STEREOTAXIS, INC. NOTE AND WARRANT PURCHASE AGREEMENT

Exhibit 10.1

 

STEREOTAXIS, INC.

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

THIS NOTE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is made as of November 10, 2005 by and among Stereotaxis, Inc., a Delaware corporation (the “Company”) and the persons on the attached signature pages (sometimes hereinafter individually referred to as a “Lender” or collectively as the “Lenders”).

 

Recitals

 

A.

The Company wishes to obtain a commitment for additional financing which would allow the Company to draw funds as needed;

 

B.

The Lenders wish to provide such commitment to the Company; and

 

C.

In consideration of the above and the mutual covenants hereinafter set forth, the Company and the Lenders desire to agree on the terms of the Notes to be issued upon execution of this Agreement , and accordingly agree as follows:

 

1. The Notes .

 

1.1 The Notes . The Lenders are hereby committing to make available to the Company up to an aggregate original principal amount as set forth on the attached Schedule 1.1 (the “Committed Funds”) during the Commitment Period, as defined in Section 1.2. Subject to and upon the terms and conditions set forth herein, and upon the draw by the Company and advance of funds by the Lenders as set forth in Section 1.3, the Company shall issue and sell to each Lender, and each Lender shall purchase from the Company, the Company’s promissory notes (the “Notes”), in the form attached hereto as Exhibit A , up to the aggregate original principal amount set forth on the attached Schedule 1.1 .

 

1.2 Commitment Period . The Lenders without condition make the Committed Funds available for the Company’s use for a term which shall terminate upon the earlier of (i) May 10, 2006, and (ii) the date on which the Company actually receives additional financing from an institution engaged in the business of providing goods or services in the field of medical technology or devices in the form of new equity and/or new debt that is not subject to escrow or other condition(s) (“Strategic Financing”) in the aggregate amount of not less than Thirty Million Dollars ($30,000,000), (the “Commitment Period”). The Company shall have the option to extend the Commitment Period through November 10, 2006. To extend the Commitment Period, the Company shall notify the Lender of its election in writing, pursuant to the Notification Provision set out in Section 6.8, no less than 15 days before the original Commitment Period is scheduled to expire. In no event shall the Commitment Period extend beyond November 10, 2006.

 

1.3 Election to Draw on Committed Funds . The Company shall be entitled to draw on the Committed Funds in no more than ten (10) tranches, in minimum amounts of $2,000,000 each, up to an aggregate amount as set forth on the attached Schedule 1.1 . To draw on the Committed Funds, the Company shall notify the Lender of its election in writing, pursuant to the

 

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Notification Provision set out in Section 6.8, no less than fourteen (14) days before the requested advance. The Lender shall advance to the Company such amount no later than fourteen (14) days after receiving such notification from the Company. There shall be no preconditions or additional requirements with respect to the Company’s ability to draw on the Committed Funds. The Lenders hereby acknowledge that the determination as to whether to make a draw at any time shall be at the discretion of the executive officers of the Company.

 

1.4 Maturity Date . All amounts due under the Note shall become due and payable on the earlier of (i) May 10, 2006, and (ii) the date on which the Company procures Strategic Financing in the amount of not less than Thirty Million Dollars ($30,000,000), (the “Maturity Date”). The Company shall have the option to extend the Maturity Date to November 10, 2006. To extend the Maturity Date, the Company shall notify the Lenders of its election in writing, pursuant to the Notification Provision set out in Section 6.8, no less than thirty days before the original Maturity Date. In no event shall the Maturity Date be extendable to beyond November 10, 2006.

 

1.5 Optional Prepayment . The Company may at any time, prepay the unpaid principal amount of the Note, or any part thereof, without penalty or premium, but with interest accrued to the date fixed for prepayment. Notice of prepayment shall be given by the Company by mail and shall be mailed to the Lenders not less than 30 days prior to the date fixed for prepayment. Upon giving of notice of prepayment as aforesaid, the Note (or the portion thereof to be prepaid, as the case may be) shall on the prepayment date specified in such notice become due and payable; and from and after the prepayment date so specified (unless the Company shall default in making such prepayment) interest on the Note (or the portion thereof to be prepaid, as the case may be) shall cease to accrue and, on presentation and surrender hereof to the Company for cancellation, the Note (or the portion thereof to be prepaid as the case may be) shall be paid by the Company at the prepayment price aforesaid.

