Document:

Exhibit 10.1

 

FORM OF SUBSCRIPTION AGREEMENT

 

SUBSCRIPTION AGREEMENT (“Agreement”) is being made by the undersigned (the “Purchaser”) with Vertical Health Solutions, Inc., a Florida corporation (“VHS” or the “Company”) and OnPoint Medical Diagnostics, Inc., a Minnesota corporation (“OnPoint”) in connection with the Purchaser’s subscription to acquire securities to be issued by VHS if this Agreement is accepted by VHS and OnPoint.

 

WHEREAS, the Company and OnPoint are parties to an Agreement and Plan of Merger whereby it is contemplated that OnPoint will merge with a wholly owned subsidiary of the Company so that OnPoint will become a wholly owned subsidiary of the Company, and the then existing OnPoint stockholders would obtain majority ownership and control of the Company (the “Merger”).

 

WHEREAS, as a condition to the closing of the Merger, OnPoint was to obtain subscriptions for the purchase, in a private placement transaction (the “Offering”) pursuant to Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), of units (the “Units”) comprised of one share of the Company’s common stock, $0.001 par value per share (the “Shares” or “Common Stock”) and a five-year warrant (the “Warrants”) to purchase 0.5 of a share of Common Stock (the “Warrant Shares”), at an exercise price of $2.00 per share.

 

WHEREAS, the price for such Units in the Offering is $1.00 per Unit and the terms of the Agreement and Plan of Merger required subscriptions for a minimum of 500,000 Units to be received no later than March 31, 2011.

 

WHEREAS, Purchaser desires to purchase the number of Units set forth on the signature page hereof.

 

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows:

 

1.                                       Subscription.

 

(a)                                  Purchaser, intending to be legally bound, hereby irrevocably agrees to purchase the number of Units set forth on the signature page at a purchase price of $1.00  per Unit.  This subscription is submitted in accordance with and subject to the terms and conditions described in this Subscription Agreement, and the Confidential Private Placement Memorandum dated March 3, 2011, as amended or supplemented from time to time, including all documents incorporated by reference therein and all attachments, schedules and exhibits thereto (the “Memorandum”), relating to the offering (the “Offering”) by the Company of a minimum of 500,000 Units ($500,000) (the “Minimum Amount”) and a maximum of 5,000,000 Units ($5,000,000) (the “Maximum Amount”).  The initial closing of the Offering shall not occur unless and until (i) the Minimum Amount has been sold; and (ii) the Merger is completed. The minimum subscription for a Purchaser in the Offering is 25,000 Units ($25,000); provided, however, the Placement Agent and the Company, in their sole discretion, may waive such minimum subscription requirement from time to time.  We do not intend to issue fractional shares and, as a result, the Units will be offered in increments of two Units.

 

(b)                                 The terms of the Offering are more completely described in the Memorandum and such terms are incorporated herein in their entirety.  Certain capitalized terms used, but not otherwise defined herein, shall have the respective meanings provided in the Memorandum.

 

 

2.                                       Payment.  Contemporaneous with the delivery of this Agreement, the Purchaser has submitted to Private Bank Minnesota, as escrow agent, payment of the full amount of the purchase price of the Units being subscribed for.  Purchaser has indicated on the signature page if such payment is made by wire transfer or by delivery of a check.

 

3.                                       Deposit of Funds.  All payments made as provided in Section 2 hereof shall be received by Private Bank Minnesota, as escrow agent (the “Escrow Agent”) or such other escrow agent appointed by Emergent Financial Group, Inc. (“Emergent” or the “Placement Agent”) and the Company, in an escrow account (the “Escrow Account”).  The Units will be offered until the earlier of the date upon which all the Units are sold or until June 30, 2011, which date may be extended up to an additional 45 days at the election of Emergent and OnPoint (the “Offering Deadline”).  In the event that the Company does not accept the subscription contemplated by this Agreement or if the Minimum Amount is not deposited to the Escrow Account prior to March 31, 2011, at OnPoint’s request, the Escrow Agent will refund all of the Purchaser’s subscription funds, without interest thereon or deduction therefrom, and terminate the Offering.

 

4.                                       Acceptance of Subscription.  The Purchaser understands and agrees that the Company in its sole discretion reserves the right to accept or reject this or any other subscription for the Units, in whole or in part, notwithstanding prior receipt by the Placement Agent of this Agreement or by the Escrow Agent of the Purchaser’s payment of the subscription price.  Neither OnPoint nor the Company shall have any obligation hereunder until OnPoint and the Company shall execute this Agreement indicating their acceptance.  If Purchaser’s subscription is rejected in whole, or the Offering is terminated, all funds received from the Purchaser will be returned without interest, penalty, expense or deduction, and this Agreement shall thereafter be of no further force or effect.  If Purchaser’s subscription is rejected in part, the funds for the rejected portion of such subscription will be returned without interest, penalty, expense or deduction, and this Subscription Agreement will continue in full force and effect to the extent such subscription was accepted.

 

5.                                       Representations and Warranties of the Purchaser.  The Purchaser hereby acknowledges, represents, warrants, and agrees as follows:

 

(a)                                  Neither the offer nor the sale of the Shares, the Warrants or the Warrant Shares are registered under the Securities Act, or any state securities laws.  The Purchaser understands that the offering and sale of the Shares and Warrants is intended to be exempt from registration under the Securities Act, by virtue of Section 4(2) thereof and the provisions of Regulation D promulgated thereunder, based, in part, upon the representations, warranties and agreements of the Purchaser contained in this Subscription Agreement;

 

(b)                                 The Purchaser and the Purchaser’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, “Advisors”), have received the Memorandum and all other documents requested by the Purchaser or its Advisors, if any, have carefully reviewed them and understand the information contained therein, prior to the execution of this Subscription Agreement;

 

(c)                                  Neither the Securities and Exchange Commission (the “Commission”) nor any state securities commission has approved the Units to be issued by the Company or Warrant Shares, or passed upon or endorsed the merits of the Offering or confirmed the accuracy or determined the adequacy of the Memorandum.  The Memorandum has not been reviewed by any Federal, state or other regulatory authority;

 

 

(d)                                 All documents, records, and books pertaining to the investment in the Units (including, without limitation, the Memorandum) have been made available for inspection by the Purchaser and its Advisors, if any;

 

(e)                                  The Purchaser and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the offering of the Units and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered by the Company in writing to the full satisfaction of the Purchaser and its Advisors, if any;

 

(f)                                    In evaluating the suitability of an investment in the Company, the Purchaser has not relied upon any representation or other information (oral or written) other than as stated in the Memorandum or as contained in documents so furnished to the Purchaser or its Advisors, if any, by the Company in writing;

 

(g)                                 The Purchaser is unaware of, is in no way relying on, and did not become aware of the offering of the Units through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or over the Internet, in connection with the offering and sale of the Units and is not subscribing for Units and did not become aware of the offering of the Units through or as a result of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally;

 

(h)                                 The Purchaser has taken no action which would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Subscription Agreement or the transactions contemplated hereby (other than commissions to be paid by the Company to the Placement Agent as described in the Memorandum or as otherwise described in the Memorandum);

 

(i)                                     The Purchaser, either alone or together with its Advisor(s), if any, have such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable them to utilize the information made available to them in connection with the offering of the Units to evaluate the merits and risks of an investment in the Units and the Company and to make an informed investment decision with respect thereto;

 

(j)                                     The Purchaser is not relying on the Company, the Placement Agent or any of their respective employees or agents with respect to the legal, tax, economic and related considerations of an investment in the Units, and the Purchaser has relied on the advice of, or has consulted with, only its own Advisors;

 

(k)                                  The Purchaser is acquiring the Units solely for such Purchaser’s own account for investment and not with a view to resale or distribution thereof, in whole or in part.  The Purchaser has no agreement or arrangement, formal or informal, with any person to sell or transfer all or any of the Shares or the Warrant Shares, and the Purchaser has no plans to enter into any such agreement or arrangement;

 

(l)                                     The purchase of the Units represents high risk capital and the Purchaser is able to afford an investment in a speculative venture having the risks and objectives of the Company.  The Purchaser must bear the substantial economic risks of the investment in the Units indefinitely because none of the securities included in the Units may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available.  Legends shall be placed on the securities included in the Units to the effect

 

 

that they have not been registered under the Securities Act or applicable state securities laws and appropriate notations thereof will be made in the Company’s stock books.  Stop transfer instructions will be placed with the transfer agent of the securities constituting the Units.  The Company has agreed that purchasers of the Units will have, with respect to the Units and the shares of Common Stock underlying the Warrants, the registration rights described in the Registration Rights Agreement in the form annexed to the Memorandum.  Notwithstanding such registration rights, it is not anticipated that there will be any market for resale of the Shares, the Warrants or the Warrant Shares, and such securities will not be freely transferable at any time in the foreseeable future;

