REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April , 1998 (the
"Agreement"), is made by and between American Bio Medica Corporation, a New York
corporation (the "Company"), and CC Investments, LDC (the "Initial Investor").
W I T N E S S E T H :
WHEREAS, in connection with the Securities Purchase Agreement dated April
24, 1998 between the Initial Investor and the Company (the "Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of said Purchase Agreement, to issue and sell to the Initial Investor
Four Million ($4,000,000) U.S. Dollars face amount of the Company's Series D
Preferred Stock (the "Preferred Shares"), convertible into shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), together
with Stock Purchase Warrants (the "Warrants") to purchase additional shares of
Common Stock. The shares of Common Stock of the Company into which the Preferred
Shares are convertible and the Warrants are exercisable for are collectively
referred to herein as the "Common Shares." In connection with the sale of the
Preferred Shares to the Initial Investor, the Company has offered Preferred
Shares to other investors as part of the same offering of securities (the
"Offering"), and each of the other investors will be entitled to registration
rights as set forth in this Agreement.
WHEREAS, to induce the Initial Investor to execute and deliver the Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws with respect to the Common Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Holders" are stockholders of the Company who, by virtue of agreements
with the Company, are entitled to include their securities in certain
Registration Statements filed by the Company.
(b) "Investors" means the Initial Investor and any transferees or assignees
of the Initial Investor who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
1
(c) "Registrable Securities" means the Common Shares (including any Common
Shares issuable with respect to conversion default payments under the
Certificate of Designation) issued or issuable with respect to the Preferred
Stock and the Warrants (without regard to any limitations on conversion or
exercise) and any shares of capital stock issued or issuable, from time to time
(with any adjustments), on or in exchange for or otherwise with respect to the
Common Stock or any other Registrable Securities.
(d) "Registration Period" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the Registrable
Securities have been sold and no further Registrable Securities may be issued in
the future, or (ii) the date on which all the Registrable Securities (in the
opinion of Investors' counsel) may be immediately sold without registration and
without restriction as to the number of Registrable Securities to be sold
pursuant to Rule 144 or otherwise.
(e) "Registration Statement" means a registration statement filed with the
Securities and Exchange Commission (the "SEC") under the 1933 Act.
(f) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415") and applicable rules and regulations thereunder, and the
declaration or ordering of effectiveness of such Registration Statement by the
SEC.
2. Registration.
(a) Mandatory Registration. The Company will file a Registration Statement
on Form SB-2 or Form S-3 (or if Form SB-2 or Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration only of all Registrable Securities, and no other securities (other
than shares of Common Stock issuable upon exercise of warrants issued to
Shoreline (as defined below) in connection with the transactions contemplated
hereby and under the Securities Purchase Agreement), subject to the consent of
the Investors and determined pursuant to Section 12 hereof) with the SEC
registering the Registrable Securities for resale within twenty (20) business
days of the closing of the purchase of the Preferred Shares (the "Closing
Date"). Upon becoming eligible to use Form S-3, the Company shall promptly
convert its Registration Statement to Form S-3, unless instructed otherwise by
the Investors. To the extent allowable under the 1933 Act, the Registration
Statement shall include the Common Shares and such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Preferred Shares and exercise of the Warrants (i) to prevent dilution resulting
from stock splits, stock dividends or similar transactions, or (ii) by reason of
changes in the conversion price of the Preferred Shares or the exercise price of
the Warrants in accordance with the terms thereof. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than two (2) times the number of Common Shares that are issuable upon conversion
of the Preferred Shares and exercise of the Warrants. The Company shall use its
best efforts to cause such Registration Statement to be declared effective by
the SEC as soon as practicable after filing and in any event no later than the
ninetieth (90th) day following the Closing Date (the "Required Effective Date").
