UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report: April 30, 1998
(Date of earliest event reported)
Commission File Number: 0-18105
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VASOMEDICAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2871434
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
180 Linden Avenue, Westbury, New York 11590
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 997-4600
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
On April 30, 1998, Vasomedical, Inc. (the "Company") issued 175,000 shares
of newly created 5% Series C Convertible Preferred Stock, $.01 par value, at a
price of $20 per share, for an aggregate of $3,500,000. The shares were sold to
one (1) accredited investor pursuant to Regulation D promulgated under the
Securities Act of 1933. The Series C Convertible Preferred Stock is convertible
into Common Stock of the Company at an effective conversion price of the lower
of (i) $2.08, or (ii) 85% of the average closing bid price on the Nasdaq
SmallCap Market System of the Company's Common Stock for the five (5) trading
days immediately preceding the Date of Conversion, as defined in the Certificate
of Designation of the Series C Convertible Preferred Stock attached hereto as
Exhibit 3.1. In addition, the Investor was issued five-year warrants to purchase
413,712 shares of Common Stock at an exercise price of $2.08 per share.
Item 7. Financial Statements, Pro Forma Information and Exhibits
(a) and (b) Financial Statements and Pro Forma Information
None.
(c) Exhibits
Exhibit 3.1 Certificate of Designation of Series C Convertible
Preferred Stock of Vasomedical, Inc. as filed with the
Delaware Secretary of State on May 1, 1998.
Exhibit 4.1 Purchase Agreement between Vasomedical, Inc. and JNC
Opportunity Fund, Ltd., dated as of April 30, 1998.
Exhibit 4.2 Registration Rights Agreement between Vasomedical, Inc.
and JNC Opportunity Fund, Ltd., dated as of April 30,
1998.
Exhibit 4.3 Form of Warrant dated April 30, 1998.
Exhibit 99.1 Press Release dated May 8, 1998.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VASOMEDICAL, INC.
By: /s/ Anthony Viscusi
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Anthony Viscusi
President and CEO (Principal Executive
Officer)
/s/ Joseph A. Giacalone
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Joseph A. Giacalone
Treasurer and Secretary (Principal Financial
and Accounting Officer)
Date: May 11, 1998
CERTIFICATE OF DESIGNATION OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
VASOMEDICAL, INC.
The undersigned, Anthony Viscusi and Joseph A. Giacalone, hereby certify
that:
I. They are the duly elected and acting President and Secretary,
respectively, of Vasomedical, Inc., a Delaware corporation (the "Company").
II. The Certificate of Incorporation of the Company authorizes
1,000,000 shares of preferred stock, par value $.01 per share, (of which 500,000
shares have been designated as Class Preferred Stock, Series A, and of which
150,000 shares have been designated as Class Preferred Stock, Series B), of
which no Series A shares are issued and outstanding and 58,000 Series B Shares
are issued and outstanding.
III. The following is a true and correct copy of resolutions duly
adopted by the Board of Directors of the Company (the "Board of Directors") at a
meeting duly held April 30, 1998, which constituted all requisite action on the
part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors is authorized to provide for the
issuance of shares of preferred stock from time to time in one or more series,
and by filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, and to fix or alter the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (and any
sinking fund provisions), redemption price or prices, and the liquidation
preferences of any wholly unissued series of preferred stock.
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
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NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
Section 1. Designation, Amount and Par Value. The series of preferred
stock shall be designated as the Series C Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 175,000
(which shall not be subject to increase without the consent of the holders
thereof). Each share of Preferred Stock shall have a par value of $.01 per share
and a stated value of $20 per share (the "Stated Value").
Section 2. Dividends.
(a) Holders of Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors out of funds legally available therefor,
and the Company shall pay, cumulative dividends at the rate per share (as a
percentage of the Stated Value per share) equal to 5% per annum, payable, in
cash or shares of Common Stock (in accordance with the delivery terms hereof as
defined in Section 7) at the option of the Company, quarterly in arrears, but in
no event later than the Conversion Date (as hereinafter defined) applicable to
such share of Preferred Stock in accordance with the delivery terms hereof.
Dividends on the Preferred Stock shall accrue daily commencing the Original
Issue Date (as defined in Section 7), and shall be deemed to accrue on such date
whether or not earned or declared and whether or not there are profits, surplus
or other funds of the Company legally available for the payment of dividends. If
dividends are to be paid in shares of Common Stock, the number of shares to be
issued shall equal the cash sum of the dividends divided by the Conversion Price
(as defined in Section 5(c)(i)) as of the date paid. The party that holds the
Preferred Stock of record on an applicable record date for any dividend payment
will be entitled to receive such dividend payment and any other accrued and
unpaid dividends which accrued prior to such dividend payment date, without
regard to any sale or disposition of such Preferred Stock subsequent to the
applicable record date but prior to the applicable dividend payment date. Except
as otherwise provided herein, if at any time the Company pays less than the
total amount of dividends then accrued on account of the Preferred Stock, such
payment shall be distributed ratably among the holders of the Preferred Stock
based upon the number of shares held by each holder. Payment of dividends on the
Preferred Stock is further subject to the provisions of Section 5(c)(i).
Notwithstanding anything to the contrary contained herein, the Company may not,
without the written consent of the holders of a majority of the then outstanding
Preferred Stock, pay dividends in cash on the Preferred Stock unless both the
payment thereof and the retention of such paid cash by the holders is consented
to in writing free of any subordination prior thereto by all lenders and debt
holders of the Company or by all holders of any class of securities of the
Company who by agreement have the right to consent to or force the subordination
of such payment.
(b) Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of dividends (and must
deliver cash in respect thereof) on the Preferred Stock if:
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(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held as treasury stock, is
insufficient to issue such dividends to be paid in shares of Common Stock;
(ii) such shares are not registered for resale pursuant to an
effective registration statement that names the recipient of such dividend as a
selling stockholder thereunder or may not be sold without volume restrictions
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the holder, in form and substance
acceptable to such holder;
(iii) such shares are not listed on the Nasdaq SmallCap Market
(or the American Stock Exchange, Nasdaq National Market or The New York Stock
Exchange) and any other exchange or quotation system on which the Common Stock
is then listed for trading; or
(iv) the issuance of such shares would result in the recipient
thereof beneficially owning, in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), more than
4.99% of the issued and outstanding shares of Common Stock.
(c) Notwithstanding anything to the contrary contained herein,
dividends in respect of the Preferred Stock will cease to accrue if the Per
Share Market Value for any consecutive 10 Trading Day period commencing after
the date that an Underlying Shares Registration Statement (as defined in Section
5) is declared effective by the Securities and Exchange Commission (the
"Commission") exceeds the Initial Conversion Price by more than 50%. In such
event, dividends accrued through such date shall be due and payable.
(d) So long as any Preferred Stock shall remain outstanding, neither
the Company nor any subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities (as defined in Section 7),
nor shall the Company directly or indirectly pay or declare any dividend or make
any distribution (other than a dividend or distribution described in Section 5)
upon, nor shall any distribution be made in respect of, any Junior Securities,
nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities unless all
accrued and unpaid dividends on the Preferred Stock for all past dividend
periods shall have been paid.
Section 3. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the holders of a majority of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock, (b) alter or
amend this Certificate of Designation or (c) authorize or create any class of
stock ranking as to dividends or distribution of assets upon a Liquidation (as
defined in Section 4) senior to the Preferred Stock.
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Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the holders of Preferred Stock shall be entitled to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid
dividends per share, whether declared or not, before any distribution or payment
shall be made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of Preferred Stock shall be distributed
among the holders of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. A sale, conveyance or disposition of all or substantially all of
the assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 33% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record holder of Preferred Stock.
Section 5. Conversion.
(a)(i)(A) Each share of Preferred Stock shall be convertible into
shares of Common Stock (subject to reduction pursuant to Section 5(a)(ii) below
and Section 4.10 of the Purchase Agreement (as defined in Section 7)) at the
Conversion Ratio (as defined in Section 7) at the option of the holder in whole
or in part at any time after the earlier to occur of (A) the 105th day after the
Original Issue Date or (B) the date the Commission declares effective under the
Securities Act, a registration statement contemplated by the Registration Rights
Agreement (as defined in Section 7) (the "Underlying Shares Registration
Statement"). The holder shall effect conversions by surrendering the certificate
or certificates representing the shares of Preferred Stock to be converted to
the Company, duly endorsed or accompanied by a validly executed stock power,
together with the form of conversion notice attached hereto as Exhibit A (the
"Holder Conversion Notice"). Each Holder Conversion Notice shall specify the
number of shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the Holder
Conversion Notice is deemed delivered hereunder (the "Holder Conversion Date").
If no Holder Conversion Date is specified in a Holder Conversion Notice, the
Holder Conversion Date shall be the date that the Conversion Notice (defined
below) is deemed delivered pursuant to Section 5(h). Subject to Sections 5(b)
and 5(a)(ii) hereof and Section 4.10 of the Purchase Agreement, each Holder
Conversion Notice, once given, shall be irrevocable. If the holder is converting
less than all shares of Preferred Stock represented by the certificate or
certificates tendered by the holder with the Holder Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such holder (in the manner and within the time set
forth in Section 5(b)) a certificate for such number of shares of Preferred
Stock as have not been converted.