 

(m)                               The Purchaser has adequate means of providing for such Purchaser’s current financial needs and foreseeable contingencies and has no need for liquidity of the investment in the Units, shares of Common Stock contained in the Shares, the Warrants or the Warrant Shares for an indefinite period of time;

 

(n)                                 The Purchaser is aware that an investment in the Units involves a number of very significant risks and has carefully read and considered the matters set forth in the Memorandum and, in particular, the matters under the caption “Risk Factors” therein, and, in particular, acknowledges that such risks may materially adversely affect the Company’s results of operations and future prospects;

 

(o)                                 The Purchaser is an “accredited investor” as that term is defined in Regulation D under the Securities Act, and has truthfully and accurately completed the Accredited Investor Certification contained herein;

 

(p)                                 The Purchaser: (i) if a natural person, represents that the Purchaser has reached the age of 21 and has full power and authority to execute and deliver this Subscription Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Units, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Subscription Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the securities constituting the Units, the execution and delivery of this Subscription Agreement has been duly authorized by all necessary action, this Subscription Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Subscription Agreement in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Subscription Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom the Purchaser is executing this Subscription Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Subscription Agreement and make an investment in the Company, and represents that this Subscription Agreement constitutes a legal, valid and binding obligation of such entity.  The execution and delivery of this Subscription Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Purchaser is a party or by which it is bound;

 

(q)                                 The Purchaser and its Advisors, if any, have had the opportunity to obtain any additional information, to the extent the Company had such information in their possession or could acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information

 

 

contained in the Memorandum and all documents received or reviewed in connection with the purchase of the Units and have had the opportunity to have representatives of the Company provide them with such additional information regarding the terms and conditions of this particular investment and the financial condition, results of operations, business and prospects of the Company deemed relevant by the Purchaser or its Advisors, if any, and all such requested information, to the extent the Company had such information in its possession or could acquire it without unreasonable effort or expense, has been provided by the Company in writing to the full satisfaction of the Purchaser and its Advisors, if any;

 

(r)                                    The Purchaser represents to the Company that any information which the undersigned has heretofore furnished or is furnishing herewith to the Company or Emergent is complete and accurate and may be relied upon by the Company in determining the availability of an exemption from registration under Federal and state securities laws in connection with the offering of securities as described in the Memorandum.  The Purchaser further represents and warrants that it will notify and supply corrective information to the Company and Emergent immediately upon the occurrence of any change therein occurring prior to the Company’s issuance of the securities contained in the Units;

 

(s)                                  The Purchaser has significant prior investment experience, including investment in non-listed and non-registered securities.  The Purchaser is knowledgeable about investment considerations in public companies and, in particular, public companies traded on the OTC Bulletin Board.  The Purchaser has a sufficient net worth to sustain a loss of its entire investment in the Company in the event such a loss should occur.  The Purchaser’s overall commitment to investments which are not readily marketable is not excessive in view of the Purchaser’s net worth and financial circumstances and the purchase of the Units will not cause such commitment to become excessive.  This investment is a suitable one for the Purchaser;

 

(t)                                    The Purchaser is satisfied that it has received adequate information with respect to all matters which it or its Advisors, if any, consider material to its decision to make this investment;

 

(u)                                 The Purchaser acknowledges that any estimates or forward-looking statements or projections included in the Memorandum were prepared by the Company in good faith, but that the attainment of any such projections, estimates or forward-looking statements cannot be guaranteed by the Company and should not be relied upon;

 

(v)                                 No oral or written representations have been made, or oral or written information furnished, to the Purchaser or its Advisors, if any, in connection with the offering of the Units which are in any way inconsistent with the information contained in the Memorandum;

 

(w)                               Within five days after receipt of a request from the Company or Emergent, the Purchaser will provide such information and deliver such documents as may reasonably be necessary to comply with any and all laws and ordinances to which the Company or Emergent is subject;

 

(x)                                   The Purchaser’s substantive relationship with Emergent or subagent through which the Purchaser is subscribing for Units predates Emergent’s or such subagent’s contact with the Purchaser regarding an investment in the Units;

 

(y)                                 THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.  THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO

 

 

REGISTRATION OR EXEMPTION THEREFROM.  THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL;

 

(z)                                   The Purchaser acknowledges that neither the Units nor the Warrants have been recommended by any Federal or state securities commission or regulatory authority.  In making an investment decision investors must rely on their own examination of the Company and the terms of the Offering, including the merits and risks involved.  Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Subscription Agreement.  Any representation to the contrary is a criminal offense.  The Shares issued by the Company, the Warrants and the Warrant Shares, are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act, and the applicable state securities laws, pursuant to registration or exemption therefrom.  Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time; and

 

(aa)                            (For ERISA plans only)  The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities.  The Purchaser or Plan fiduciary (a) is responsible for the decision to invest in the Company; (b) is independent of the Company and any of its affiliates; (c) is qualified to make such investment decision; and (d) in making such decision, the Purchaser or Plan fiduciary has not relied on any advice or recommendation of the Company or any of its affiliates.

 

6.                                       Representations and Warranties of the VHS and OnPoint.

 

(a)                                  VHS hereby acknowledges, represents, warrants, and agrees as follows:

 

(i)                                     VHS is a corporation duly organized, existing and in good standing under the laws of its state of incorporation and has the corporate power to conduct its business.

 

(ii)                                  The execution, delivery and performance of this Agreement by VHS have been duly approved by the Board of Directors of VHS.

 

(iii)                               The Shares, Warrants and Warrant Shares have been or will be duly and validly authorized and, when issued in accordance with the terms hereof, will be duly and validly issued, fully paid and non-assessable.

 

(iv)                              No consent, authorization or filing of or with any federal court or government authority of the United States is required in connection with the consummation of the transactions contemplated herein, except for required filings with the Commission and applicable “Blue Sky” or state securities commissions relating specifically to the Offering or with applicable state authorities relating specifically to the Merger.

 

(v)                                 The Memorandum, and any amendments or supplements thereto, as of the date of any such amendment or supplement thereto, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

 

(vi)                              VHS has authorized and outstanding the capital stock of VHS as is set forth in its most recent filings with the Commission as of the date set forth therein.  All outstanding shares of capital stock of VHS are duly authorized, validly issued and outstanding, fully paid and non-assessable.  Except as referred to in the Memorandum or in its most recent filings with the Commission: (i) there are no outstanding options, warrants or other rights permitting or requiring VHS or others to purchase or acquire any shares of capital stock or other equity securities of VHS or to pay any dividend or make any other distribution in respect thereof; (ii) there are no securities issued or outstanding which are convertible into or exchangeable for shares of capital stock or other equity securities of VHS and there are no contracts, commitments or understandings to which VHS is a party, whether or not in writing, to issue or grant any such option, warrant, right or convertible or exchangeable security; (iii) no shares of stock or other securities of VHS are reserved for issuance for any purpose; (iv) there are no voting trusts or other contracts, commitments, understandings, arrangements or restrictions of any kind to which VHS is a party with respect to the ownership, voting or transfer of shares of stock or other securities of VHS, including without limitation, any preemptive rights, rights of first refusal, proxies or similar rights and (v) no person holds a right to require VHS to register any securities of VHS under the Securities Act or to participate in any such registration.

 

(vii)                           Except as set forth in the Memorandum or in its most recent filings with the Commission, no default by VHS or, to the knowledge of VHS, any other party exists in the due performance under any material agreements to which VHS is a party or to which any of its assets are subject, other than defaults that could not reasonably be expected to have a material adverse effect on the (i) assets, liabilities, results of operations, condition (financial or otherwise), business or business prospects of VHS or (ii) ability of VHS to perform its obligations under this Agreement (“VHS  Material Adverse Effect”).

 

(viii)                        Except as set forth in the Memorandum or in its most recent filings with the Commission, there are no actions, suits, claims, hearings or proceedings pending before any court or governmental authority or, to the knowledge of VHS, threatened, against VHS, or involving its assets or any of its officers or directors (in their capacity as such) which, if determined adversely to VHS or such officer or director, could not reasonably be expected to have a VHS Material Adverse Effect or adversely affect the transactions contemplated by this Agreement or the Merger Agreement or the enforceability thereof.