Such best efforts shall include, but not be limited to, promptly responding to
2
all comments received from the staff of the SEC. Should the Company receive
notification from the SEC that the Registration Statement will receive no action
or no review from the SEC, the Company shall cause such Registration Statement
to become effective within five (5) business days of such SEC notification. Once
declared effective by the SEC, the Company shall cause such Registration
Statement to remain effective throughout the Registration Period. If at any time
after effectiveness of the Registration Statement sales cannot be made
thereunder for any reason for a period of more than twenty (20) days during any
twelve (12) month period, the Company will thereafter make cash payments to the
Investor as partial compensation for such delay in an amount equal to two
percent (2%) of the purchase price paid for the unconverted Preferred Shares for
the first month that sales cannot be made under the effective Registration
Statement, and three percent (3%) of said purchase price for each month
thereafter, continuing through the date that sales can be made under the
effective Registration Statement. Such payments will be prorated on a daily
basis for partial months and will be paid to the Investor in cash within five
(5) business days following the end of each month following the twentieth (20th)
day that sales could not be made.
(c) Late Registration Payments. If the Registration Statement required
pursuant to Section 2(a) above has not been declared effective by the Required
Effective Date, the Company will make cash payments to the Investor as partial
compensation for such delay (the "Late Registration Payments"). The Late
Registration Payments will be equal to one percent (1%) of the purchase price
paid for the Preferred Shares for the first month following the Required
Effective Date, two percent (2%) of the said purchase price for the second month
following the Required Effective Date, and three percent (3%) of said purchase
price for each month thereafter, continuing through the date the Registration
Statement is declared effective by the SEC. The Late Registration Payments will
be prorated on a daily basis for partial months and will be paid to the Initial
Investor in cash within five (5) business days following the earlier of: (i) the
end of each month following the Required Effective Date, or (ii) the effective
date of the Registration Statement. Nothing herein shall limit the Investor's
right to pursue actual damages for the Company's failure to file a Registration
Statement or to have it declared effective by the SEC on or prior to the
Required Effective Date in accordance with the terms of this Agreement.
(d) Piggyback Registrations. If, at any time prior to the expiration of the
Registration Period, the Company decides to register any of its securities for
its own account or for the account of others (excluding registrations for the
Company on Form S-4 or S-8 or their equivalents relating to equity securities to
be issued solely in connection with an acquisition of any entity or business or
equity securities isssuable in connection with stock option or other employee
benefit plans), the Company will promptly give the Investors written notice
thereof, and will use its best efforts to include in such registration all or
any part of the Registrable Securities so requested by such Investors (excluding
any Registrable Securities previously included in a Registration Statement).
Each Investor's request for registration must be given to the Company in writing
within fifteen (15) days after receipt of the notice from the Company. If the
registration for which the Company gives notice is a public offering involving
an underwriting, the Company will so advise the Investors as part of the
3
above-described written notice. In such event, if the managing underwriter(s) of
the public offering 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 would be necessary to effect an
orderly public distribution, then the Company will be obligated to include only
such limited portion, if any, of the Registrable Securities with respect to
which such Investors have requested inclusion hereunder. Any exclusion of
Registrable Securities shall be made pro-rata among all Holders of the Company's
securities seeking to include shares of Common Stock in proportion to the number
of shares of Common Stock sought to be included by such Holders; provided,
however, that the Company will 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
or are not entitled pro rata inclusion with the Registrable Securities. No right
to registration of Registrable Securities under this Section 2(d) shall be
construed to limit in any way the registration required under Section 2(a)
above. The obligations of the Company under this Section 2(d) will expire upon
the earlier of: (i) the effectiveness of the Registration Statement filed
pursuant to Section 2(a) above; (ii) after the Company has afforded the
opportunity for the Investors to exercise registration rights under this Section
2(d) for two registrations; provided, however, that any Investor who shall have
had any Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(d) shall be entitled to include in any additional
Registration Statement filed by the Company the Registrable Securities so
excluded; or (iii) when all of the Registrable Securities held by any Investor
may be sold by such Investor under Rule 144 under the 1933 Act without being
subject to any volume restrictions.
(e) Eligibility for Form S-3. The Company represents and warrants that it
meets the requirements for the use of Form SB-2 for registration of the sale by
the Investors of the Registrable Securities. The Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
become eligible for the use of Form S-3, and agrees to become eligible to use
Form S-3 on or prior to July 31, 1998.