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(B) After the third anniversary of the date the Underlying Shares
Registration Statement is declared effective by the Commission, which date shall
be extended by any days the Holder is unable to sell Underlying Shares under the
Underlying Shares Registration Statement as a result of (1) the failure of the
Underlying Shares Registration Statement being effective and not subject to any
suspension or blackout, (2) any action taken by the Company to prevent such
ability to sell Underlying Shares under the Underlying Shares Registration
Statement or (3) a delisting or suspension of trading of the Common Stock, the
Company may require the conversion of all or any portion of the then outstanding
and unconverted shares of Preferred Stock at the Conversion Ratio (subject to
reduction pursuant to Section 5(a)(ii) below and Section 4.10 of the Purchase
Agreement) by delivering to the Holder of such shares to be converted written
notice (the "Company Conversion Notice"), provided, that, no such conversion is
permitted unless at the time of delivery of the Company Conversion Notice and on
the Company Conversion Date (as defined below), (a) no less than 10 days have
passed since the issuance of any press release or other public statement
relating to such conversion, (b) an Underlying Shares Registration Statement
covering the resale of the shares of Common Stock issuable upon such conversion
is effective and (c) the shares of Common Stock issuable upon such conversion
are listed for trading on the Nasdaq SmallCap Market and any other exchange or
quotation system on which the Common Stock is then listed for trading. Each
Company Conversion Notice shall specify the number of shares of Preferred Stock
to be converted and the date on which such conversion is to be effected, which
date may not be prior to the day after the Company delivers such Company
Conversion Notice by facsimile (the "Company Conversion Date"). If no Company
Conversion Date is specified in a Company Conversion Notice, the Company
Conversion Date shall be the date that the Conversion Notice is deemed delivered
pursuant to Section 5(h). A Holder Conversion Date and a Company Conversion Date
are sometimes referred to herein as the "Conversion Date" and a Holder
Conversion Notice and a Company Conversion Notice are sometimes referred to as a
"Conversion Notice." Any conversion pursuant to this Section 5(a)(i)(B) shall be
subject to Section 5(b) with respect to consequences of the Company's failure to
deliver shares of Common Stock in respect of a conversion under this Section. If
the Company is converting less than all shares of Preferred Stock represented by
the certificate or certificates tendered by the Holder in response to a Company
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall promptly deliver to such tendering Holder (in the
manner and within the time set forth in Section 5(b)) a certificate for such
number of shares as have not been converted.
(ii) Certain Regulatory Approval. If on the Conversion Date
applicable to any conversion under this Section 5(a), (A) the Common Stock is
then listed for trading on the Nasdaq National Market or the American Stock
Exchange or if the rules of the Nasdaq Stock Market are hereafter amended to
extend Rule 4460(i) promulgated thereby (or any successor or replacement
provision thereof) to the Nasdaq SmallCap Market and the Common Stock is then
listed for trading on such market, (B) the Conversion Price then in effect is
such that the aggregate number of shares of Common Stock that would then be
issuable upon conversion of all outstanding shares of Preferred Stock, together
<PAGE>
with any shares of Common Stock previously issued upon conversion of Preferred
Stock and in respect of payment of dividends hereunder, would equal or exceed
20% of the number of shares of Common Stock outstanding on the Original Issue
Date (the "Issuable Maximum"), and (C) the Company has not previously obtained
Shareholder Approval (as defined below), then the Company shall issue to the
converting holder of the Preferred Stock the Issuable Maximum and, with respect
to any shares of Common Stock that otherwise would have been issuable to such
holder in respect of the Conversion Notice at issue or in respect of payment of
dividends hereunder in excess of the Issuable Maximum, the holder shall have the
option to require the Company to either (1) as promptly as possible, but in no
event later than 60 days after such Conversion Date, convene a meeting of the
holders of the Common Stock and use its best efforts to obtain the Shareholder
Approval or (2) redeem, from funds legally available therefor at the time of
such redemption, the balance of the Preferred Stock subject to such Conversion
Notice at a price per share equal to the product of (i) the Per Share Market
Value for the Trading Day immediately preceding (1) the Conversion Date or (2)
the date of payment in full by the Company of the redemption price, whichever is
greater, and (ii) the Conversion Ratio calculated on the Conversion Date;
provided, however, that if the holder has requested that the Company obtain
Shareholder Approval under paragraph (1) above and the Company fails for any
reason to obtain such Shareholder Approval within the time period set forth in
(1) above, the Company shall be obligated to redeem the Preferred Stock not
converted as a result of the provisions of this Section in accordance with the
provisions of paragraph (2) above, and in such case the interest contemplated by
the immediately succeeding sentence shall be deemed to accrue from the
Conversion Date. If the holder has requested that the Company redeem shares of
Preferred Stock pursuant to this Section and the Company fails for any reason to
pay the redemption price under (2) above within seven days after the Conversion
Date, the Company will pay interest on such redemption price at a rate of 15%
per annum to the converting holder of Preferred Stock, accruing from the
Conversion Date until the redemption price plus any accrued interest thereon is
paid in full. The entire redemption price, including interest thereon, shall be
paid in cash. Unless a greater vote is required by applicable law, "Shareholder
Approval" means the approval by a majority of the total votes cast on the
proposal, in person or by proxy, at a meeting of the shareholders of the Company
held in accordance with the Company's Certificate of Incorporation and by-laws,
of the issuance by the Company of shares of Common Stock exceeding the Issuable
Maximum as a consequence of the conversion of Preferred Stock into Common Stock
at a price less than the greater of the book or market value on the Original
Issue Date as and to the extent required pursuant to Rule 4460(i) of the Nasdaq
Stock Market or Rule 713 of the American Stock Exchange (or any successor or
replacement provision thereof), as applicable.
(b) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the converting holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 4.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock (subject to reduction pursuant to Section 5(a)(iii) and Section
4.10 of the Purchase Agreement) and (ii) one or more certificates representing
the number of shares of Preferred Stock not converted; provided, however, that
<PAGE>
the Company shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon conversion of any shares of Preferred Stock until
certificates evidencing such shares of Preferred Stock are either delivered for
conversion to the Company or any transfer agent for the Preferred Stock or
Common Stock duly endorsed or accompanied by a validly executed stock power, or
the holder of such Preferred Stock notifies the Company that such certificates
have been lost, stolen or destroyed and provides a bond (or other adequate
security) reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection therewith. If in the case of any
Conversion Notice such certificate or certificates, including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid dividends hereunder, are not delivered to or as
directed by the applicable holder by the third Trading Day after the Conversion
Date, the holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
If the Company fails to deliver to the holder such certificate or certificates
pursuant to this Section, including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, prior to the expiration of the fourth Trading Day after the
Conversion Date, the Company shall pay to such holder, in cash, as liquidated
damages and not as a penalty, $1,500 for each day after such fourth Trading Day
until such certificates are delivered. If the Company fails to deliver to the
holder such certificate or certificates pursuant to this Section prior to the
20th day after the Conversion Date, the Company shall, at the holder's option
(i) redeem, from funds legally available therefor at the time of such
redemption, such number of shares of Preferred Stock then held by such holder,
as requested by such holder, and (ii) pay all accrued but unpaid dividends on
account of the Preferred Stock for which the Company shall have failed to issue
Common Stock certificates hereunder, in cash. The redemption price per share
shall be equal to the product of (A) the average Per Share Market Value for the
five (5) Trading Days immediately preceding (1) the Conversion Date or (2) the
date of payment in full by the Company of such redemption price, whichever is
greater, and (ii) the Conversion Ratio calculated on the Conversion Date. If the
holder has requested that the Company redeem shares of Preferred Stock pursuant
to this Section and the Company fails for any reason to pay the redemption price
under (2) above within seven days after such notice is deemed delivered pursuant
to Section 5(h), the Company will pay interest on the redemption price at a rate
of 15% per annum, in cash to such holder, accruing from such seventh day until
the redemption price and any accrued interest thereon is paid in full.
(c) (i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of (a)
$2.08 (the "Initial Conversion Price") or (b) 85% of the average of the Per
Share Market Value for the five (5) Trading Days immediately preceding the
Conversion Date; provided that, (a) if the Underlying Shares Registration
Statement is not filed on or prior to the 92nd day after the Original Issue
Date, or (b) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Exchange Act
within five (5) days of the date that the Company is notified (orally or in
<PAGE>
writing, whichever is earlier) by the Commission that an Underlying Shares
Registration Statement will not be "reviewed" or is not subject to further
review or comment by the Commission, or (c) if the Underlying Shares
Registration Statement is not declared effective by the Commission on or prior
to the 105th day after the Original Issue Date, or (d) if such Underlying Shares
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities (as such
term is defined in the Registration Rights Agreement) at any time prior to the
expiration of the "Effectiveness Period" (as such term as defined in the
Registration Rights Agreement), without being succeeded within 10 Business Days
by a subsequent Underlying Shares Registration Statement filed with and declared
effective by the Commission, or (e) if trading in the Common Stock shall be
suspended for any reason for more than three Trading Days, or (f) if the
conversion rights of the holders of Preferred Stock hereunder are suspended for
any reason, or (g) after an Underlying Shares Registration Statement has been
declared effective by the Commission, if holders of Preferred Stock are unable
to utilize an Underlying Shares Registration Statement for the resale of
Registrable Securities for an aggregate of ten (10) Trading Days in any 360 days
after the Original Issue Date (any such failure being referred to as an "Event,"
and for purposes of clauses (a), (c) and (f) the date on which such Event
occurs, or for purposes of clause (g) the Business Day after such Event occurs,
or for purposes of clause (b) the date on which such five
(5) days period is exceeded, or for purposes of clause (d) the date on which
such 10 Business Day-period is exceeded, or for purposes of clause (e) the date
on which such three Trading Day period is exceeded, being referred to as "Event
Date"), the Conversion Price shall be decreased by 2.5% each month (i.e., 82.5%
as of the Event Date and 80% as of the one month anniversary of the Event Date)
until the earlier to occur of the second month anniversary after the Event Date
and such time as the applicable Event is cured. Commencing the second month
anniversary after the Event Date, the Company shall pay to the holders of the
Preferred Stock 2.5% of the outstanding amount of Preferred Stock (each holder
being entitled to receive such portion of such amount as equals its pro rata
portion of the Preferred Stock then outstanding) in cash as liquidated damages,
and not as a penalty on the first day of each monthly anniversary of the Event
Date until such time as the applicable Event, is cured. Any decrease in the
Conversion Price pursuant to this Section shall continue notwithstanding the
fact that the Event causing such decrease has been subsequently cured. The
provisions of this Section are not exclusive and shall in no way limit the
Company's obligations under the Registration Rights Agreement. Notwithstanding
anything to the contrary set forth herein, the Company may not, without the
prior written consent of the holders, pay liquidated damages hereunder in cash
unless it shall have received the prior written consent of all lenders of the
Company or its Affiliates that have the right to require such consent or to
subordinate any such cash payment, which consent shall provide that the payment
by the Company of any such liquidated damages hereunder (and the retention of
such sum by the receiving holder) is not subject to any applicable subordination
rights of such lender.