 

(b)                                 OnPoint hereby acknowledges, represents, warrants, and agrees as follows:

 

(i)                                     OnPoint is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota. OnPoint is duly qualified to transact business as a foreign corporation and is in good standing under the laws of each jurisdiction where the location of its properties or the conduct of its business makes such qualification necessary, except where the failure to be so qualified would not, or could not reasonably be expected to, have a material adverse effect on the (i) assets, liabilities, results of operations, condition (financial or otherwise), business or business prospects of OnPoint or (ii) ability of OnPoint to perform its obligations under this Agreement (“OnPoint Material Adverse Effect”).

 

(ii)                                  OnPoint has all requisite corporate power and authority to conduct its business as presently conducted and as proposed to be conducted, to enter into and perform its obligations under this Agreement.  This Agreement constitutes the valid and binding obligations of OnPoint, enforceable against OnPoint in accordance with their respective terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the rights of creditors generally and to general equitable principles and the availability of specific performance.

 

 

(iii)                               The execution and delivery of, or performance by, OnPoint under this Agreement does not conflict with any term or provision of, or will result in the creation or imposition of, any lien, charge or other encumbrance upon any of the assets of OnPoint under, any other agreement or other instrument to which OnPoint is a party or by which OnPoint or its assets is bound, or any term of the charter or by-laws of OnPoint, or any license, permit, statute, rule or regulation applicable to OnPoint or any of its assets, or any judgment, decree, or order of any court or governmental body having jurisdiction over OnPoint except as same would not have a OnPoint Material Adverse Effect.

 

(iv)                              No consent, authorization or filing of or with any federal court or government authority of the United States is required in connection with the consummation of the transactions contemplated herein, except for required filings with the SEC and applicable “Blue Sky” or state securities commissions relating specifically to the Offering or with applicable state authorities relating specifically to the Merger.

 

(v)                                 The Memorandum, and any amendments or supplements thereto, as of the date of any such amendment or supplement thereto, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(vi)                              OnPoint has authorized and outstanding the capital stock of OnPoint as set forth in the Memorandum as of the date set forth therein.  All outstanding shares of capital stock of OnPoint are duly authorized, validly issued and outstanding, fully paid and non-assessable.  Except as referred to in the Memorandum: (i) there are no outstanding options, warrants or other rights permitting or requiring OnPoint or others to purchase or acquire any shares of capital stock or other equity securities of OnPoint or to pay any dividend or make any other distribution in respect thereof; (ii) there are no securities issued or outstanding which are convertible into or exchangeable for shares of capital stock or other equity securities of OnPoint and there are no contracts, commitments or understandings to which OnPoint is a party, whether or not in writing, to issue or grant any such option, warrant, right or convertible or exchangeable security; (iii) no shares of stock or other securities of OnPoint are reserved for issuance for any purpose; (iv) there are no voting trusts or other contracts, commitments, understandings, arrangements or restrictions of any kind to which OnPoint is a party with respect to the ownership, voting or transfer of shares of stock or other securities of OnPoint, including without limitation, any preemptive rights, rights of first refusal, proxies or similar rights and (v) no person holds a right to require OnPoint to register any securities of OnPoint under the Securities Act or to participate in any such registration.

 

(vii)                           The financial statements, together with the related notes, of OnPoint included in the Memorandum present fairly in all material respects the financial position of OnPoint as of the respective dates specified and the results of its operations and cash flow for the respective periods covered thereby.

 

(viii)                        The conduct of business by OnPoint as presently and proposed to be conducted is not subject to continuing oversight, supervision, regulation or examination by any governmental official or body of the United States or any other jurisdiction wherein OnPoint conducts or proposes to conduct such business, except as described in the Memorandum and except such regulation as is applicable to commercial enterprises generally.  Except as described in the Memorandum, OnPoint has complied with all applicable laws, regulations, judgments, decrees or orders of any court or governmental agency or entity except where the failure to so comply would not have a OnPoint Material Adverse Effect and has obtained all requisite licenses, permits and other governmental authorizations to conduct its business as presently conducted and to be conducted following the consummation of the Merger, except to the extent the failure to so obtain could not reasonably be expected to have a Material Adverse Effect

 

 

on OnPoint.  OnPoint has not received any notice of any violation of, or noncompliance with, any federal, state, local or foreign laws, ordinances, regulations and orders (including, without limitation, those relating to environmental protection, occupational safety and health, federal securities laws, equal employment opportunity, consumer protection, credit reporting, “truth-in-lending”, and warranties and trade practices) applicable to its business, the violation of, or non-compliance with, which would have a Material Adverse Effect, and OnPoint knows of no facts or set of circumstances which would give rise to such a notice.

 

(ix)                                Except as set forth in the Memorandum, no default by OnPoint or, to the knowledge of OnPoint, any other party exists in the due performance under any of the agreements referred to in the Memorandum to which OnPoint is a party or to which any of its assets are subject, other than defaults that could not reasonably be expected to have a OnPoint Material Adverse Effect.

 

(x)                                   Except as set forth in the Memorandum, there are no actions, suits, claims, hearings or proceedings pending before any court or governmental authority or, to the knowledge of OnPoint, threatened, against OnPoint, or involving its assets or any of its officers or directors (in their capacity as such) which, if determined adversely to OnPoint or such officer or director, could not reasonably be expected to have a OnPoint Material Adverse Effect or adversely affect the transactions contemplated by this Agreement or the Merger Agreement or the enforceability thereof.

 

(xi)                                Subsequent to the respective dates as of which information is given in the Memorandum, except as may otherwise be set forth in the Memorandum, there has been no: (i) material adverse change in the financial condition of OnPoint; (ii) damage, loss or destruction, whether or not covered by insurance, with respect to any material asset or property of OnPoint; or (iii) agreement to permit any of the foregoing.

 

7.                                       Indemnification.  The Purchaser agrees to indemnify and hold harmless the Company, the Placement Agent and their respective officers, directors, employees, agents, control persons and affiliates from and against all losses, liabilities, claims, damages, costs, fees and expenses whatsoever (including, but not limited to, any and all expenses incurred in investigating, preparing or defending against any litigation commenced or threatened) based upon or arising out of any actual or alleged false acknowledgment, representation or warranty, or misrepresentation or omission to state a material fact, or breach by the Purchaser of any covenant or agreement made by the Purchaser herein or in any other document delivered in connection with this Subscription Agreement.

 

8.                                       Irrevocability; Binding Effect.  The Purchaser hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Purchaser, except as required by applicable law, and that this Subscription Agreement shall survive the death or disability of the Purchaser and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives, and permitted assigns.  If the Purchaser is more than one person, the obligations of the Purchaser hereunder shall be joint and several and the agreements, representations, warranties, and acknowledgments herein shall be deemed to be made by and be binding upon each such person and such person’s heirs, executors, administrators, successors, legal representatives, and permitted assigns.

 

9.                                       Modification.  This Subscription Agreement shall not be modified or waived except by an instrument in writing signed by the party against whom any such modification or waiver is sought.

 

10.                                 Notices.  Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or delivered against receipt to the party to whom it is to be given (a) if to the Company, at the address set forth above or (b) if to the Purchaser, at the address set forth on the signature page hereof (or, in either case, to such other

 

 

address as the party shall have furnished in writing in accordance with the provisions of this Section 10).  Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party’s address which shall be deemed given at the time of receipt thereof.

 

11.                                 Assignability.  This Subscription Agreement and the rights, interests and obligations hereunder are not transferable or assignable by the Purchaser and the transfer or assignment of the Shares issued by the Company, the Warrants or the Warrant Shares shall be made only in accordance with all applicable laws.

 

12.                                 Applicable Law.  This Agreement shall be governed by and construed under the laws of the State of Minnesota as applied to agreements among Minnesota residents entered into and to be performed entirely within Minnesota.  Each of the parties hereto (1) agree that any legal suit, action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in the state or federal courts of Minnesota, (2) waive any objection which the Company may have now or hereafter to the venue of any such suit, action or proceeding, and (3) irrevocably consent to the jurisdiction in the state or federal courts of Minnesota in any such suit, action or proceeding.  Each of the parties hereto further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the state or federal courts of Minnesota and agree that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process upon it, in any such suit, action or proceeding.  THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SUBSCRIPTION AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

 

13.                                 Blue Sky Qualification.  The purchase of Units under this Subscription Agreement is expressly conditioned upon the exemption from registration of the offer and sale of the Units from applicable Federal and state securities laws.

 

14.                                 Use of Pronouns.  All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require.

 

15.                                 Confidentiality.  The Purchaser acknowledges and agrees that any information or data the Purchaser has acquired from or about the Company, not otherwise properly in the public domain, was received in confidence.  The Purchaser agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Subscription Agreement, or use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any confidential information of the Company, including any scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that are treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions, developments and improvements belonging to the Company and confidential information obtained by or given to the Company about or belonging to third parties.