3. Additional Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall have the following
additional obligations:
(a) The Company shall keep the Registration Statement effective pursuant to
Rule 415 under the 1933 Act at all times during the Registration Period as
defined in Section 1(d) above.
4
(b) The Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) filed by the Company shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. The Company
shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to permit
sales pursuant to the Registration Statement at all times during the
Registration Period, and, during such period, shall comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until the termination of the
Registration Period, or if earlier, such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement. In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is, for any three (3) consecutive
trading days (the last of such three (3) trading days being the "Registration
Trigger Date"), insufficient to cover one hundred fifty percent (150%) of the
Registrable Securities issued or issuable upon conversion of the Preferred Stock
held by any Investor, the Company shall amend, if permissible, the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover two hundred percent (200%) of
the Registrable Securities issued or issuable to such Investor, in each case, as
soon as practicable, but in any event within five (5) days in the case of an
amendment and ten (10) days in the case of a Registration Statement after the
Registration Trigger Date (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.
(c) The Company shall furnish to each Investor whose Registrable Securities
are included in the Registration Statement and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC or
received by the Company, one copy of the Registration Statement and any
amendment thereto; each preliminary prospectus and final prospectus and each
amendment or supplement thereto; and, in the case of the Registration Statement
required under Section 2(a) above, each letter written by or on behalf of the
Company to the SEC and each item of correspondence from the SEC or the staff of
the SEC, in each case relating to such Registration Statement (other than any
portion of any item thereof which contains information for which the Company has
sought confidential treatment); and (ii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto,
and such other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
5
(d) The Company shall use its best efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as each Investor who holds (or
has the right to hold) Registrable Securities being offered reasonably request,
(ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions.
Notwithstanding the foregoing provision, the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (ii) subject itself to general taxation in any such
jurisdiction, (iii) file a general consent to service of process in any such
jurisdiction, (iv) provide any undertakings that cause material expense or
burden to the Company, or (v) make any change in its charter or bylaws, which in
each case the Board of Directors of the Company determines to be contrary to the
best interests of the Company and its stockholders.
(e) In the event Investors who hold a majority in interest of the
Registrable Securities being offered in an offering pursuant to a Registration
Statement or any amendment or supplement thereto under Section 2(a) or 3(b)
select underwriters for such offering, the Company shall enter into and perform
its obligations under an underwriting agreement in usual and customary form
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering. The Company shall
be responsible for payment of the fees of such underwriters and the attorney
fees and costs incurred by one attorney selected by such Investors to represent
their interests in the underwritten offering.
(f) The Company shall notify (by telephone and also by facsimile and
reputable overnight courier) each Investor who holds Registrable Securities
being sold pursuant to a Registration Statement of the happening of any event of
which the Company has knowledge as a result of which the prospectus included in
the Registration Statement as then in effect includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (a "Suspension Event"). The Company shall
make such notification as promptly as practicable after the Company becomes
aware of such Suspension Event, shall promptly use its best efforts (but in any
event within five (5) days) to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and shall
deliver a number of copies of such supplement or amendment to each Investor as
such Investor may reasonably request. Notwithstanding anything contained herein
or in the Securities Purchase Agreement, in the event that the use of the
Registration Statement is suspended by the Company, the Company shall promptly
notify all Investors whose securities are covered by the Registration Statement
of such suspension, and shall promptly notify each such Investor as soon as the
use of the Registration Statement may be resumed. Notwithstanding anything to
the contrary, the Company shall cause the Transfer Agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Certificate of Designation in connection with any sale of
Registrable Securities with respect to which such Investor has entered into a
contract for sale prior to receipt of notice of such suspension and for which
such Investor has not yet settled.
6
(g) The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement and,
if such an order is issued, shall use its best efforts to obtain the withdrawal
of such order at the earliest possible time and to notify each Investor who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
(h) The Company shall permit a single firm of counsel designated by the
Investors who hold a majority in interest of the Registrable Securities being
sold pursuant to such registration to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and shall not file any document in a form to which such counsel
reasonably objects.