(ii) If the Company, at any time while any shares of Preferred
Stock are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine outstanding shares of Common Stock into a
smaller number of shares, or (d) issue by reclassification of shares (other than
<PAGE>
a stock split or reverse stock split) of Common Stock any shares of capital
stock of the Company, the Initial Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section 5(c)(ii) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights or warrants to all holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Initial Conversion Price shall be multiplied by
a fraction, of which the denominator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted in an adjustment
in the Initial Conversion Price pursuant to this Section 5(c)(iii), if any such
right or warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial Conversion
Price made pursuant to the provisions of this Section 5 after the issuance of
such rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock
are outstanding, shall distribute to all holders of Common Stock (and not to
holders of Preferred Stock) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Sections 5(c)(ii) and (iii) above), then in each such case the Initial
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Initial Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of Common Stock determined as of
the record date mentioned above, and of which the numerator shall be such Per
<PAGE>
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith; provided, however, that
in the event of a distribution exceeding ten percent (10%) of the net assets of
the Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holders of a majority in interest of the shares of
Preferred Stock then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the holders
of Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Initial Conversion Price is adjusted pursuant
to Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to each
holder of Preferred Stock, a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(vii) In case of any reclassification (which, for purposes of
this Section 5(c)(vii), does not include a stock split or reverse stock split)
of the Common Stock, any consolidation or merger of the Company with or into
another person pursuant to which the Company will not be the surviving entity,
the sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the holders of the Preferred Stock then
outstanding shall have the right thereafter to, at their option, (A) convert
such shares only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger, sale, transfer or share
exchange, and the holders of the Preferred Stock shall be entitled upon such
event to receive such amount of securities, cash or property as the shares of
the Common Stock of the Company into which such shares of Preferred Stock could
have been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled or (B) require
the Company to redeem, from funds legally available therefor at the time of such
redemption, its shares of Preferred Stock at a price per share equal to the
product of (i) the average Per Share Market Value for the five (5) Trading Days
immediately preceding (1) the effective date or the date of the closing, as the
case may be, of the reclassification, consolidation, merger, sale, transfer or
share exchange the triggering such redemption right or (2) the date of payment
in full by the Company of the redemption price hereunder, whichever is greater,
and (ii) the Conversion Ratio calculated on the date of the closing or the
effective date, as the case may be, of the reclassification, consolidation,
merger, sale, transfer or share exchange triggering such redemption right, as
<PAGE>
the case may be. The entire redemption price shall be paid in cash, and the
terms of payment of such redemption price shall be subject to the provisions set
forth in Section 6. The terms of any such consolidation, merger, sale, transfer
or share exchange shall include such terms so as to continue to give to the
holder of Preferred Stock the right to receive the securities, cash or property
set forth in this Section 5(c)(vii) upon any conversion or redemption following
such consolidation, merger, sale, transfer or share exchange. This provision
shall similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company,
of any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
<PAGE>
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert shares of Preferred Stock during
the 30-day period commencing the date of such notice to the effective date of
the event triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock and payment of dividends on
Preferred Stock, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the holders of
Preferred Stock, not less than such number of shares of Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5(c)) upon the conversion of all
outstanding shares of Preferred Stock and payment of dividends hereunder. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradeable.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
undesignated stock.
(h) Any and all notices or other communications or deliveries to be
provided by the holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the attention of
<PAGE>
the Chief Executive Officer of the Company at the facsimile telephone number or
address of the principal place of business of the Company as set forth in the
Purchase Agreement. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed to
each holder of Preferred Stock at the facsimile telephone number or address of
such holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of the
holder. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (Eastern Time),
(ii) the date after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern Time) on any date and earlier than 11:59
p.m. (Eastern Time) on such date, (iii) four days after deposit in the United
States mails, (iv) the Business Day following the date of mailing, if send by
nationally recognized overnight courier service, or (v) upon actual receipt by
the party to whom such notice is required to be given.
Section 6. Redemption.
The Company shall have the right, exercisable at any time upon 20
Trading Days notice to the holders of the Preferred Stock given at any time
after the Original Issue Date to redeem, from funds legally available therefor
at the time of such redemption, all or any portion of the shares of Preferred
Stock which have not previously been converted or redeemed, at a price per share
equal to the product of (i) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (1) the date of the redemption notice
referenced above or (2) the date of payment in full by the Company of the
redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio
calculated on the date of such redemption notice. The entire redemption price
shall be paid in cash. Holders of Preferred Stock may convert any shares of
Preferred Stock, including shares subject to a redemption notice given under
this Section, during the period from the date of such redemption notice through
the 19th Trading Day thereafter.
If any portion of the redemption price under this Section shall not be
paid by the Company within seven (7) calendar days after the date due, interest
shall accrue thereon at the rate of 15% per annum until the redemption price
plus all such interest is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). In addition, if any portion of such redemption
price remains unpaid for more than 7 calendar days after the date due, the
holder of the Preferred Stock subject to such redemption may elect, by written
notice to the Company given within 30 days after the date due, to either (i)
demand conversion in accordance with the formula and the time frame therefor set
forth in Section 5 of all of the shares of Preferred Stock for which such
redemption price, plus accrued liquidated damages thereof, has not been paid in
full (the "Unpaid Redemption Shares"), in which event the Per Share Market Price
<PAGE>
for such shares shall be the lower of the Per Share Market Price calculated on
the date such redemption price was originally due and the Per Share Market Price
as of the holder's written demand for conversion, or (ii) invalidate ab initio
such redemption, notwithstanding anything herein contained to the contrary. If
the holder elects option (i) above, the Company shall within three (3) Trading
Days of its receipt of such election deliver to the holder the shares of Common
Stock issuable upon conversion of the Unpaid Redemption Shares subject to such
holder conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company shall
promptly, and in any event not later than three (3) Trading Days from receipt of
holder's notice of such election, return to the holder all of the Unpaid
Redemption Shares. Notwithstanding anything to the contrary contained herein,
the Company may not, without the written consent of the holder, redeem shares of
Preferred Stock unless both the payment thereof and the retention of such paid
cash by the holder is consented to in writing free of any subordination prior
thereto by all lenders of the Company who by agreement have the right to consent
to or force the subordination of such payment.
Section 7. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
"Common Stock" means the Company's common stock, $.001 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid interest thereon) but only to the extent to be paid in shares
of Common Stock in accordance with the terms hereof, and of which the
denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq SmallCap
Market or other stock exchange or quotation system on which the Common Stock is
then listed or if there is no such price on such date, then the closing bid
price on such exchange or quotation system on the date nearest preceding such
date, or (b) if the Common Stock is not listed then on the Nasdaq SmallCap
Market or any stock exchange or quotation system, the closing bid price for a
<PAGE>
share of Common Stock in the over-the-counter market, as reported by the Nasdaq
Stock Market or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the holders of a majority in interest of the shares of the
Preferred Stock; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original holder of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Original Issue Date, by and between the Company and the
original holder of Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq SmallCap Market or other stock exchange or market on which the Common
Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq
SmallCap Market or any stock exchange or market, a day on which the Common Stock
is traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
<PAGE>
RESOLVED FURTHER, that the President and Secretary of the Company be,
and they hereby are, authorized and directed to prepare, execute, verify, and
file with the Secretary of State of Delaware, a Certificate of Designation in
accordance with these resolutions and as required by law.
IN WITNESS WHEREOF, Vasomedical, Inc. has caused its corporate seal to
be hereunto affixed and this certificate to be signed by Anthony Viscusi, its
President, and attested by Joseph A. Giacalone, its Secretary, this 30th day of
April, 1998.
VASOMEDICAL, INC.
By:/s/Anthony Viscusi
-------------------
Anthony Viscusi
President
Attest:
By:/s/Joseph Giacalone
-------------------
Joseph A. Giacalone
Secretary
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.001 per share (the "Common Stock"), of Vasomedical, Inc. (the "Company")
pursuant to the terms of the Certificate of Designation of Series B Convertible
Preferred Stock of the Company, as of the date written below. If shares are to
be issued in the name of a person other than undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.
Conversion calculations:
--------------------------------------------------------
Date to Effect Conversion
--------------------------------------------------------
Number of shares of Preferred Stock to be Converted
--------------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------------
Applicable Conversion Price
--------------------------------------------------------
Signature
--------------------------------------------------------
Name
--------------------------------------------------------
Address
The Company undertakes to promptly upon its receipt of this conversion notice
(and, in any case prior to the time it effects the conversion requested hereby),
notify the converting holder by facsimile of the number of shares of Common
Stock which would be issuable to the holder if the conversion requested in this
conversion notice were effected in full and whether and (if so) the number of
shares of Common Stock to be issued as payment of dividends in respect of the
shares of Preferred Stock to be converted hereby, whereupon, if the converting
holder determines that such conversion would result in it owning in excess of
4.999% of the outstanding shares of Common Stock on such date, the Company shall
convert up to an amount equal to 4.999% of the outstanding shares of Common
Stock and issue to the holder one or more certificates representing shares of
Preferred Stock which have not been converted as a result of this provision.
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
VASOMEDICAL, INC.
and
JNC OPPORTUNITY FUND LTD.