 

16.                                 Miscellaneous.

 

(a)                                  This Subscription Agreement, together with the Warrants, if any, and the Registration Rights Agreement, constitute the entire agreement between the Purchaser and the Company with respect to the subject matter hereof and supersede all prior oral or written agreements and understandings, if any, relating to the subject matter hereof.  The terms and provisions of this

 

 

Subscription Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.

 

(b)                                 Each of the Purchaser’s and the Company’s representations and warranties made in this Subscription Agreement shall survive the execution and delivery hereof and delivery of the Units.

 

(c)                                  Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Subscription Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated.

 

(d)                                 This Subscription Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

 

(e)                                  Each provision of this Subscription Agreement shall be considered separable and, if for any reason any provision or provisions hereof are determined to be invalid or contrary to applicable law, such invalidity or illegality shall not impair the operation of or affect the remaining portions of this Subscription Agreement.

 

(f)                                    Paragraph titles are for descriptive purposes only and shall not control or alter the meaning of this Subscription Agreement as set forth in the text.

 

17.                                 Registration Rights.  If this Agreement is accepted, the Purchaser will be a beneficiary of the Registration Rights Agreement pertaining to the issuance by the Company of the Units to subscribers pursuant to the Memorandum.  Accordingly, pursuant to the terms and conditions of this Agreement and such related agreements, it is hereby agreed that the execution by the Purchaser of this Agreement, in the place set forth herein, shall constitute agreement to be bound by the terms and conditions of the Registration Rights Agreement, with the same effect as if each of such separate, but related agreement, were separately signed.

 

[REMAINDER OF THIS PAGE IS BLANK]

 

[ACCREDITED INVESTOR CERTIFICATION AND SIGNATURE PAGE FOLLOWS]

 

 

ACCREDITED INVESTOR CERTIFICATION

 

For Individual Investors Only

(all Individual Investors must INITIAL where appropriate):

 

	
Initial o
    	
 
    	
I certify that  I have a net worth in excess of $1 million either   individually or through aggregating my individual holdings and those in which   I have a joint, community property or other similar shared ownership interest   with my spouse.
    
	
Initial o
    	
 
    	
I certify that  I have had an annual gross income for the past two years of   at least $200,000 (or $300,000 jointly with my spouse) and expect my income   (or joint income, as appropriate) to reach the same level in the current   year.
    

 

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):

 

	
Initial o
    	
 
    	
The undersigned certifies that it is a   partnership, corporation, limited liability company or business trust that is   100% owned by persons who meet either of the criteria for Individual   Investors, above.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is a   partnership, corporation, limited liability company or business trust that   has total assets of at least $5 million and was not formed for the purpose of   investing in the Company.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is an   employee benefit plan whose investment decision is made by a plan fiduciary   (as defined in ERISA §3(21)) that is a bank, savings and loan association,   insurance company or registered investment adviser.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is an   employee benefit plan whose total assets exceed $5,000,000 as of the date of   the Subscription Agreement.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is a   self-directed employee benefit plan whose investment decisions are made   solely by persons who meet either of the criteria for Individual Investors,   above.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is a U.S.   bank, U.S. savings and loan association or other similar U.S. institution   acting in its individual or fiduciary capacity.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is a   broker-dealer registered pursuant to §15 of the Securities Exchange Act of   1934.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is an   organization described in §501(c)(3) of the Internal Revenue Code with   total assets exceeding $5,000,000 and not formed for the specific purpose of   investing in the Company.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is a trust   with total assets of at least $5,000,000, not formed for the specific purpose   of investing in the Company, and whose purchase is directed by a person with   such knowledge and experience in financial and business matters that he is capable   of evaluating the merits and risks of the prospective investment.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is a plan   established and maintained by a state or its political subdivisions, or any   agency or instrumentality thereof, for the benefit of its employees, and   which has total assets in excess of $5,000,000.
    
	
Initial o
    	
 
    	
The undersigned certifies that it is an   insurance company as defined in §2(13) of the Securities Act of 1933, as   amended, or a registered investment company.
    

 

 

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

 

Purchaser hereby elects to purchase a total of                                Units at a price of $1.00 per Unit

 

Purchaser is sending subscription payment by:

 

o                                    Mail to the Escrow Agent

o                                    Wire transfer to the Escrow Agent

 

Purchaser’s election to participate in the Minnesota Angel Tax Credit Program:

 

o                                    Purchaser elects to participate and has advised the Placement Agent of such election

o                                    Purchaser elects not to participate

 

If the Purchaser is an INDIVIDUAL, or INDIVIDUALS purchasing

as JOINT TENANTS, or as as TENANTS IN COMMON:

 

	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Print Name(s) of Purchaser(s)
    	
 
    	
Social   Security Number(s)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Signature   of Purchaser
    	
 
    	
Signature   of Additional Purchaser
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date
    	
 
    	
Address
    	
 
    

 

Ownership to be:    o individual    o Tenants in Common   o Joint Tenants with rights of survivorship

 

 

	
 
    
	
If the Purchaser is a   PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or TRUST:
    

 

	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name of   Partnership,
    	
 
    	
Federal   Taxpayer
    	
 
    
	
 
    	
Corporation,   Limited
    	
 
    	
Identification   Number
    	
 
    
	
 
    	
Liability   Company or Trust
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    	
State of   Organization
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date
    	
 
    	
Address
    	
 
    

 

	
 
    
	
 
    	
 
    
	
VERTICAL HEALTH SOLUTIONS, INC. 
    	
ONPOINT MEDICAL DIAGNOSTICS, INC. 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
					

 

 

Schedule of Investors

 

Initial Closing — June 7, 2011

 

	
Investor
    	
 
    	
Investment 
   Amount
    	
 
    
	
Katherine White
    	
 
    	
$
    	
25,000.00
    	
 
    
	
Donald Schreifels
    	
 
    	
$
    	
100,000.00
    	
 
    
	
Craig S. Stevenson
    	
 
    	
$
    	
25,000.00
    	
 
    
	
Lowell L. Hancuh
    	
 
    	
$
    	
50,000.00
    	
 
    
	
William Priedman
    	
 
    	
$
    	
25,000.00
    	
 
    
	
Fred J.   Williams, Jr.
    	
 
    	
$
    	
100,000.00
    	
 
    
	
James Behm
    	
 
    	
$
    	
25,000.00
    	
 
    
	
Daniel Nourie
    	
 
    	
$
    	
25,000.00
    	
 
    
	
David Drummer
    	
 
    	
$
    	
50,000.00
    	
 
    
	
RBC Capital   Markets FBO Louis G. Doering
    	
 
    	
$
    	
50,000.00
    	
 
    
	
Elmer R. Salovich   Trust
    	
 
    	
$
    	
12,500.00
    	
 
    
	
Larry   Hopfenspirger
    	
 
    	
$
    	
12,500.00
    	
 
    
	
Christopher Brown
    	
 
    	
$
    	
25,000.00
    	
 
    
	
TOTAL:
    	
 
    	
$
    	
525,000.00Exhibit 10.2

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of this 7th day of June, 2011 (the “Effective Date”) by Vertical Health Solutions, Inc. (the “Company”) for the benefit of the parties identified on the Schedule of Rights Holders attached hereto as Exhibit A, as the same may be amended from time to time and relates to shares of common stock of the Company (the “Common Stock”).

 

RECITALS:

 

WHEREAS, the Company, a wholly owned subsidiary of the Company and OnPoint Medical Diagnostics, Inc. (“OnPoint”) are parties to an Agreement and Plan of Merger in which it was contemplated that OnPoint would be acquired by the Company by way of a merger with the Company’s subsidiary with the shareholders of OnPoint and those holding shares and rights to acquire shares of OnPoint would receive Common Stock or rights to acquire Common Stock (the “Merger”).

 

WHEREAS, the Merger contemplated the Company obtaining capital from the issuance of Common Stock and rights to acquire Common Stock (the “Unit Warrants” and together with the Common Stock issued with a Unit Warrant, the “Units”) in an issuance (the “Offering”) exempt from registration with the Commission (as such term is hereinafter defined) with completion of the Merger being conditioned upon OnPoint obtaining subscriptions in the Offering for a minimum gross proceeds of $500,000, which have been received, such that the Merger was completed.

 

WHEREAS, the Offering contemplated the execution by the Company of this Agreement so as to provide to the investors in the Offering (the “Purchasers”) the opportunity to resell the shares issued to a Purchaser at a closing in the Offering (the “PIPE Shares”).