 

1.6 Interest . The Company shall pay interest on the unpaid balance of each advance under the Notes at a per annum interest rate equal to the greater of (i) six percent (6%) and (ii) the Prime Rate as published in The Wall Street Journal as of the date of such advance hereunder less one percent (1%). Such interest shall be paid by the Company to the Lenders with the unpaid principal balance on the Maturity Date.

 

2. Warrants .

 

2.1 In consideration for entering into and performing this Agreement, the Company shall grant to the Lender warrants to purchase the Company’s common stock, par value .001 per share (“Common Stock”). Such warrants shall be in the form attached as Exhibit B (the “Warrants”), and shall be issued to the Lender no later than 10 Trading Days following the determination of the Exercise Price. Each Lender shall receive the number of Warrants as follows:

 

(a) upon execution and delivery of this Agreement, a number of warrants equal to the that portion of the Committed Funds to be loaned by each such Lender to the Company multiplied by 0.10, divided by the Exercise Price;

 

(b) upon advance, if any, by each such Lender under Section 1.3, a number of additional warrants equal to the portion of the Committed Funds so advanced multiplied by 0.10, divided by the Exercise Price; and

 

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(c) upon the first to occur of any extension of either (1) the Commitment Period under Section 1.2 or (2) the Maturity Date under Section 1.4, a number of additional warrants equal to that portion of the Committed Funds to be loaned by each such Lender multiplied by 0.10, divided by the Exercise Price, provided that only one adjustment shall be made pursuant to this Section 2.1(c).

 

In no event shall the number of shares issuable upon exercise of such Warrants exceed 19.9% of the outstanding Common Stock of the Company.

 

2.2 Registration Rights .

 

(a) Promptly following the execution and delivery of this Agreement, the Company shall use its reasonable best efforts to obtain an amendment, waiver or other similar document, from the Holders of Registrable Securities under that certain that certain Fourth Amended and Restated Investor Rights Agreement dated as of December 17, 2002, as amended, including without limitation a waiver of any incidental or piggyback registration rights thereunder, to permit the registration of the shares of Common Stock isssuable upon exercise of the Warrants (“Warrant Shares”). Within sixty (60) days after the date hereof (or immediately following receipt of such waiver or amendment, if later), the Company shall file with the SEC a registration statement with respect to the maximum number of Warrant Shares isssuable upon exercise of the Warrants (assuming all Warrants are issued pursuant to Section 2.1 above) and use its diligent best efforts to cause such registration statement to become effective, and to keep such registration statement effective for up to ninety (90) days or until the Lenders have completed the distribution relating thereto (or in the alternative at the Company’s election cause such Warrant Shares to be included on an amendment to a shelf registration statement previously filed by the Company). The Company shall not have any obligation to sell such shares in an underwritten offering.

 

(b) In connection therewith, the Company shall:

 

i. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act of 1933, as amended (the “Securities Act”) with respect to the disposition of all securities covered by such registration statement.

 

ii. Furnish to the Lenders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Warrant Shares owned by them.

 

iii. Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Lenders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

 

iv. Notify each Lender of Warrant Shares covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the

 

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Securities Act of the happening of any event as a result of which the prospectus included in such 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 not misleading in the light of the circumstances then existing.

 

(b) The Parties agree that they shall have such indemnification obligations as set forth on Schedule 2.2 hereto.

 

(c) Each Lender or other permitted holder of Warrant Shares included in any registration shall furnish to the Company such information regarding such person and the distribution proposed by such person as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification, or compliance referred to in this Section.

 

2.3 All expenses incurred in connection with the registration effected pursuant to Section 2.2, including without limitation all registration, filing, and qualification fees (including blue sky fees and expenses), printing expenses, escrow fees, fees and disbursements of counsel for the Company, reasonable fees and disbursements of one special counsel for the participating Lenders (collectively, “Registration Expenses”), shall be borne by the Company; provided, however, that the term Registration Expenses shall not include, and in no event will the Company be obligated to pay, stock transfer taxes or underwriters’ discounts, or commissions relating to the Warrant Shares.