------------------------------
Dated as of April 30, 1998
------------------------------
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of April 30, 1998
(this "Agreement"), between Vasomedical, Inc., a Delaware corporation (the
"Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the
"Purchaser").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to acquire shares of the Company's 5% Series C Convertible Preferred Stock, $.01
par value per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
ARTICLE I CERTAIN DEFINITIONS
-----------------------------
Section 1.1. Certain Definitions. As used in this Agreement, unless the
context requires a different meaning, the following terms have the meanings
indicated in this Section 1.1:
"Affiliate" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the recitals hereto.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a Federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government actions
to close.
"Certificate of Designation" shall have the meaning set forth in Section
2.1(a).
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
<PAGE>
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.001 per share.
"Company" shall have the meaning set forth in the recitals hereto.
"Conversion Ratio" shall have the meaning set forth in the Certificate of
Designation.
"Disclosure Materials" means, collectively, the SEC Documents, the
disclosure package delivered to the Purchaser in connection with the offering by
the Company of the Shares and the Schedules to this Agreement furnished by or on
behalf of the Company pursuant to Section 3.1.
"Escrow Agent" means Robinson Silverman Pearce Aronsohn & Berman LLP.
"Escrow Agreement" means the escrow agreement, dated as of the date hereof,
by and among the Company, the Purchaser and the Escrow Agent, in the form of
Exhibit E, as the same may be amended, supplemented or otherwise modified in
accordance with its terms.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, right
of first refusal, charge, security interest or encumbrance of any kind in or on
such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"Original Issue Date" shall mean the first issuance of any Shares,
regardless of the number of transfers of any particular Share and regardless of
the number of certificates which may be issued to evidence any particular Share.
"Per Share Market Value" shall have the meaning set forth in the
Certificate of Designation.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the recitals hereto.
<PAGE>
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Purchaser" shall have the meaning set forth in the recitals hereto.
"Registration Rights Agreement" means the registration rights agreement,
dated as of the date hereof, between the Company and the Purchaser, in the form
of Exhibit B, as the same may be amended, supplemented or otherwise modified in
accordance with its terms. "Required Approvals" shall have the meaning set forth
in Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section 3.1(l).
"Securities" means, collectively, the Shares, the Warrant and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock to be purchased pursuant to
this Agreement.
"Stated Value" shall have the meaning set forth in Section 2.1(a).
"Subsequent Financing" shall have the meaning set forth in Section 4.9.
"Subsequent Financing Notice" shall have the meaning set forth in Section
4.9.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Trading Day" shall have the meaning set forth in the Certificate of
Designation.
"Transaction Documents" shall have the meaning set forth in Section 3.1(b).
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Shares and as payment of dividends thereon in accordance with the
terms of the Certificate of Designation, and upon exercise of the Warrant in
accordance with the terms thereof.
"Underlying Shares Registration Statement" shall have the meaning set forth
in Section 3.1(f).
"Warrant" means the Common Stock purchase warrant, to be issued to the
Purchaser on the date hereof, in the form of Exhibit C, entitling the Purchaser
to purchase up to 413,712 shares of Common Stock in accordance with the terms
thereof.
<PAGE>
ARTICLE II
PURCHASE OF SHARES
------------------
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions set forth in this Agreement, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company on the Closing Date 175,000 Shares, which shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation"), at a price per Share of $20 (the "Stated Value").
The aggregate "Purchase Price" for the Shares is $3,500,000.
(b) The closing of the purchase and sale of the Shares and the Warrant (the
"Closing") shall take place at the offices of the Escrow Agent, 1290 Avenue of
the Americas, New York, New York 10104, immediately following the execution
hereof, or at such other time and/or place as the Purchaser and the Company may
agree. The date of the Closing is referred to herein as the "Closing Date".
(c) At the Closing, the Escrow Agent, in accordance with and subject to the
terms and conditions of the Escrow Agreement, shall deliver (i) to the
Purchaser, (A) one or more stock certificates representing the Shares purchased
hereunder, registered in the name of the Purchaser, (B) the Warrant, and (C) the
legal opinion addressed to the Purchaser and dated the Closing Date, of Blau,
Kramer, Wactlar & Lieberman, P.C., counsel for the Company, substantially in the
form of Exhibit D; (ii) to the Company, the Purchase Price, less the amounts to
be deducted in accordance with the Escrow Agreement, in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company prior to the Closing; and (iii) to the party entitled thereto all
documents, instruments and writings required to have been delivered at or prior
to Closing by either the Company or the Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
<PAGE>
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in the SEC Documents or in Schedule 3.1(a) (collectively, the "Subsidiaries").
Each of the Subsidiaries is a corporation, duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of this Agreement, the
Certificate of Designation, the Warrant or the Registration Rights Agreement
(collectively, the "Transaction Documents"), (y) have a material adverse effect
on the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole or (z) adversely impair in any
material respect with the Company's ability to perform fully on a timely basis
its obligations under the Transaction Documents or the Securities (a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and to otherwise carry out its
obligations under the Transaction Documents. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company, including, without limitation, approval
thereof by the Company's Board of Directors. Each of the Transaction Documents
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents, which could adversely affect the execution, delivery and timely
performance of the Transaction Documents.
(c) Capitalization Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and the Warrant hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any Person
<PAGE>
any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company without independent investigation, except as
specifically disclosed in the SEC Documents or Schedule 3.1(c), no Person
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of in excess of 5% of the Common
Stock.
(d) Issuance of Shares, Warrant and Underlying Shares. The Shares and the
Warrant have been duly authorized and, when paid for in accordance with the
terms hereof, shall be validly issued, fully paid and nonassessable, free and
clear of any Liens. The Company has and at all times while any Shares are or the
Warrant is outstanding will maintain a reserve of shares of Common Stock to
enable it to perform its conversion and other obligations under this Agreement,
the Certificate of Designation and Warrant, which reserve shall be no less than
7,724,826 shares of Common Stock (such sum, the "Initial Reserve"). If at any
time the sum of the number of shares of Common Stock issuable (a) upon
conversion in full of the then outstanding Shares, (b) as the payment of
dividends on account of the Shares and (c) upon exercise in full of the Warrant
exceeds the Initial Reserve, then the Company shall duly reserve twice the
number of shares of Common Stock equal to such excess to fulfill such
obligations. When issued in accordance with the terms hereof, the Certificate of
Designation and the Warrant (as the case may be), the Underlying Shares will
have been duly authorized, validly issued, fully paid and nonassessable, and
free and clear of any Liens.
(e) No Conflicts No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation or bylaws (each as
amended through the date hereof), or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, loans or credit agreement or other
instrument to which the Company is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or United States governmental authority to which the
Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for possible violations which either individually or in the
aggregate would not have or reasonably be expected to result in a Material
Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, or make any
<PAGE>
filing or registration with, any court or other Federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, except for
(i) the filing of the Certificate of Designation with respect to the Shares with
the Secretary of State of Delaware, which filing shall be effected on or prior
to the Closing Date, (ii) the filing of the registration statement covering the
Underlying Shares (the "Underlying Shares Registration Statement") with the
Commission and the making of the applicable blue-sky filings under state
securities laws, each as contemplated by the Registration Rights Agreement, and
(iii) other than, in all other cases, where the failure to obtain such consent,
waiver, authorization or order, or to give or make such notice or filing, would
not, individually or in the aggregate, have or would reasonably be expected to
result in a Material Adverse Effect (the "Required Approvals").
(g) Litigation; Proceedings. Except as set forth in the SEC Documents,
there is no action, suit, notice of violation, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which relates to
or challenges the legality, validity or enforceability of the Transaction
Documents or the Securities or which would, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary (i) is
in default under or in violation (or has received notice of a claim that it is
in default under or in violation) of any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound, (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is in violation of any statute, rule
or regulation of any governmental authority, except as would not, in any case of
(i) and (iii) above, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(i) Certain Fees. Except for fees payable to Wharton Capital Partners, Ltd.
no fees or commissions will be payable by the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates (as such term
is defined under Rule 405 promulgated under the Securities Act), from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, except to the extent such fees or claims result from a written
agreement executed by the Purchaser and such claimant in connection with the
transactions contemplated hereby.
(j) Disclosure Materials. Except as disclosed in the SEC Documents, the
Disclosure Materials do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
<PAGE>
(k) Private Offering. Neither the Company nor any Person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of securities of the Company under circumstances which would require
the integration of such offering with the offering of the Shares or the
Underlying Shares under the Securities Act) which might subject the offering,
issuance or sale of the Shares or the Underlying Shares to the registration
requirements of Section 5 of the Securities Act.
(l) SEC Documents. The Company has filed all reports required to be filed
by it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the one year preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC Documents") on a timely basis,
or has received a valid extension of such time of filing (in which case it has
made all such filings in the time required by such extension). As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the published rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, 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. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specifically indicated in such financial statements or the notes
thereto or, in the case of unaudited interim statements, to the extent they may
include footnotes or may be condensed as summary statements, and fairly present
in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments. The Company last
filed audited financial statements with the Commission in its Annual Report on
Form 10-K for the year ended May 31, 1997 and the Company has not received any
comments from the Commission in respect of such audited financial statements.
Since the date of the financial statements included in the Annual Report on Form
10-K for the year ended May 31, 1997, there has been no event, occurrence or
development that has had, would have or could reasonably be expected to result
in a Material Adverse Effect which is not specifically disclosed in the
Disclosure Materials.
(m) Seniority. No class of equity securities of the Company is senior to
the Shares in right of payment, whether upon liquidation, dissolution or
otherwise.
(n) Form S-3 Eligibility. The Company is, and at the Closing Date will be,
eligible to register securities for resale with the Commission under Form S-3
promulgated under the Securities Act.
(o) Investment Company. The Company is not and is not an Affiliate of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(p) Exclusivity. The Company shall not issue and sell Preferred Stock to
any Person other than the Purchaser other than with the specific prior written
consent of the Purchaser.