 

WHEREAS, the Company has also agreed to provide certain registration rights with respect to (i) the shares of Common Stock of VHS held by VHS stockholders prior to the Merger (the “VHS Shares”), and (ii) all shares of Common Stock issued upon conversion (the “Conversion Shares”) of the 10% Convertible Promissory Notes previously issued by OnPoint which are converted into Common Stock on or prior to the Registration Filing Date (as that term is hereinafter defined) on the terms and conditions provided herein.

 

AGREEMENTS:

 

NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein, the parties mutually agree as follows:

 

1.                                       Certain Definitions.  As used in this Agreement, the following terms shall have the following respective meanings:

 

“Approved Market” means the Over-the-Counter Bulletin Board, the New York Stock Exchange, the NYSE Amex LLC, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market.

 

“Blackout Default Period” means a Blackout Period that (i) exceeds 20 consecutive Trading Days or a total of 30 non-consecutive Trading Days in any 12-month period or (ii) commences sooner than 60 days after the end of a prior Blackout Period.

 

1

 

“Blackout Period” means, with respect to a registration, a period, in each case commencing on the day immediately after the Company notifies the Purchasers that they are required, because of the occurrence of an event of the kind described in Section 4(f) hereof, to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of its board of directors, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of the Registrable Securities to be covered by such registration statement, if any, would be seriously detrimental to the Company and its stockholders and ending on the earlier of (1) the date upon which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (2) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of the Registration Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume; provided, that the Company shall limit its use of Blackout Default Periods.

 

“Business Day” means any day of the year, other than a Saturday, Sunday, or other day on which the Commission is required or authorized to close.

 

“Commission” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

“Common Stock” means the common stock, par value $0.001 per share, of the Company and any and all shares of capital stock or other equity securities of: (i) the Company which are added to or exchanged or substituted for the Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (ii) any other corporation, now or hereafter organized under the laws of any state or other governmental authority, with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.

 

“Effectiveness Period” has the meaning as set forth in Section 4(a).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Family Member” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.

 

“Final Closing Date” means the final closing of the purchase and sale of the Units contemplated by the Memorandum.

 

2

 

“Holder” means each Purchaser holding PIPE Shares, each holder of VHS Shares and each holder of Conversion Shares.

 

“Initial Closing Date” means the initial closing the purchase and sale of the Units contemplated by the Memorandum.

 

“Majority Holders” means at any time Holders representing a majority of the Registrable Securities.

 

“Memorandum” means the Confidential Private Placement Memorandum with respect to the Offering together with all addenda and supplements thereto.

 

“Qualified Purchaser” has the meaning as set forth in Section 3(e).

 

“Permitted Assignee” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests; (b) with respect to a corporation, its stockholders in accordance with their interest in the corporation; (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company; (d) with respect to an individual party, any Family Member of such party; (e) an entity that is controlled by, controls, or is under common control with a transferor; or (f) a party to this Agreement.

 

“PIPE Shares” as defined in the Recitals.

 

The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

 

“Registrable Securities” means the (i) the PIPE Shares, (ii) the VHS Shares and (iii) the Conversion Shares; provided, that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale pursuant to Rule 144 under the 1933 Act.

 

“Registration Filing Date” means the date that is 90 days after the Initial Closing Date or the Final Closing Date, as applicable.

 

“Registration Statement” means the registration statement that the Company is required to file pursuant to this Agreement to register the Registrable Securities.

 

“Rule 144” means Rule 144 promulgated by the Commission under the Securities Act.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the 1933 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, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

“SEC Effective Date” means the date the Registration Statement to be filed following the Final Closing Date is declared effective by the Commission.

 

3

 

“Subscription Agreement” means the Subscription Agreement dated as of the date hereof between the Company and the Purchaser setting forth the terms and conditions of the Company’s offer of Units and the Purchaser’s purchase of Units.

 

“Trading Day” means any day on which the national securities exchange, the Nasdaq Stock Market, the NASD Over-the-Counter Bulletin Board or such other securities market or quotation system, which at the time constitutes the principal securities market for the Common Stock, is open for general trading of securities.

 

“VHS Shares” as defined in the Recitals.

 

2.                                       Term.  This Agreement shall continue in full force and effect for a period of three years from the Effective Date.

 

3.                                       Registration.

 

(a)                                  Registration on Form S-1.  Not later than the related Registration Filing Date, the Company shall prepare and file with the Commission a registration statement on Form S-1, or other applicable form, covering the resale by the Holders of all of the then outstanding Registrable Securities, and the Company shall use its commercially reasonable best efforts to cause such registration statement to be declared effective; provided, however, that the Company shall not be obligated to effect any such registration, qualification, or compliance pursuant to this Section, or keep such registration effective pursuant to the terms hereunder: (i) in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or as a dealer in securities under the securities or blue sky laws of such jurisdiction or to execute a general consent to service of process in effecting such registration, qualification or compliance, in each case where it has not already done so; or (ii) during any Blackout Period, in which case the Registration Filing Date shall be extended to the date immediately following the last day of such Blackout Period.  Such Registration Statement shall include the plan of distribution attached hereto as Exhibit B.  Such Registration Statement also shall cover, to the extent allowable under the Securities Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities.

 

(b)                                 Reduction of Registrable Securities Included in a Registration Statement.  Notwithstanding anything contained herein, in the event that the Commission requires the Company to reduce the number of Registrable Securities to be included in a Registration Statement in order to allow the Company to rely on Rule 415 with respect to a Registration Statement, then the Company shall be obligated to include in such Registration Statement (which may be a subsequent Registration Statement if the Company needs to withdraw the initial Registration Statement and refile a new Registration Statement in order to rely on Rule 415) only such limited portion of the Registrable Securities as the Commission shall permit.  Any exclusion of Registrable Securities shall be made pro rata among the Purchasers in proportion to the number of Registrable Securities held such persons; provided, however, that 100% of the Conversion Shares shall be included prior to the inclusion of any other Registrable Securities, and 100% of the PIPE Shares shall be included prior to the inclusion of any of the VHS Shares.  Any Registrable Securities that are excluded in accordance with the foregoing terms are hereinafter referred to as “Cut Back Securities.”  To the extent Cut Back Securities exist, as soon as may be permitted by the Commission, the Company shall be required to file a registration statement on Form S-3 (or, if Form S-3 is not then available to the Company, on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of the Cut Back Securities) covering the resale of the Cut Back Securities and shall use commercially reasonable efforts to cause such Registration Statement to be declared effective as promptly as practicable thereafter; provided, however, that the foregoing obligation

 

4

 

shall cease with respect to any Cut Back Securities at such time such Cut Back Securities are eligible for sale pursuant to Rule 144 under the 1933 Act.

 

(c)                                  Other Registrations.  Prior to the SEC Effective Date, 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 a Registration Statement other than the Registrable Securities.  Prior to the SEC Effective Date, the Company shall not, without the prior written consent of the Majority Holders, file any other registration statement or any amendment thereto with the Commission under the Securities Act, other than any registration statement on Form S-8 or Form S-4.

 

4.                                       Registration Procedures.  The Company will keep each Holder reasonably advised as to the filing and effectiveness of the Registration Statement. At its expense with respect to the Registration Statement, the Company will:

 

(a)                                  prepare and file with the Commission with respect to the Registrable Securities, a registration statement on Form S-1, or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its commercially reasonable efforts to cause such registration statement to become and remain effective for a period of two years or for such shorter period ending on the earlier to occur of (i) the sale of all Registrable Securities and (ii) the availability under Rule 144 for the Holder to sell the Registrable Securities (in either case, the  “Effectiveness Period”);

 

(b)                                 if a registration statement is subject to review by the Commission, promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the Commission;

 

(c)                                  prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective during the Effectiveness Period;

 

(d)                                 furnish, without charge, to each Holder of Registrable Securities covered by such registration statement (i) one copy of such registration statement (including any exhibits thereto other than exhibits incorporated by reference), each amendment and supplement thereto upon the request of a Holder, (ii) such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any other prospectus filed under Rule 424 under the Securities Act) as the Holders may reasonably request, in conformity with the requirements of the Securities Act, and (iii) such other documents as such Holder may require to consummate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period;

 

(e)                                  use its commercially reasonable best efforts to register or qualify such registration under such other applicable securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by such registration statement reasonably requests and as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the applicable registration statement is deemed effective by the Commission) and do any and all other acts and things necessary to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction;

 

5

 