 

2.4 The Warrants shall provide that if the per share Closing Price of the Common Stock shall exceed an amount that is three (3) times the Exercise Price for 20 consecutive Trading Days ending no later than March 31, 2006, the Company may require that the Lender exercise such Warrants, provided that such notice may be given no later than 5:00 p.m. St. Louis time on April 10, 2006. The Warrants shall be exercised on such date specified in the notice, but no fewer than three and no more than 10 Trading Days following the date of such Notice.

 

2.5 Certain Definitions.

 

“Trading Day” shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for business.

 

“Closing Price” with respect to Common Stock on any day means the reported last sales price regular way on NASDAQ, or, if no such reported sale occurs on such day, the average of the closing bid and asked prices regular way on such day, in each case as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such class of security is listed or admitted to trading as reported by NASDAQ or any comparable system then in use or, if not so reported, as reported by any New York Stock Exchange member firm reasonably selected by the Company for such purpose.

 

“Exercise Price” shall mean the average of the daily Closing Prices of a share of the Common Stock for 10 consecutive Trading Days commencing on and including November 4, 2005 and ending on and including November 17, 2005.

 

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3. Representations and Warranties of the Company.

 

3.1 Organization and Standing . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority to conduct its business as it is presently being conducted and to own and operate its properties and assets.

 

3.2 Corporate Power . The Company will have at Closing all requisite corporate power and authority and has taken all corporate action necessary to execute and deliver this Agreement, to issue the Note and to carry out and perform its obligations under the terms of this Agreement.

 

3.3 Authorization . The execution, delivery and performance of this Agreement by the Company has been duly authorized by all requisite corporate action, and constitutes the valid and binding obligations of the Company, enforceable, in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights.

 

4. Representations and Warranties of the Lenders.

 

4.1 Representations and Warranties of the Lenders . Each Lender severably represents and warrants to the Company as of the Closing Date as follows:

 

(a) The Lender has all requisite power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by the Lender, and the consummation by the Lender of the transactions contemplated hereby have been duly approved and no other corporate or other proceedings on the part of the Lender are or will be necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Lender and is a legal, valid and binding obligation of the Lender enforceable against the Lender in accordance with its respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights.

 

(b) The Lender is experienced in evaluating and investing in new companies such as the Company. The Lender is a sophisticated investor with such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of a prospective investment in the Notes, the Warrants and the Common Stock issuable upon exercise of the Warrants (collectively, the “Securities”) and who is capable of bearing the economic risks of such investment.

 

(c) The Lender is acquiring the Securities for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof. The Lender understands that the Securities to be acquired have not been registered under the Act by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein. The Lender further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to any third person with respect to any of the Securities. The Lender understands and acknowledges that the offering of the Securities pursuant to this Agreement will not be registered under the Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from the registration requirements of the Act.

 

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(d) The Lender acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or unless an exemption from such registration is available. The Lender is aware of the provisions of Rule 144 promulgated under the Act which permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions. The Lender covenants that, in the absence of an effective registration statement covering the Securities in question, the Lender will sell, transfer, or otherwise dispose of the Securities only in a manner consistent with the Lender’s representations and covenants set forth in this Section 4. In connection therewith, the Lender acknowledges that the Company will make a notation on its stock books regarding the restrictions on transfers set forth in this Section 4 and will transfer Securities on the books of the Company only to the extent not inconsistent therewith.

 

(e) The Lender understands that no public market now exists for any of the Securities issued by the Company and there can be no assurance that a public market will ever exist for the Securities.

 

(f) The Lender (or its authorized representative) has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management and to review the Company’s facilities. The Lender understands that such discussions, as well as the written information issued by the Company, were intended to describe the aspects of the Company’s business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description.

 

(g) The Lender represents that Lender is an “accredited investor” as such term is defined in Regulation D promulgated under the Act. The Lender has the financial ability to perform or cause this Agreement to be performed, and shall provide to the Company reasonable evidence of such ability upon written request from time to time, subject to confidentiality reasonably requested by such Lender.

 

4.2 Legend . The Note shall be endorsed with the following legend:

 

THE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE ‘SECURITIES ACT”), AS AMENDED, OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, THE NOTE MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED TO A “PERMITTED TRANSFEREE” (AS DEFINED HEREIN) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR IN A TRANSACTION EXEMPT FROM THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF SENIOR INDEBTEDNESS (AS DEFINED BELOW) TO THE EXTENT PROVIDED HEREIN.