<PAGE>
(q) Listing and Maintenance Requirements Compliance. The Company has not in
the two years prior to the date hereof received written notice from any stock
exchange or market on which the Common Stock is or has been listed (or on which
it is or has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange or market.
(r) Use of Proceeds. The Company shall use all of the proceeds from the
placement of the securities offered hereby for working capital purposes and not
for the satisfaction of any portion of Company debt or to redeem any Company
equity or equity-equivalent securities. Pending their permitted application, the
Company will invest such proceeds in interest bearing accounts and short-term,
interest bearing securities.
(s) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and rights (collectively, the "Intellectual
Property Rights") which are necessary for use in connection with its business
and which the failure to so have would have a Material Adverse Effect. Except as
disclosed in Schedule 3.1(s), to the best knowledge of the Company, there is no
existing infringement by another Person of any of the Intellectual Property
Rights which are necessary for use in connection with its business.
Section 3.2. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly and
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Purchaser has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated hereby and by the
Registration Rights Agreement, the Escrow Agreement and the Warrant and
otherwise to carry out its obligations hereunder and thereunder. The purchase of
the Securities by the Purchaser hereunder has been duly authorized by all
necessary action on the part of the Purchaser. Each of this Agreement, the
Registration Rights Agreement and the Escrow Agreement has been duly executed
and delivered by or on behalf of the Purchaser and constitutes the valid and
legally binding obligation of the Purchaser, enforceable against it in
<PAGE>
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity.
(b) Investment Intent. The Purchaser is acquiring the Securities for its
own account (and/or on behalf of managed accounts who are purchasing solely for
their own accounts for investment) for investment purposes only and not with a
view to or for distributing or reselling the Securities or any part thereof or
interest therein, without prejudice, however, to the Purchaser's right, subject
to the provisions of the Transaction Documents, at all times to sell or
otherwise dispose of all or any part of the Securities under an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption or exclusion from such
registration.
(c) Purchaser Status. At the time the Purchaser (and any account for which
it is purchasing) was offered the Shares and the Warrant, it (and any managed
account for which it is purchasing) was, and at the date hereof, it (and any
managed account for which it is purchasing) is, and at the Closing Date, it (and
any managed account for which it is purchasing) will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it or its representatives has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
merits and risks of an investment therein; (ii) access to information about the
Company and the Company's financial condition, results of operations, business,
properties and management sufficient to enable it to evaluate such investment;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
Securities.
(g) Manner of Sale. At no time was Purchaser presented with or solicited by
or through any leaflet, public promotional meeting, television advertisement or
any other form of general solicitation or advertising in connection with its
purchase of the Shares or the Warrant.
<PAGE>
(h) Reliance. The Purchaser understands and acknowledges that (i) the
Shares and the Warrant are being offered and sold, and the Underlying Shares are
being offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
-------------------------------
4.1. Transfer Restrictions. (a) If the Purchaser should decide to dispose
of any of the Shares or any portion of the Warrant (and upon conversion or
exercise thereof, as the case may be, any Underlying Shares), the Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements thereof. In connection
with any transfer of any of the Securities other than pursuant to an effective
registration statement or to the Company, the Company may require the transferor
of such Securities to provide to the Company an opinion of counsel experienced
in the area of United States securities laws selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
Securities under the Securities Act.
(b) The Purchaser agrees to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on certificates representing the
Securities:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [CONVERTIBLE] [EXERCISABLE]] [THE SECURITIES REPRESENTED HEREBY] HAVE
[NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS.
<PAGE>
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN A CONVERTIBLE
PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF APRIL 30, 1998, BETWEEN
VASOMEDICAL, INC. (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF
THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
The Underlying Shares issuable upon conversion of Shares or exercise of the
Warrant, as the case may be, shall not contain the legend set forth above if the
conversion of Shares or exercise of the Warrant occurs at any time while an
Underlying Shares Registration Statement is effective under the Securities Act,
or in the event there is not an effective Underlying Shares Registration
Statement at such time, if in the opinion of counsel to the Company experienced
in the area of United States securities laws such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide the Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from such
legend at such time as such legend is no longer required hereunder.
Section 4.2. Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in Section 4.1(b)
above.
Section 4.3. Furnishing of Information. For so long as the Purchaser owns
Shares or Underlying Shares, the Company covenants to timely file (or obtain
valid extensions in respect thereof) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and, if requested, to promptly furnish the Purchaser with true and complete
copies of all such filings. Until such time as all Underlying Shares may be
resold under Rule 144(k) promulgated under the Securities Act, if the Company is
not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act.
Section 4.4. Use of Disclosure Materials. The Company consents to the use
of the SEC Documents, and any amendments and supplements thereto, by the
Purchaser in connection with resales of Securities other than pursuant to an
effective registration statement.
<PAGE>
Section 4.5. Increase in Authorized Shares. At any such time as the Company
would be, if (with respect to the Shares) a notice of conversion or (with
respect to the Warrant) form of election to purchase were to be delivered on
such date, precluded from converting at least 135% of the full number of Shares
that remain unconverted or from exercising the entire Warrant at such date (the
"Overflow Date"), as the case may be, due to the unavailability of authorized
but unissued or re-acquired Common Stock the Board of Directors of the Company
shall promptly (and in any case within 14 Business Days from such date) cause to
be prepared and filed with the SEC and mailed to the shareholders of the Company
within seven (7) Business Days after clearance by the SEC or 15 days after
filing with the SEC in the event the SEC has not commented on such filing, proxy
materials requesting authorization to amend the Company's certificate of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue at least to such number of shares of Common Stock as
would be necessary or to promptly effect a reverse stock split so that it can
satisfy its conversion and exercise obligations in accordance with the
Certificate of Designation and Warrant. In connection with an increase in the
number of Shares, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval to carry out such resolutions
(and hold a special meeting of the shareholders no later than the 40th day after
mailing of the proxy materials relating to such meeting) and (c) within 5
Business Days of obtaining such shareholder authorization, file an appropriate
amendment to the Company's certificate of incorporation to evidence such
increase.
Section 4.6. Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as the Purchaser may reasonably request
and continue such qualification at all times until the Purchaser notifies the
Company in writing that it no longer owns Shares, the Warrant or Underlying
Shares; provided, however, that neither the Company nor its Subsidiaries shall
be required in connection therewith to qualify as a foreign corporation where
they are not now so qualified.
Section 4.7. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Shares, the Warrant or the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares, the Warrant or
Underlying Shares to the Purchaser.
Section 4.8. Solicitation Materials. The Company shall not (i) distribute
any offering materials in connection with the offering and sale of the Shares,
the Warrant or Underlying Shares other than the Disclosure Materials and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares, the Warrant or Underlying Shares by
means of any form of general solicitation or advertising.
<PAGE>
Section 4.9. Right of First Refusal; Subsequent Registrations; Certain
Corporate Actions. (a) The Company shall not, directly or indirectly, without
the prior written consent of the Purchaser, offer, sell, grant any option to
purchase, or otherwise dispose (or announce any offer, sale, grant or any option
to purchase or other disposition) of any of its or its Affiliates equity or
equity-equivalent securities at a price which is on the face thereof or implied
therein, less than either the market price or fair market value for such
securities (a "Subsequent Financing") for a period of 180 days after Closing
Date, except (i) the granting of options or warrants to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock in each case
disclosed in Schedule 3.1(c), and (iii) shares of Common Stock issued upon
conversion of Shares in accordance with the terms of the Certificate of
Designation, unless (A) the Company delivers to the Purchaser a written notice
(the "Subsequent Financing Notice") of its intention to effect such Subsequent
Financing, which Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing shall be
affected, and a term sheet or similar document relating thereto shall be
attached to such Subsequent Financing Notice and (B) the Purchaser shall not
have notified the Company by 5:00 p.m. (Eastern Time) on the fifth Business Day
after its receipt of the Subsequent Financing Notice of its willingness to
provide (or to cause its sole designee to provide), subject to completion of
mutually acceptable documentation, financing to the Company on substantially the
terms set forth in the Subsequent Financing Notice. If the Purchaser shall fail
to notify the Company of its intention to enter into such negotiations within
such time period, the Company may effect the Subsequent Financing substantially
upon the terms and to the Persons (or Affiliates of such Persons) set forth in
the Subsequent Financing Notice; provided, that the Company shall provide the
Purchaser with a second Subsequent Financing Notice, and the Purchaser shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Financing Notice within 60 Business Days after the date of the
initial Subsequent Financing Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Financing Notice.
(b) Except Underlying Shares and other "Registrable Securities" (as such
term is defined in the Registration Rights Agreement) to be registered in
accordance with the Registration Rights Agreement, other than Company securities
to be registered under post effective amendments of the Company's existing
registration statements on Forms S-3, S-4 or S-8 (each as promulgated under the
Act) and other than Company securities to be registered for resale in connection
with financings permitted pursuant to Section 4.9(a)(i) through 4.9(a)(iii), the
Company shall not, without the prior written consent of the Purchaser, (i) issue
or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register for resale any securities of the Company for a period of not less
than 90 Trading Days after the date that the Underlying Shares Registration
Statement is declared effective by the Commission. Any days that the Purchaser
is unable to sell Underlying Shares under the Underlying Shares Registration
Statement shall be added to such 90 Trading Day period for the purposes of (i)
and (ii) above.
<PAGE>
(c) As long as there are Shares outstanding, the Company shall not and
shall cause the Subsidiaries not to, without the consent of the holders of the
Preferred Stock, (i) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Purchaser, except
the Company is permitted to increase authorized stock and/or engage in a reverse
stock split; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock other than as to the Underlying Shares except
under Company option plans; or (iii) enter into any agreement with respect to
any of the foregoing.