(f)                                    as promptly as practicable after becoming aware of such event, notify each Holder of Registrable Securities, the disposition of which requires delivery of a prospectus relating thereto under the Securities Act, of the happening of any event, which comes to the Company’s attention, that will after the occurrence of such event cause the prospectus included in such registration statement, if not amended or supplemented, to contain an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading and the Company shall promptly thereafter prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an 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 not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of a Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period, and in which case the Company will use its commercially reasonable best efforts to ensure that the use of the prospectus may be resumed as promptly as is practicable;

 

(g)                                 comply, and continue to comply during the Effectiveness Period, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission with respect to the disposition of all securities covered by such registration statement;

 

(h)                                 as promptly as practicable after becoming aware of such event, notify each Holder of Registrable Securities being offered or sold pursuant to the Registration Statement of the issuance by the Commission of any stop order or other suspension of effectiveness of the Registration Statement;

 

(i)                                     cause all the Registrable Securities covered by the Registration Statement to be quoted on the OTC Bulletin Board or such other principal securities market on which securities of the same class or series issued by the Company are then listed or traded;

 

(j)                                     provide a transfer agent and registrar, which may be a single entity, for the shares of Common Stock at all times;

 

(k)                                  cooperate with the Holders of Registrable Securities being offered pursuant to the Registration Statement to issue and deliver, or cause its transfer agent to issue and deliver, certificates representing Registrable Securities to be offered pursuant to the Registration Statement within a reasonable time after the delivery of certificates representing the Registrable Securities to the transfer agent or the Company, as applicable, and enable such certificates to be in such denominations or amounts as the Holders may reasonably request and registered in such names as the Holders may request;

 

(l)                                     during the Effectiveness Period, refrain from bidding for or purchasing any Common Stock or any right to purchase Common Stock or attempting to induce any person to purchase any such security or right if such bid, purchase or attempt would in any way limit the right of the Holders to sell Registrable Securities by reason of the limitations set forth in Regulation M under the Exchange Act; and

 

(m)                               take all other reasonable actions necessary to expedite and facilitate the disposition by the Holders of the Registrable Securities pursuant to the Registration Statement.

 

5.                                       Suspension of Offers and Sales.  Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f) hereof or of the commencement of an Blackout Period, such Holder shall discontinue the disposition of Registrable

 

6

 

Securities included in the Registration Statement until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(f) hereof or notice of the end of the Blackout Period, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

 

6.                                       Registration Expenses.  The Company shall pay all expenses in connection with any registration obligation provided herein, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with securities or blue sky laws, and the fees and disbursements of counsel for the Company and of its independent accountants; provided that, in any underwritten registration, each party shall pay for its own underwriting discounts and commissions and transfer taxes. Except as provided in this Section and Section 9, the Company shall not be responsible for the expenses of any attorney or other advisor employed by a Holder.

 

7.                                       Assignment of Rights.  No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided, however, that a Holder may assign its rights under this Agreement without such consent to a Permitted Assignee as long as: (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee agrees in writing to become subject to the terms of this Agreement; and (c) the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned.

 

8.                                       Information by Holder.  Holders included in any registration shall furnish to the Company such information as the Company may reasonable request in writing regarding such Holders and the distribution proposed by such Holders.  The failure of a Holder to provide such information to the Company will suspend the Company’s obligation to register the Registrable Securities of such Holder.

 

9.                                       Indemnification.

 

(a)                                  In the event of the offer and sale of Registrable Securities under the Securities Act, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities, or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement prepared and filed by the Company under which shares of Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission to state therein 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, and the Company shall reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided that the Company shall not be liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement in or omission from such registration statement, any such preliminary

 

7

 

prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Holder specifically stating that it is for use in the preparation thereof or (ii) if the person asserting any such loss, claim, damage, liability (or action or proceeding in respect thereof) who purchased the Registrable Securities that are the subject thereof did not receive a copy of an amended preliminary prospectus or the final prospectus (or the final prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Registrable Securities to such person because of the failure of such Holder or underwriter to so provide such amended preliminary or final prospectus and the untrue statement or omission of a material fact made in such preliminary prospectus was corrected in the amended preliminary or final prospectus (or the final prospectus as amended or supplemented). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder.

 

(b)                                 As a condition to including Registrable Securities in any registration statement filed pursuant to this Agreement, each Holder agrees to be bound by the terms of this Section 9 and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) that arises out of or is based upon an untrue statement in or omission from such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of the Holder specifically stating that it is for use in the preparation thereof, and such Holder shall reimburse the Company, and each such director, officer, and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating, defending, or settling and such loss, claim, damage, liability, action, or proceeding; provided, however, that such indemnity agreement found in this Section 9 shall in no event exceed the gross proceeds from the offering received by such Holder.  Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer by any Holder of such shares.

 

(c)                                  Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in this Section (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice.  In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner, other than reasonable costs of

 

8

 

investigation.  Neither an indemnified nor an indemnifying party shall be liable for any settlement of any action or proceeding effected without its consent.  No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.  Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party shall have the right to retain, at its own expense, counsel with respect to the defense of a claim.

 

(d)                                 In the event that an indemnifying party does or is not permitted to assume the defense of an action pursuant to Sections 9(c) or in the case of the expense reimbursement obligation set forth in Sections 9(a) and (b), the indemnification required by Sections 9(a) and (b) hereof shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills received or expenses, losses, damages, or liabilities are incurred.

 

(e)                                  If the indemnification provided for in this Section is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall (i) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation.

 

(f)                                    Indemnification similar to that specified in this Section (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.

 

10.                                 Rule 144.  For a period of at least 24 months following the Initial Closing Date, the Company will use its commercially reasonable best efforts to timely file all reports required to be filed by the Company after the date hereof under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and if the Company is not required to file reports pursuant to such sections, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell shares of Common Stock under Rule 144.

 

11.                                 Independent Nature of Each Purchaser’s Obligations and Rights.  The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and each Purchaser shall not be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute such Purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each

 

9

 

Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

 

12.                                 Miscellaneous.

 

(a)                                  Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota and the United States of America, both substantive and remedial, without regard to conflicts of law principles. Any judicial proceeding brought against either of the parties to this agreement or any dispute arising out of this Agreement or any matter related hereto shall be brought in the state or federal courts of the State of Minnesota, by its execution and delivery of this agreement, each party to this Agreement accepts the jurisdiction of such courts. The foregoing consent to jurisdiction shall not be deemed to confer rights on any person other than the parties to this Agreement.

 

(b)                                 Successors and Assigns.  Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, or be binding upon, the successors, Permitted Assignees, executors and administrators of the parties hereto.  In the event the Company merges with, or is otherwise acquired by, another publicly traded company, or a direct or indirect subsidiary of a publicly traded company, the Company shall condition the merger or acquisition on the assumption by such public company of the Company’s rights and obligations under this Agreement.

 

(c)                                  Entire Agreement.  This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.

 

(d)                                 Notices, etc. All notices or other communications which are required or permitted under this Agreement shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, by electronic mail, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:

 

If to the Company to:

 

Vertical Health Solutions, Inc.

7760 France Avenue South, 11th Floor

Minneapolis, Minnesota 55435

Attn:  William Cavanaugh

Facsimile:  (888) 370-2819

 

With copy to:

 

Morgan Lewis & Bockius LLP

5175 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402

Attn: Michael Macaluso, Esq.

Facsimile: (612) 334-1001

 

If to the Holders:

 

To each Holder at the address

 

10

 

set forth in the records of the Company

as the current address for such Holder

 

With copy to:

 

Emergent Financial Group, Inc.

3600 American Boulevard West, Suite 670

Bloomington, MN 55431

Attn: Peter Voldness

Facsimile: (952) 828-1220

 

or at such other address as any party shall have furnished to the other parties in writing.

 

(e)                                  Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any Holder, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereunder occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement, or any waiver on the part of any Holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any holder, shall be cumulative and not alternative.

 

(f)                                    Severability. In the 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.

 

(g)                                 Amendments. The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and the Majority Holders. The Purchasers acknowledge that by the operation of this Section, the Majority Holders may have the right and power to diminish or eliminate all rights of the Purchasers under this Agreement.

 

This Registration Rights Agreement is hereby executed as of the date first above written.