(i) The Company shall make generally available to its security Holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in a form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
(j) At the request of the Investors who hold a majority in interest of the
Registrable Securities being sold pursuant to such registration, the Company
shall furnish on the date that Registrable Securities are delivered to an
underwriter for sale in connection with the Registration Statement (i) a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel representing
the Company for purposes of such Registration Statement, in form and substance
as is customarily given in an underwritten public offering, addressed to the
underwriters and Investors.
(k) The Company shall make available for inspection by any Investor whose
Registrable Securities are being sold pursuant to such registration, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed necessary
by each Inspector to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of any
Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (iii) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement (to the knowledge of the relevant
7
Investor). The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
(l) The Company shall hold in confidence and shall not make any disclosure
of information concerning an Investor provided to the Company pursuant hereto
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure and allow such Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(m) The Company shall cause the listing and the continuation of listing of
all the Registrable Securities covered by the Registration Statement on the
Nasdaq National Market System, the Nasdaq SmallCap Market, the New York Stock
Exchange or the American Stock Exchange, and cause the Registrable Securities to
be quoted or listed on each additional national securities exchange or quotation
system upon which the Common Stock is then listed or quoted.
(n) The Company shall provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
(o) The Company shall cooperate with the Investors who hold Registrable
Securities being sold and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates to be in such
denominations or amounts as the case may be, and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request; and, within one (1) business day after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) instructions to the transfer agent to issue new stock certificates
without a legend and an opinion of such counsel that the Common Shares have been
registered.
8
(p) At the request of any Investor, the Company shall promptly prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
(q) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the SEC).
(r) the Company shall take all other reasonable actions as any Investor or
the underwriters, if any, may reasonably request to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of each Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the registration of the Registrable
Securities. At least twenty (20) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor (the
"Requested Information") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If within three
(3) business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession (other than a limited number of file
copies), of the prospectus covering such Registrable Securities current at the
time of receipt of such notice.
9
(d) Without limiting any Investor's rights under Sections 2(a) or 3(b)
hereof, no Investor may participate in any underwritten distribution hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and other fees and expenses of investment bankers and
any manager or managers of such underwriting and legal expenses of the
underwriter applicable with respect to its Registrable Securities, in each case
to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company, and the reasonable fees and disbursements of one counsel selected
by the Initial Investor pursuant to Section 3(e) hereof, shall be borne by the
Company.
6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the 1933 Act or the
Exchange Act, any underwriter (as defined in the 0000 Xxx) for the Investors,
the directors, if any, of such underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls any such underwriter within
the meaning of the 1933 Act or the Exchange Act (each, an "Indemnified Person"),
against any losses, claims, damages, expenses or liabilities (joint or several)
(collectively together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened in respect
thereof, "Claims") to which any of them become subject under the 1933 Act, the
Exchange Act or otherwise, insofar as such Claims arise out of or are based upon
any of the following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
Exchange Act or any other law, including without limitation any state securities
law or any rule or regulation thereunder (the matters in the foregoing clauses
10
(i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person and each such other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (A) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (B) with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Party from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; and the Indemnified Party was promptly advised
in writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Party, notwithstanding such notice, used it (C)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Persons and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the 1933 Act
or the Exchange Act, and any other stockholder selling securities pursuant to
the Registration Statement or any of its directors or officers or any person who
controls such stockholder within the meaning of the 1933 Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the 1933 Act,
the Exchange Act or otherwise, insofar as such Claim arises out of or is based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement, and subject to Section 6(c), such
Investor will promptly reimburse any legal or other expenses (promptly as such
expenses are incurred and due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount of a Claim as does not exceed the net proceeds actually received by
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.