Section 4.10. Purchaser Ownership of Common Stock. The Purchaser may not
use its ability to convert Shares hereunder or under the terms of the
Certificate of Designation to the extent that such conversion would result in
the Purchaser beneficially owning (for purposes of Rule 13d-3 under the Exchange
Act) more than 4.99% of the outstanding shares of the Common Stock; provided,
however, that if ten days shall have elapsed since the Purchaser has declared an
event of default under any Transaction Document and such event shall not have
been cured to the Purchaser's satisfaction prior to the expiration of such
ten-day period, the provisions of this Section 4.10 shall be null and void ab
initio.
Section 4.11. Listing of Underlying Shares. The Company shall (a) not later
than the tenth Business Day following the Closing Date, prepare and file with
The Nasdaq Sock Market, Inc. (and each other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application covering at least 7,724,826 Underlying Shares, (b) take all steps
necessary to cause such shares to be approved for listing on such exchanges and
markets as soon as possible thereafter, and (c) provide to the Purchaser
evidence of such filing and listing, and the Company shall maintain the listing
of its Common Stock on such exchange.
Section 4.12. Certain Redemption Events. (a) In the event that at any time
within the five-year period after the Closing Date trading in the shares of the
Common Stock is suspended on the Nasdaq SmallCap Market or any other principal
market or exchange for such shares (other than as a result of the suspension of
trading in securities on such market or exchange generally or temporary
suspensions pending the release of material information) for more than three
Trading Days or delisted from the Nasdaq SmallCap Market, unless immediately
therewith the Common Stock is listed for trading on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market, at the Purchaser's
option exercisable by five Business Days prior notice to the Company, the
Company shall redeem all Shares and
<PAGE>
Underlying Shares then held by the Purchaser, at an aggregate purchase price
equal to the sum of (I) the number of Shares then held by the Purchaser
multiplied by the product of (A) the Per Share Market Value for the Trading Day
immediately preceding (1) the day of such notice or (2) the date of payment in
full of the redemption price calculated under this Section 4.12, whichever is
greater, multiplied by (B) the Conversion Ratio on the date of such notice, (II)
the number of Underlying Shares then held by the Purchaser multiplied by the Per
Share Market Value for the Trading Day immediately preceding (A) the date of the
notice or (B) the date of payment in full by the Company of the redemption price
calculated under this Section 4.12, whichever is greater, (III) the aggregate of
all accrued but unpaid dividends and other amounts than due and payable on
account of all Shares to be redeemed, and (IV) interest on the amounts set forth
in I - III above accruing from the 5th day after such notice until the
redemption price under this Section 4.12 is paid in full at the rate of 15% per
annum (the "Redemption Price").
(b) In the event the Underlying Shares Registration Statement shall not
have been declared effective by the Commission on or prior to the 180th day
after the Closing Date, then, at the Purchaser's option, exercisable by five
Business Days prior notice to the Company, the Company shall redeem all Shares
and Underlying Shares then held by the Purchaser at a price equal to the
Redemption Price.
(c) In the event that any conversion of Shares or exercise of the Warrant
would, if honored in full, result in the triggering of the Company's Shareholder
Rights Plan as then in effect, the Company shall (i) timely honor such
conversion and/or exercise (as the case may be) and issue Underlying Shares up
to the maximum number, and (ii) redeem all other Underlying Shares that are not
delivered in respect of such conversion or exercise at a price equal to the
Redemption Price. This provision shall apply to any subsequent conversions
and/or exercises.
Section 4.13. No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if any redemption of Securities otherwise
required under the Transaction Documents would be prohibited by the relevant
provisions of the Delaware General Corporation Law, such redemption shall be
effected as soon as it is permitted under such law; provided, however, that,
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.12 during any such period.
Section 4.14. Redemption Restrictions. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of Securities otherwise
required under this Agreement would be prohibited in the absence of consent from
any lender of the Company or of any Subsidiary, or by the holders of any class
of securities of the Company, the Company shall use its best efforts to obtain
such consent as promptly as practicable after the redemption is required.
Interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.12 until such consent is
obtained. Nothing contained in this Section shall be construed as a waiver by
the Purchaser of any rights it may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
<PAGE>
Section 4.15. Notice of Breaches. Each of the Company and the Purchaser
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in the Transaction
Documents, as well as any events or occurrences arising after the date hereof
and prior to the Closing Date, which could reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may be,
contained therein to be incorrect or breached as of such Closing Date. However,
no disclosure by either party pursuant to this Section shall be deemed to cure
any breach of any such representation, warranty or other agreement. Neither the
Company, any Subsidiary nor the Purchaser will take, or agree to commit to take,
any action that is intended to make any representation or warranty of the
Company or the Purchaser, as the case may be, contained in the Transaction
Documents, inaccurate in any respect at the Closing Date.
Notwithstanding the generality of the foregoing, the Company shall promptly
notify the Purchaser of any notice or claim (written or oral) that it receives
from any lender of the Company to the effect that the consummation of the
transactions contemplated by any of the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares a copy of any written statement in support of or relating to such
claim or notice.
Section 4.16. Conversion Procedures. Exhibit F attached hereto sets forth
the procedures with respect to the conversion of the Shares, including the forms
of conversion notice to be provided upon conversion, instructions as to the
procedures for conversion, the form of legal opinion, if necessary, that shall
be rendered to the Transfer Agent and such other information and instructions as
may be reasonably necessary to enable the Purchaser to exercise its right of
conversion smoothly and expeditiously.
Section 4.17. Conversion and Exercise Obligations of the Company. The
Company covenants to honor conversions of Shares and to honor exercises under
the Warrant (as the case may be) to deliver Underlying Shares in accordance with
the terms and conditions and time periods set forth in each of the Certificate
of Designation and the Warrant.
Section 4.18. Transfer of Intellectual Property Rights. Except in
connection with the sale of all or substantially all of the assets of the
Company that are covered under Section 5 of the Certificate of Designation, the
Company shall not transfer, sell or otherwise dispose of, any Intellectual
Property Rights, or allow the Intellectual Property Rights to become subject to
any Liens, without the prior written consent of the Purchaser.
<PAGE>
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1. Fees and Expenses. Except as set forth in the Registration
Rights Agreement and except that the Company shall reimburse the Purchaser at
the Closing $15,000 for its legal fees and disbursements, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Shares (and upon conversion thereof, the Underlying
Shares) pursuant hereto.
Section 5.2. Entire Agreement; Amendments. This Agreement, together with
the Exhibits and Schedules hereto, the Certificate of Designation, the Warrant
and the Registration Rights Agreement (together with the respective Exhibits and
Schedules thereto) contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
Section 5.3. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
If to the Company: Vasomedical, Inc.
180 Linden Avenue
Westbury, NY 11590
Facsimile No.: 516-997-2299
Attn: Chief Financial Officer
With copies to: Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, NY 11753
Facsimile No.: 516-822-5609
Attn: David Lieberman
<PAGE>
If to the Purchaser:JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House
20 Reid Street
Hamilton, HM11
Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
With copies to: Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Managing Member
and
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
Section 5.4. Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 5.5. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
<PAGE>
Section 5.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Purchaser may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other,
except that the Purchaser may assign its rights hereunder and under the Warrant
and the Registration Rights Agreement without the consent of the Company,
provided, that the Company shall have the right to require any such assignee to
execute a counterpart of this Agreement and any other Transaction Documents to
which the assignor was a party as a condition to such holders claim to any right
hereunder or thereunder. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 5.7. No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to permitted assignees under Section 5.6,
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
Section 5.8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
Section 5.9. Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the agreements and covenants of
the parties contained in Article IV and this Article V shall survive the Closing
(or any earlier termination of this Agreement) and any conversion of Shares and
exercise of the Warrant.
Section 5.10. Counterpart Signatures. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
Section 5.11. Publicity. The Company and the Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement.
<PAGE>
Section 5.12. Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 5.13. Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchaser hereunder with respect to the
subsequent transfer of Shares and the Underlying Shares. Each of the Company and
the Purchaser agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of any breach of its obligations described in
the foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first indicated above.
Company:
VASOMEDICAL, INC.
By:
Name:
Title:
Purchaser:
JNC OPPORTUNITY FUND LTD.
By:
Name:
Title:
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 30, 1998, between Vasomedical, Inc., a Delaware corporation
(the "Company"), and JNC Opportunity Fund Ltd., a corporation organized and
existing under the laws of the Cayman Islands (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred Stock Purchase
Agreement, dated as of the date hereof between the Company and the Purchaser
(the "Purchase Agreement").
The Company and the Purchaser hereby agrees as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall have the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.001 per share.
<PAGE>
"Effectiveness Date" means the 105th day following the Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 92nd day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"New York Courts" shall have the meaning set forth in Section 7(h).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" means the shares of Series C Convertible Preferred Stock,
par value $.01 per share, of the Company issued to the Purchaser pursuant to the
Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
<PAGE>
"Registrable Securities" means the shares of Common Stock (a) issuable upon
conversion of all shares of Preferred Stock, (b) upon payment of dividends on
account of the Preferred Stock and (c) issuable upon exercise of the Common
Stock purchase warrants issued by the Company to the Purchaser and to Wharton
Capital Partners, Ltd. in connection with the transactions contemplated by the
Purchase Agreement; provided, however that in order to account for the fact that
the number of shares of Common Stock that are issuable upon conversion of shares
of Preferred Stock is determined in part upon the market price of the Common
Stock at the time of conversion, Registrable Securities shall initially include
no less than 7,724,826 shares of Common Stock. Notwithstanding anything herein
contained to the contrary, if the actual number of shares of Common Stock
issuable upon conversion of the Preferred Stock at any time exceeds twice the
number of shares of Common Stock issuable if such conversion occurred on the
Closing Date, the term "Registrable Securities" shall be deemed to include such
additional shares of Common Stock and the Company shall promptly, but in any
case within ten Business Days of notice of such fact, file one or more
additional Registration Statements covering such additional shares of Common
Stock. The Company shall use its best efforts to cause such additional
Registration Statements to be declared effective as promptly as possible, but in
any event within 60 days after the date of the notice triggering such
requirement.