 

	
 
    	
VERTICAL   HEALTH SOLUTIONS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Its:
    	
 
    

 

11

 

Exhibit A

 

Schedule of Rights Holders

 

Investor List Attached

 

A-1

 

	
21ST   CENTURY HEALTHCARE FUND LLC
    	
 
    	
CHRISTOPHER   E EISEN
    
	
A   F LEHMKUHL
    	
 
    	
CHRISTOPHER   M GUTHRIE
    
	
A   F LEHMKUHL CUST FOR JOSEPH J ZAM JR UGMA OH
    	
 
    	
CLARA   DUNAY
    
	
A   F LEHMKUHL CUST FOR KATELYN C ZAM UGMA OH
    	
 
    	
CLARENCE   HOYE
    
	
ALFRED   LEHMKUHL
    	
 
    	
CLAYTON   A HOCK & ETHEL J HOCK
    
	
ALFREDO   P SCALZO
    	
 
    	
COMSTOCK   LAND COMPANY LLC
    
	
ALICE   JEAN HARRISON
    	
 
    	
CRAIG   M WATKINS IRA
    
	
ALLAN   M ANDERSON
    	
 
    	
CRAIG   S STEVENSON
    
	
ANGELINE   BROWN & ISAAC C BROWN
    	
 
    	
CRAIG   S. STEVENSON
    
	
ANNE   GILBERT
    	
 
    	
DALE   A LINK & LORI A LINK JT TEN
    
	
ARTIS   PRICE
    	
 
    	
DANIEL   C SCHULTE
    
	
ARTIS   PRICE CUST DEONDRA FRANKLIN
    	
 
    	
DANIEL   NOURIE
    
	
B   C ROWLAND
    	
 
    	
DARNELL   L LEFFEL
    
	
BARRY   J MISHEY
    	
 
    	
DARYL   MCNAB & MARGARET MCNAB JT TEN
    
	
BARRY   LAMKIN
    	
 
    	
DARYL   SKIBA
    
	
BASHAR   DIAB
    	
 
    	
DAVE   KNIGHTS & PATTY KNIGHTS JT TEN
    
	
BASQUE   FINANCIAL
    	
 
    	
DAVID   BLOORE
    
	
BENTON   CASE JR
    	
 
    	
DAVID   DRUMMER
    
	
BERNARD   J WIEDERWOHL
    	
 
    	
DAVID   DUNAY & HELEN DUNAY JT TEN
    
	
BETH   A TRAMER & DAVID L ABT
    	
 
    	
DAVID   E KOPPER
    
	
BETTY   BROCKMAN & ROBERT W BROCKMAN JT TEN
    	
 
    	
DAVID   H BOYNE & LINDA J BOYNE JT TEN
    
	
BETTY   J MILLER
    	
 
    	
DAVID   L PERRY
    
	
BETTY   S BLAIR
    	
 
    	
DAVID   L WALKER SR
    
	
BILL   THOMPSON
    	
 
    	
DAVID   L. HINTERMEISTER
    
	
BRADFORD   C RICHTER
    	
 
    	
DAVID   P. DRUMMER
    
	
BRADLEY   D FIKE CUST TAYLOR DEAN FIKE
    	
 
    	
DEAN   P JACKLITCH
    
	
BRENDA   WATTERS
    	
 
    	
DEAN   P. JACKLITCH
    
	
BRIAN   G ZINSER
    	
 
    	
DELORES   FALASCO
    
	
BRIAN   KARLEN
    	
 
    	
DENNIS &   ROBERTA DEVETTER
    
	
BRIAN   T NUGENT
    	
 
    	
DENNIS   DEVETTER & ROBERTA DEVETTER JT TEN
    
	
BRUCE   E. FOREMAN
    	
 
    	
DENNIS   J HOLLAND
    
	
BRUCE   FLORA & CYNTHIA FLORA JT TEN
    	
 
    	
DENNIS   J STOINER & JUDY L STOINER JT TEN
    
	
BRUCE   KONYA & CAROLYN KONYA JT TEN
    	
 
    	
DENNIS   J. HOLLAND
    
	
CANI   I SHUMAN
    	
 
    	
DENNIS   L PAUL
    
	
CARNEGIE   CAPITAL
    	
 
    	
DERRYLE   C BAGLEY & MASON R BAGLEY JT TEN
    
	
CARNEGIE   CAPITAL LTD
    	
 
    	
DIANE   ZAM
    
	
CAROLYN   ABRAHAM
    	
 
    	
DIANNE   H B WELSH
    
	
CEDE &   CO
    	
 
    	
DON   HAMMONDS & FRANCIS HAMMONDS
    
	
CHARLES   CHRISTOPHER BERCAW
    	
 
    	
DONALD   B SCHREIFELS
    
	
CHARLES   E SURAN & EDITH I SURAN
    	
 
    	
DONALD   DAVIDSON & JOANNE DAVIDSON JT TEN
    
	
CHARLES   HARNER
    	
 
    	
DONALD   HALL
    
	
CHARLES   I SANDERS & SHIRLEY A SANDERS JT TEN
    	
 
    	
DONALD   SCHREIFELS
    
	
CHARLES   PIHL
    	
 
    	
DONNA   PIERSON
    
	
CHARLES   R CRIST SR
    	
 
    	
DORA   J TENAGLIA
    
	
CHRIS   BROWN
    	
 
    	
DOUGLAS   A PARSELL
    
	
CHRIS   HALPIN
    	
 
    	
DOUGLAS   PIETIG
    

 

 

	
CHRISTIAN &   ELGA LOHLER
    	
 
    	
DOUGLAS   WATTERS
    
	
CHRISTINE   L ENGEBRETSON
    	
 
    	
DR   JAMES P ARGIRES & TASIA ARGIRES JT TEN
    
	
EDWARD   E SISLER
    	
 
    	
DREW   A WILLOUGHBY & SUSAN A WILLOUGHBY JT TEN
    
	
EDWARD   GAMARY & LOUISE GAMARY
    	
 
    	
EDITH   BUMGARDNER
    
	
EDWARD   L LUTZ & BETTY L LUTZ JT TEN
    	
 
    	
HOWARD   L HOWELL
    
	
ELMER   R. SALOVICH TRUST
    	
 
    	
HOWARD   MANSKE
    
	
EMILY   KLOTZ TOD SHERYL NECHVAL
    	
 
    	
HUNTINGTON   BANK FBO MORTON L STONE IRA ACCOUNT #15993404005
    
	
EQUINE   TRUST
    	
 
    	
HUSEIN   Y. SARAMEH
    
	
ERNEST   E FERRONI JR
    	
 
    	
IRA   A THOMPSON
    
	
ERVING   RABER
    	
 
    	
IRA   RESOURCES INC FBO CAROL V THIRION IRA #33982
    
	
ESSTECH   HOLDINGS LTD
    	
 
    	
IRA   RESOURCES INC FBO HOWARD MANSKE IRA #33975
    
	
FIRST   DELHI TRUST
    	
 
    	
IRA   RESOURCES INC FBO JOHN W SCHREINER IRA #21379
    
	
FIRST   NATIONAL BANK CUST FOR MARK LEHMKUHL
    	
 
    	
IRA   RESOURCES INC FBO JONATHAN JACOBSON IRA #33972
    
	
FIRST   NATIONAL BANK CUSTODIAN FOR DIANE M ZAM
    	
 
    	
IRA   RESOURCES INC FBO KELLY TIGHE IRA #33938
    
	
FRANCIS   C HARRELL
    	
 
    	
IRA   RESOURCES INC FBO KEVIN MILLER #34557
    
	
FRANK   J DEMARCO
    	
 
    	
IRA   RESOURCES INC FBO MICHAEL S OLSON IRA #34008
    
	
FRANK   S POLICHENA & JANE V POLICHENA JT TEN
    	
 
    	
IRA   RESOURCES INC FBO RONALD R RUNCK IRA #33976
    
	
FRANKLIN   D PARCHER & FAYE L PARCHER
    	
 
    	
IRA   RESOURCES INC FBO TERRY THIRION IRA #33983
    
	
FRED   BEARISON
    	
 
    	
IRENE   CANDY
    
	
FRED   J. WILLIAMS, JR.
    	