 

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4.3 Each Lender agrees that in no event will it make a transfer or disposition of any of the Notes or Warrants (other than pursuant to an effective registration statement under the 1933 Act), unless and until (i) it shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the disposition and assurance that the proposed disposition is in compliance with all applicable laws, and (ii) if reasonably requested by the Company, at the expense of such Lender or its transferee, it shall have furnished to the Company an opinion of counsel, reasonably satisfactory to the Company, to the effect that such transfer may be made without registration under the 1933 Act. Notwithstanding the foregoing, no formal notice or opinion of counsel shall be required for the transfer by an Lender to: (x) any partner of a Lender or to a retired partner of a Lender, who retires after the date of this Agreement, (y) the estate of any such partner or a retired partner or for the transfer by gift, will or intestate succession of any partner to his spouse or lineal descendants or ancestors or (z) any entity which is a wholly-owned subsidiary of the Lender or which is under common control with the Lender; provided, however, in all cases where no legal opinion is required that the transferee shall agree in writing to be subject to the terms of this Agreement to the same extent as if it were the original Lender hereunder.

 

5. Subordination . The indebtedness evidenced by the Notes shall be expressly subordinated, to the extent and in the manner set forth in the Notes, in right of payment to the prior payment in full of all the Company’s Senior Indebtedness, as defined in the Notes. All other terms related to the subordination set forth in the Note are incorporated herein by reference. The Company agrees that any future Junior Indebtedness, as defined in the Notes, shall be subordinate to the Notes on as set forth therein.

 

6. Miscellaneous .

 

6.1 Waivers and Amendments . Any term of this Agreement may be amended or waived only with the written consent of the Company and all of the Lenders.

 

6.2 Governing Law . This Agreement shall be governed in all respects by the internal laws of the State of Delaware, without giving effect to principles of conflicts of law.

 

6.3 Attorney’s Fees . If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

6.4 Successors and Assigns . Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

6.5 Entire Agreement; Conflict . This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Except as expressly provided herein, in the event of any conflict between the terms of this Agreement and the other documents as attached hereto, this Agreement shall control.

 

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6.6 Severability of this Agreement . In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

6.7 Titles and Subtitles; Construction . The titles of the Sections and Subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.

 

6.8 Notices . Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

 

To the Company:

 

Stereotaxis, Inc.

4041 Forest Park Avenue

St. Louis, Missouri 63108

Fax: (314) 615-6922

Attention:

Chief Executive Officer

 

Chief Financial Officer

 

Copy to:

 

Bryan Cave LLP

One Metropolitan Square

Suite 3600

St. Louis, MO 63102

Fax: (314) 259-2020

Attn:

James L. Nouss, Jr., Esq.

 

Robert J. Endicott, Esq.

 

To the Lenders:

 

[To the addresses specified on Schedule 1.1 hereto]

 

6.9 Counterparts . This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument.

 

[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first written above.

 

THE COMPANY:		STEREOTAXIS, INC.
		a Delaware corporation
		By:		/s/ Bevil J. Hogg
		Name:		Bevil J. Hogg
		Title:		President and Chief Executive Officer

 

THE LENDERS:		SANDERLING VENTURE PARTNERS VI CO-INVESTMENT FUND, L.P.
		By:		Middleton, McNeil, Mills & Associates, VI, LLC
		By:		/s/ Fred A. Middleton
				Fred A. Middleton
				Managing Director

 

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Schedule A

 

 

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Schedule 2.2

 

Indemnification

 

(a) The Company will, and does hereby undertake to, indemnify and hold harmless each Lender of Warrant Shares, each of such Lender’s officers, directors, partners and agents, and each person controlling such Lender, with respect to any registration, qualification, or compliance of the Warrant Shares held by or issuable to such Lender effected pursuant to this Section 1, and each underwriter of such registration, if any, and each person who controls any underwriter, against all claims, losses, damages, and liabilities (or actions in respect thereto) to which they may become subject under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or other federal or state law arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular, or other similar document (including any related registration statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any violation or alleged violation by the Company of any federal, state or common law rule or regulation applicable to the Company in connection with any such registration, qualification, or compliance, and will reimburse, as incurred, each such Lender, each such underwriter, and each such director, officer, partner, agent and controlling person, for any legal and any other expenses reasonably incurred in connection with investigating o