"Registration Statement" means the registration statement contemplated by
Section 2(a) (and any additional Registration Statements contemplated in the
definition of Registrable Securities), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre-and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one firm of counsel to the Holders.
"Underwritten Registration or Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective registration statement.
<PAGE>
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare and file with
the Commission a "Shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if otherwise
directed by the Holders in accordance herewith). The Company shall (i) not
permit any securities other than the Registrable Securities to be included in
the Registration Statement (except as permitted pursuant to Section 7(c)) and
(ii) use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the Effectiveness Date, and to keep such
Registration Statement continuously effective under the Securities Act until the
date which is three years after the date that such Registration Statement is
declared effective by the Commission or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144 as determined by the counsel to
the Company pursuant to a written opinion letter reasonably acceptable to the
Holders and addressed to the Holders to such effect (the "Effectiveness
Period"); provided, however, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in the
Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company promptly files after such action a
post-effective amendment to the Registration Statement and the Commission has
not declared it effective.
(b) If the Holders of a majority of the Registrable Securities so elect, an
offering of Registrable Securities pursuant to the Registration Statement may be
effected in the form of an Underwritten Offering. In such event, and if the
managing underwriters advise the Company and such Holders in writing that in
their opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can be
sold in such Underwritten Offering, there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated pro rata
among the Holders proposing to sell Registrable Securities in such Underwritten
Offering.
(c) If any of the Registrable Securities are to be sold in an Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be reputable firms that will be selected
by the Holders of a majority of the Registrable Securities included in such
offering upon consultation with (but not consent of) the Company. No Holder may
participate in any Underwritten Offering hereunder unless such Person (i) agrees
to sell its Registrable Securities on the basis provided in any underwriting
agreements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
<PAGE>
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Prepare and file with the Commission on or prior to the Filing Date a
Registration Statement on Form S-3 in accordance with the method or methods of
distribution thereof as specified by the Holders (except if otherwise directed
by the Holders), and cause the Registration Statement to become effective and
remain effective as provided herein; provided, however, that not less than three
(3) Business Days prior to the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall (i) furnish to the Holders, their Special Counsel
and any managing underwriters, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the opinion of respective counsel to
such Holders and such underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities, their Special
Counsel, or any managing underwriters, shall reasonably object on a timely
basis.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to all Registrable
Securities for the applicable time period and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as practicable to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and promptly provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
<PAGE>
(c) Notify the Holders of Registrable Securities to be sold, their Special
Counsel and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than three (3) days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof to each of the Holders upon request therefor) and (C) with respect to
the Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any 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.
(d) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a majority
of the Registrable Securities to be sold in connection with an Underwritten
Offering, (i) promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as such managing
underwriters and such Holders reasonably agree should be included therein and
(ii) make all required filings of such Prospectus supplement or such post--
effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law.
<PAGE>
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
reasonably requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and to do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall be free of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such managing underwriters or Holders may
request at least two Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as
promptly as practicable, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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 under which they were made, not misleading.
<PAGE>
(k) Use its best efforts to cause all Registrable Securities relating to
such Registration Statement to be listed on the Nasdaq SmallCap Market and any
other securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then
listed.
(l) Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates thereof
addressed to each selling Holder and each such underwriter, in form, scope and
substance reasonably satisfactory to any such managing underwriters and Special
Counsel to the selling Holders covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters; (iii) immediately
prior to the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each selling Holder and each of the underwriters, if
any, in form and substance as are customary in connection with Underwritten
Offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 6
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
<PAGE>
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement as shall be reasonably necessary to enable them to
exercise their due diligence responsibility; provided, however, that any
information that is determined in good faith by the Company in writing to be of
a confidential nature at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities; (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
(n) Comply with all applicable rules and regulations of the Commission and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 not later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at the end
of any fiscal quarter in which Registrable Securities are sold to underwriters
in a firm commitment or best efforts Underwritten Offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the Registration
Statement, which statement shall cover said 12-month period, or end shorter
periods as is consistent with the requirements of Rule 158.
The Company may require each selling Holder to furnish to the Company such
information regarding the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement and the Company
may exclude from such registration the Registrable Securities of any such Holder
who unreasonably fails to furnish such information within a reasonable time
after receiving such request.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (i) the inclusion therein of language, in form and substance
reasonably satisfactory to such Holder, to the effect that the ownership by such
Holder of such securities is not to be construed as a recommendation by such
Holder of the investment quality of the Company's securities covered thereby and
that such ownership does not imply that such Holder will assist in meeting any
future financial requirements of the Company, or (ii) if such reference to such
Holder by name or otherwise is not required by the Securities Act or any similar
Federal statute then in force, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
<PAGE>
Each Purchaser covenants and agrees that (i) it will not offer or sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) the Purchaser and its officers, directors or Affiliates,
if any, will comply with the prospectus delivery requirements of the Securities
Act as applicable to them in connection with sales of Registrable Securities
pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
<PAGE>
4. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (B) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the underwriters or Holders in connection with Blue
Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any, or by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) fees and disbursements of all independent certified public
accountants referred to in Section 3(1)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) Securities Act liability insurance, if the Company so
desires such insurance, and (vii) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange on which similar securities issued by the Company are then
listed.
(b) If the Holders require an Underwritten Offering pursuant to the terms
hereof, the Company shall be responsible for all costs, fees and expenses in
connection therewith, except for the fees and disbursements of the Underwriters
(including any underwriting commissions and discounts) and their legal counsel
and accountants (which shall be borne by the Holders). Therefore, in such
circumstances the Holder shall bear the expenses of the fees and disbursements
of any legal counsel or accounting firm retained by the underwriters in
connection with such Underwritten Offering and the costs of any determination
(but not filing) by the underwriters of the eligibility of the Registrable
Securities for investment under the applicable state securities laws. By way of
illustration which is not intended to diminish any of the provisions hereof, the
Holders shall not be responsible for, and the Company shall be required to pay
the fees or disbursements incurred by the Company (including by its legal
counsel and accountants) in connection with, the preparation and filing of a
Registration Statement and related Prospectus for such offering, the maintenance
of such Registration Statement in accordance with the terms hereof, the listing
of the Registrable Securities in accordance with the requirements hereof, and
printing expenses incurred to comply with the requirements hereof.
<PAGE>
5.1 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement and without limitation as to time, indemnify and
hold harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer and sale of
Registrable Securities), brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by or on behalf of such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is aware
in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, their directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
<PAGE>
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
<PAGE>
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section would
apply by its terms (other than by reason of exceptions provided in this
Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any attorneys' or other fees or expenses incurred by such party
in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), the Purchaser shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by the Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that the Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
<PAGE>
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, they will, upon the request of any
Holder, make publicly available other information so long as necessary to permit
sales of its securities pursuant to Rule 144. The Company further covenants that
it will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person except under the Company's registration statements on Form S-3 and
S-8 currently on file with the Commission and except as set forth under Section
7(c) below. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
<PAGE>
(c) No Piggyback on Registrations. Except for shares of Common Stock
issuable in connection with 100,000 shares of Common Stock issuable by the
Company upon the exercise of a common stock purchase warrant issued to P.F.
Cohn, neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of the Company
in the Registration Statement other than the Common Stock to be issued under the
Purchase Agreement, and the Company shall not enter into any agreement providing
any such right to any of its securityholders.
(d) Piggy-Back Registrations. If at any time the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities at any time when there is not then an effective
Registration Statement, other than registration statements on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Registrable Securities such holder
requests to be registered, except that if, in connection with any Underwritten
Offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the registration statement because, in such underwriter(s)'
judgment, such limitation is necessary to effect an orderly public distribution
of securities covered thereby, then the Company shall be obligated to include in
such registration statement only such limited portion of the Registrable
Securities for to which such holder has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the holders
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such holders; provided, however,
that the Company shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities the holders of which are not
entitled by right to inclusion of securities in such registration statement; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in such registration statement. No right to registration of
Registrable Securities under this Section shall be construed to limit any
registration otherwise required hereunder.
(e) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least a majority of the then outstanding Registrable Securities; provided,
however, that, for the purposes of this sentence, Registrable Securities that
<PAGE>
are owned, directly or indirectly, by the Company, or an Affiliate of the
Company are not deemed outstanding. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
If to the Company: Vasomedical, Inc.
180 Linden Avenue
Westbury, NY 11590
Facsimile No.: 516-997-2299
Attn: Chief Financial Officer
With copies to: Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, NY 11753
Facsimile No.: 516-822-5609
Attn: David Lieberman
If to the Purchaser:JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House
20 Reid Street
Hamilton, HM11
Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
<PAGE>
With copies to: Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Managing Member
and
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
If to any other Person who is then the registered Holder:
To the address of such Holder as it
appears in the stock transfer books of
the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. The Holders may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of the Holders hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Holders to any assignee or transferee of all or
a portion of the shares of Preferred Stock, the Warrants or the Registrable
Securities if: (i) the Holders agree 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, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to such registration rights are being transferred or
assigned, (iii) following such transfer or assignment the further disposition of
such securities by the transferee or assignees restricted under the Securities
Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders' (and to subsequent) successors
and assigns.
<PAGE>
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law; Submission to Jurisdiction;. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of law. The Company hereby irrevocably
submits to the jurisdiction of any New York state court sitting in the Borough
of Manhattan in the City of New York or any federal court sitting in the Borough
of Manhattan in the City of New York (collectively, the "New York") in respect
of any Proceeding arising out of or relating to this Agreement, and irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the New York Courts. The Company irrevocably
waives to the fullest extent it may effectively do so under applicable law any
objection that it may now or hereafter have to the laying of the venue of any
such Proceeding brought in any New York Court and any claim that any such
Proceeding brought in any New York Court has been brought in an inconvenient
forum. Nothing herein shall affect the right of any Holder to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against the company in any other jurisdiction.
