 7,327,995
<DEPRECIATION> 1,134,947
<TOTAL-ASSETS> 24,047,993
<CURRENT-LIABILITIES> 15,238,079
<BONDS> 16,098,103
0
0
<COMMON> 159,083
<OTHER-SE> (7,767,258)
<TOTAL-LIABILITY-AND-EQUITY> 24,047,993
<SALES> 3,879,167
<TOTAL-REVENUES> 3,879,167
<CGS> 2,978,034
<TOTAL-COSTS> 2,978,034
<OTHER-EXPENSES> 3,168,008
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,821,613
<INCOME-PRETAX> (3,753,416)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,753,416)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,753,416)
<EPS-BASIC> (.25)
<EPS-DILUTED> (.25)
</TABLE>