11
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and this indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that such Indemnified Party shall diligently pursue such
defense and that such Indemnified Party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action including both the Indemnified Person or the Indemnified Party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are different from or in addition to those available to such indemnifying
party. The Company shall pay for only one separate legal counsel for the
Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification provided for herein is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports Under the Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any similar
rule or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
12
(a) File with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the 1933 Act and the
Exchange Act so long as the Company remains subject to such requirements (it
being understood that nothing herein shall limit the Company's obligations under
Section 4.3 of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
(b) Furnish to each Investor so long as such Investor holds Preferred
Stock, Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. Assignment of Registration Rights. The rights of the Investors
hereunder, including the right to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Investors to transferees or assignees of all or any portion of such securities
only if (i) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
received the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement, and (vi)
such transferee shall be an "accredited investor" as that term is defined in
Rule 501 of Regulation D promulgated under the 1933 Act.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and Investors who hold a majority interest of the
Registrable Securities (but not an Investor who no longer owns any Preferred
Stock or Registrable Securities and who is not affected by such amendment or
waiver). Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. Notwithstanding the
foregoing, no amendment or waiver shall retroactively affect any Investor
without its comment or prospectively adversely affect any Investor who no longer
owns any Preferred Stock, Warrants or Registrable Securities without its
consent. Neither Article 6 nor Article 7 hereof may be amended or waived in a
manner adverse to an Investor without its consent.
11. Third Party Beneficiary. The parties acknowledge and agree that
Shoreline Pacific Institutional Finance, the Institutional Division of Financial
West Group ("Shoreline"), shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this Agreement, entitled
to enforce the terms thereof, and to indemnification for any damages resulting
to Shoreline from any actual or threatened breach thereof by the Company, both
in Shoreline's personal capacity and, should Shoreline so elect, and provided
that Shoreline has obtained the prior written consent of the Investor, on behalf
of the Investor.
13
12. Miscellaneous.
(a) Conflicting Instructions. A person or entity is deemed to be a holder
of Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (with return
receipt requested) or delivered personally or by courier (including a nationally
recognized overnight delivery service) or by facsimile transmission. Any notice
so given shall be deemed effective three days after being deposited in the U.S.
Mail, or upon receipt if delivered personally or by courier or facsimile
transmission, in each case addressed to a party at the following address or such
other address as each such party furnishes to the other in accordance with this
Section 12(b):
If to the Company:
American Bio Medica Corporation
000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxx Xxxxxxxxx, President
with a copy to:
Xxxx Xxxxxxx, Esq.
Attorney-at-Law
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to CC Investments, LDC:
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
with a copy to:
Castle Creek Partners, LLC
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xx. Xxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
14
and with a copy to:
Xxxxx Xxxxxxxxx, Esq.
Altheimer & Xxxx
00 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telephone:(000) 000-0000
Telecopy:(000) 000-0000
in each case with a copy to:
Shoreline Pacific Institutional Finance
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: General Counsel
(c) Waiver. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) Governing Law. This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of New York applicable to the
agreements made and to be performed entirely within such state, without giving
effect to rules governing the conflict of laws (other than Section 5-1401, or a
similar successor provision, of the New York General Obligations Law), and any
disputes arising hereunder will be adjudicated in federal or state court
situated therein. Each party hereto consents to such venue in New York and to
the personal and subject matter jurisdiction of said courts and, to the extent
permitted by applicable law, agrees to waive any objection as to such
jurisdiction or venue, and agrees not to assert any defense based on lack of
jurisdiction or venue.
(e) Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
(f) Entire Agreement. This Agreement, the Securities Purchase Agreement,
the Certificate of Designation and the Warrant (including all schedules and
exhibits thereto) constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(g) Successors and Assigns. Subject to the requirements of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. Notwithstanding anything
to the contrary herein, including without limitation, Section 9, the rights of
an Investor hereunder shall be assignable to and exerciseable by a bona fide
pledgee of the Registrable Securities in connection with an Investor's margin or
brokerage accounts.
15
(h) Use of Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) Headings. The headings and subheadings in the Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission, and
facsimile signatures shall be binding on the parties hereto.
(k) Further Acts. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(l) Consents. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by the Initial Investor or
the Investors holding a majority of the Registrable Securities, determined as if
all shares of preferred stock of the Company issued in the Offering and all
Warrants then outstanding had been converted into or exercised for Registrable
Securities.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY:
American Bio Medica Corporation
By:
Xxxx Xxxxxxxxx
President
INITIAL INVESTOR:
CC INVESTMENTS, LDC
Residency: Cayman Islands
By:
Xxxx Xxxxxxxxx
Director, CSS Corporation Ltd.
Secretary, CC Investments, LDC
16