(k) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
(n) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than the Purchaser or transferees or successors or assigns thereof if
such Persons are deemed to be Affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
VASOMEDICAL, INC.
By:
--------------------------
Name:
Title:
JNC OPPORTUNITY FUND LTD.
By:
---------------------------
Name:
Title:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
VASOMEDICAL, INC.
WARRANT
-------
Dated April 30, 1998
Vasomedical, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received, _________________, or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to a total of _______ shares of Common Stock, $.001 par value per
share (the "Common Stock"), of the Company (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at an exercise price equal to $2.08
per share (as adjusted from time to time as provided in Section 8, the "Exercise
Price"), at any time and from time to time from and after the date hereof and
through and including April 30, 2003 (the "Expiration Date"), and subject to the
following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this Warrant
in the Warrant Register, upon surrender of this Warrant, with the Form of
Assignment attached hereto duly completed and signed, to the Transfer Agent or
to the Company at the office specified in or pursuant to Section 3(b), provided,
however that the Holder shall not make any transfers to any transferee pursuant
to this Section for the right to acquire less than 25,000 Warrant Shares (or the
balance of the Warrant Shares to which this Warrant relates). Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of the Company specified in or pursuant to Section 3(b) for one or
more New Warrants, evidencing in the aggregate the right to purchase the number
of Warrant Shares which may then be purchased hereunder. Any such New Warrant
will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:30 P.M., Eastern time, at any time and from time to time
on or after the date hereof to and including the Expiration Date. At 5:30 P.M.,
Eastern time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value. Prior to the Expiration
Date, the Company may not call or otherwise redeem this Warrant without the
prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed and signed,
to the Company at its office at 180 Linden Avenue, Westbury, New York 11590,
Attention: Chief Financial Officer, or at such other address as the Company may
specify in writing to the then registered Holder, and upon payment of the
Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
in cash or by certified or official bank check or checks, all as specified by
the Holder in the Form of Election to Purchase, the Company shall promptly (but
in no event later than 3 business days after the Date of Exercise) issue or
cause to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate for
the Warrant Shares issuable upon such exercise, free of restrictive legends
other than as required by applicable law. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant.
<PAGE>
A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares
for which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. During the term of this Warrant the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed or to be
filed on Form S-8 or Form S-4 including supplements thereto, each as promulgated
under the Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or pursuant
to a merger, acquisition or similar transaction) unless the Company provides
each of the Holder and Robinson Silverman Peace Aronsohn & Berman LLP, attention
Eric L. Cohen with not less than four business days notice of its intention to
file such registration statement and provides the Purchaser the option to
include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with an effective registration statement or upon the expiration of this Warrant.
The Company will pay all of its registration expenses in connection therewith.
5. Demand Registration Rights. At any time during the term of this Warrant
when the Warrant Shares are not registered pursuant to an effective registration
statement, the Holder may make a written request for the registration under the
Securities Act of 1933, as amended (a "Demand Registration"), of all of the
Warrant Shares (the "Registrable Securities"), and the Company shall use its
best efforts to effect such Demand Registration as promptly as possible, but in
any case within 90 days thereafter. Any request for a Demand Registration shall
specify the aggregate number of Registrable Securities proposed to be sold and
shall also specify the intended method of disposition thereof. The right to
cause a registration of the Registrable Securities under this Section 5 shall be
limited to one such registration. In any registration initiated as a Demand
Registration, the Company will pay all of its registration expenses in
connection therewith. A Demand Registration shall not be counted as a Demand
Registration hereunder until such Demand Registration has been declared
effective by the Securities and Exchange Commission and maintained continuously
effective for a period of at least 360 days or such shorter period when all
Registrable Securities included therein have been sold in accordance with such
Demand Registration, provided, however that any days on which such registration
statement is not effective or on which the Holder is not permitted by the
Company or any governmental authority to sell Warrant Shares under such
registration statement shall not count towards such 360 day period.
<PAGE>
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company may in its discretion issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders (taking into account the adjustments
and restrictions of Section 9). The Company covenants that all Warrant Shares
that shall be so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9. Upon each such adjustment of the Exercise
Price pursuant to this Section 9, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
<PAGE>
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated divided rate) or
otherwise make a distribution or distributions on shares of its Common Stock (as
defined below) or on any other class of capital stock and not the Common Stock)
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock into a larger number of shares, or (iii) combine outstanding shares of
Common Stock into a smaller number of shares, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any adjustment
made pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, then the Holder shall have the right thereafter to exercise
this Warrant only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately prior
to such reclassification, consolidation, merger, sale, transfer or share
exchange. The terms of any such consolidation, merger, sale, transfer or share
exchange shall include such terms so as to continue to give to the Holder the
right to receive the securities or property set forth in this Section 9(b) upon
any exercise following any such reclassification, consolidation, merger, sale,
transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to holders of this Warrant)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Sections 9(a), (b) and
(d)), then in each such case the Exercise Price shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
<PAGE>
(d) If, at any time while this Warrant is outstanding, the Company shall
issue or cause to be issued rights or warrants to acquire or otherwise sell or
distribute shares of Common Stock to all holders of Common Stock for a
consideration per share less than the Exercise Price then in effect, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to the
price (calculated to the nearest cent) determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock which the aggregate
consideration received (or to be received, assuming exercise or conversion in
full of such rights, warrants and convertible securities) for the issuance of
such additional shares of Common Stock would purchase at the Exercise Price, and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made.
(e) For the purposes of this Section 9, the following clauses shall also be
applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to Section 9(c) above,
the Holder, after receipt of the determination by the Appraiser, shall have the
right to select an additional appraiser (which shall be a nationally recognized
accounting firm), in which case the adjustment shall be equal to the average of
the adjustments recommended by each of the Appraiser and such appraiser. The
Holder shall promptly mail or cause to be mailed to the Company, a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such adjustment shall become
effective immediately after the record date mentioned above.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
<PAGE>
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii)the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
<PAGE>
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (Eastern time) on a business day, (ii) the business
day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Section later
than 4:30 p.m. (Eastern time) on any date and earlier than 11:59 p.m. (Eastern
time) on such date, (iii) the business day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The addresses
for such communications shall be: (i) if to the Company, to Vasomedical, Inc.,
180 Linden Avenue, Westbury, New York 11590, Attention: Chief Financial Officer,
or to facsimile no. 516-997-2299, or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company may appoint a new warrant
agent.
(b) Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant; this
Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware without regard to the
principles of conflicts of law thereof.
<PAGE>
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
VASOMEDICAL, INC.
By:
Name:
Title:
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Vasomedical, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.001 par value per share, of
Vasomedical, Inc. and encloses herewith $________ in cash, certified or official
bank check or checks, which sum represents the aggregate Exercise Price (as
defined in the Warrant) for the number of shares of Common Stock to which this
Form of Election to Purchase relates, together with any applicable taxes payable
by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
(Please print name and address)
Dated: , __________ Name of Holder:
(Print)
(By:)
(Name:)
(Title:)
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Vasomedical, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Vasomedical, Inc. with full power of
substitution in the premises.
Dated:
- ---------------, ----
---------------------------------------
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
Vasomedical Inc.
180 Linden Avenue
Westbury, New York 11590
Tel: (516) 997-4600 Fax: (516) 997-2299
NEWS RELEASE
CONTACT: Natalie Karp
Investor Relations
(516) 997-4600 ext. 776
VASOMEDICAL ANNOUNCES $3.5 MILLION FINANCING
Proceeds to Expand Marketing Programs
Westbury, New York, May 8, 1998 Vasomedical, Inc. (NASDAQ:VASO) announced that
it has received $3.5 million to expand its marketing programs to increase
awareness of the benefits of EECP therapy among physicians, patients and
insurers. This second tranche of financing from the same institutional investor
from which the Company received funds last year demonstrates the investor's
confidence in the EECP technology, its broad usefulness in the treatment of
cardiovascular diseases and the Company's long-term economic outlook.
Anthony Viscusi, President and CEO of Vasomedical, stated that "the increasing
acceptance of the EECP procedure as a scientifically validated option in the
treatment of coronary artery disease and the increasing insurance reimbursement
successes achieved by most current treatment centers around the country indicate
that the market is ready to respond to a stepped-up marketing effort. The
Company has already doubled its sales force and the new funding will enable us
to undertake specific marketing initiatives, including customer support programs
to further increase patient recruitment and insurance reimbursement, as well as
seeding programs in capitated HMO settings where EECP , as a noninvasive,
outpatient therapy, has the potential to create considerable economic benefits
because of the elimination of hospital days and the avoidance of other costs
associated with invasive procedures."
The financing, consummated through the issuance of 5% Series C Convertible
Preferred Stock, was facilitated by Wharton Capital, a New York-based financial
consulting firm.
Vasomedical (www.vasomedical.com) is a medical technology company devoted to the
development, manufacture and commercialization of innovative and cost-effective
cardiovascular products and processes.
[This announcement does not constitute an offer to sell or the solicitation of
offers to buy any security and shall not constitute an offer, solicitation or
sale of any security in any jurisdiction in which such offer, solicitation or
sale would be unlawful. Except for historical information contained in this news
release, the matters discussed are forward looking statements that involve risks
and uncertainties. When used in this release, words such as "anticipate",
"believe", "estimate", "expect" and "intend" and similar expressions, as they
relate to the Company or its management, identify forward-looking statements.
Such forward-looking statements are based on the beliefs of the Company's
management, as well as assumptions made by and information currently available
to the Company's management. Among the factors that could cause actual results
to differ materially are the following: the effect of business and economic
conditions; the impact of competitive products and pricing; capacity and supply
constraints or difficulties; product development, commercialization or
technological difficulties; the regulatory and trade environment; and the risk
factors reported from time to time in the Company's SEC reports.]
###