 
    	
IRENE   M DANCZYNKO
    
	
FREDERICK   A BOSEMAN & LINDA K BOSEMAN
    	
 
    	
IRIS   WILLIAMS WEST
    
	
FREDERICK   RICHTER
    	
 
    	
J   LARRY STEVENSON & PATRICIA L STEVENSON
    
	
FRIJOUF   RUST & PYLE
    	
 
    	
J   SCOTT HALTERMAN
    
	
FULTON   T BARNETT JR
    	
 
    	
JACK   R HAMILTON
    
	
GAROLD   L BROWN & MARY P BROWN
    	
 
    	
JAMES   A HUGHES & MAJORIE J HUGHES JT TEN
    
	
GARY   EIKAAS
    	
 
    	
JAMES   BEHM
    
	
GARY   GUERNDT & DEBRA GUERNDT JT TEN
    	
 
    	
JAMES   PRUSINSKI & ELMIRA PRUSINSKI
    
	
GENE   HAPPE & JOLEEN HAPPE JT TEN
    	
 
    	
JAMES   SAMUEL TOMASEK
    
	
GENE   R JOSEPHS & IRENE M JOSEPHS JT TEN
    	
 
    	
JAMES   W KERGAN & ERMA J KERGAN
    
	
GEOPHARMA   INC
    	
 
    	
JAN   ENGLE
    
	
GEORGE   COLE TR
    	
 
    	
JANICE   U ERICKSON
    
	
GEORGE   DANKO
    	
 
    	
JANICE   WATERHOUSE
    
	
GEORGE   E NOVOTNEY & ELIZABETH D NOVOTNEY
    	
 
    	
JAY   ELSHOFF
    
	
GEORGE   KLEMMER
    	
 
    	
JEFFREY   M WILLIAMS
    
	
GEORGE   RUDY & IRENE RUDY JT TEN
    	
 
    	
JEFFREY   M. WILLIAMS
    
	
GEORGE   SMITH
    	
 
    	
JEFFREY   S BERQUIST
    
	
GEORGE   WATTS
    	
 
    	
JENKINS   LIVING TRUST (SCOTT OR BARBARA JENKINS)
    
	
GERALD   J BAUER
    	
 
    	
JEROLD   P FAHRNER TRUST 3/24/2000
    
	
GILBERT   BREITENBACH & MARY KAY BREITENBACH
    	
 
    	
JERON   L EVANS
    

 

 

	
GLENN   E MULHOLLAND
    	
 
    	
JOANNE   E DAVIDSON
    
	
GLENN   GIFFORD
    	
 
    	
JOHN   E HAPPE
    
	
GREG   D GENTLING
    	
 
    	
JOHN   E RING
    
	
GREG   JOHNS
    	
 
    	
JOHN   GUERNDT & JENNIFER GUERNDT TTEES
    
	
GREGORY   D FARNAM
    	
 
    	
JOHN   J WILEY
    
	
GUERNDT   REVOCABLE TRUST
    	
 
    	
JOHN   R HOTTENROTT II
    
	
GUS   CHAFOULIAS
    	
 
    	
JOHN   SCHNEIDER
    
	
HAROLD   F HEATH
    	
 
    	
JOHN   SCHOETTELKOTTE
    
	
HARRIET   G SCHILLING
    	
 
    	
JOHN   SIEFER
    
	
HAZEL   L WALKER
    	
 
    	
JOHN   STRAIGHT
    
	
HAZEL   M WILLACY
    	
 
    	
JOHN   W BACHELDER
    
	
HOHL   BURKETT INVESTMENT PARTNERS C/O TIM HOHL
    	
 
    	
JOHN   W SCHREINER
    
	
HOWARD   IVES & ELIZABETH MARY IVES JT TEN
    	
 
    	
JOHN   WARCABA
    
	
JONATHAN   BLAIR WITTER CUST FOR ASHLEY M WITTER UGMA MS
    	
 
    	
JOLEEN   M HAPPE
    
	
JONATHAN   BLAIR WITTER CUSTODIAN FOR AUTUMN N WITTER UGMA MS
    	
 
    	
JON   VANDEHEY & ANNETTE VANDEHEY JT TEN
    
	
JONATHAN   BLAIR WITTER CUSTODIAN FOR AYLA M KEMP UGMA MS
    	
 
    	
MARK   J LEHMKUHL
    
	
JONATHAN   BLAIR WITTER CUSTODIAN FOR JONATHAN SKYLAR WITTER UGMA MS
    	
 
    	
MARK   L STEEGE
    
	
JONATHAN   JACOBSON
    	
 
    	
MARK   PLUNKETT
    
	
JOSEPH   B ELDER
    	
 
    	
MARTIN   DEHEN & CARRIE DEHEN JT TEN
    
	
JUANITA   L THOMAS
    	
 
    	
MARTIN   G NOLAN & ANN B NOLAN JT TEN
    
	
JUGAL   K TANEJA
    	
 
    	
MARVIN   J HAMBY
    
	
JULIE   NUGENT
    	
 
    	
MARY   F HAUSER
    
	
JULIE   USCHLBEC STRICKLAND
    	
 
    	
MAYO   FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH
    
	
JUNE   E YUSKO & EDWARD M YUSKO JR JT TEN
    	
 
    	
MELVIN   E BRADESKU & LEONA BRADESKU
    
	
KATHERINE   P. WHITE
    	
 
    	
MERRILL   LYNCH CUST/FBO JUGAL K TANEJA IRA
    
	
KATHERINE   WHITE
    	
 
    	
MICHAEL   B VISLOSKY
    
	
KENNETH   F LEBAY
    	
 
    	
MICHAEL   F RESCH & GAIL G RESCH JT TEN
    
	
KENNY   L WALSH
    	
 
    	
MICHAEL   S OLSON
    
	
KEVIN   C FORD
    	
 
    	
MICHELE   LAGAMBA
    
	
KEVIN   LEDFORD CUST ASHLEY LEDFORD
    	
 
    	
MIHIR   K TANEJA
    
	
KEVIN   MOLLOY
    	
 
    	
MIHIR   TANEJA
    
	
KOTHA   S SEKHARAM
    	
 
    	
MIKE   KEMERY & DONNA KEMERY JT TEN
    
	
KRISTEN   WATTERS
    	
 
    	
MIKE   TOBE
    
	
KRISTIN   C COYLE
    	
 
    	
MILO   WEAVER & CYNTHIA WEAVER
    
	
KURT   LICHTMAN
    	
 
    	
MIRIAM   CAROLE CLARK
    
	
LARRY   ALAN BUSSE
    	
 
    	
MORGAN   LEWIS & BOCKIUS LLP ML&B
    
	
LARRY   B TAYLOR
    	
 
    	
MORRIS   W STELLER
    
	
LARRY   HOPFENSPIRGER
    	
 
    	
MORRIS   W. STELLER
    
	
LAURUS   MASTER FUND LTD
    	
 
    	
N   DEAN BANKSON TTEE N DEAN BANKSON TRUST
    
	
LAWRENCE   E GRESH & VERONICA L GRESH
    	
 
    	
NANCY   EVANS
    
	
LEO   F SANDERSON & MARCIA L SANDERSON JT TEN
    	
 
    	
NAYAN   S SHAH
    
	
LEO   GUGLIELMI & LORRAINE GUGLIELMI
    	
 
    	
NELSON   R NEUBIG
    

 

 

	
LEONA   KARDISH
    	
 
    	
NELSON   S WICKLIFFE & GENEVIEVE WICKLIFFE
    
	
LEONARD   ENTE
    	
 
    	
NEWPORT   CAPITAL CONSULTANTS INC
    
	
LEONARD   M LEENHEER & BARBARA M LEENHEER JT TEN
    	
 
    	
NICHOLAS   A COLABIANCHI
    
	
LEONARDO   ZANGANI
    	
 
    	
NICHOLAS   GENCO CUST JOAN E GENCO
    
	
LILLIAN   R CONN
    	
 
    	
NORMAN   BUTCHER SR
    
	
LINDA   FENDT
    	
 
    	
NORMAN   TUTIN & MARGARET TUTIN
    
	
LINDSTROM   FAMILY LIMITED PARTNERSHIP #2
    	
 
    	
PATRICIA   A BARTH
    
	
LLOYD   M COLVIN
    	
 
    	
PATRICIA   A. ABBOTT
    
	
LLYOD   MCBRAYER
    	
 
    	
PATRICIA   D CAIN
    
	
LOUIS   STEPHENS & DELORES STEPHENS JT TEN
    	
 
    	
PATRICK   J SHEPPARD
    
	
LOWELL   L. HANCUH
    	
 
    	
PATRICK   M COONEY & KEVIN F COONEY JT TEN
    
	
LYNN   O WALTERMIRE
    	
 
    	
PAUL   J SZABO & SHARON M SZABO JT TEN
    
	
MADHAVI   SEKHARAM
    	
 
    	
PAUL   M PITSTICK
    
	
MANDEEP   K TANEJA
    	
 
    	
PAUL   M SOKOL & JANE M SOKOL JT TEN
    
	
MANJU   TANEJA
    	
 
    	
PAUL   ROBERTS & DAWN ROBERTS JT TEN
    
	
MARGARET   B WAGNER
    	
 
    	
PAUL   W. SCHULTZ
    
	
MARGUERITE   B HARK
    	
 
    	
PEGGY   WYNKOOP
    
	
MARIE   ELIZABETH BRIDEN
    	
 
    	
PETER   ECKERLINE
    
	
MARIE   V SIML & THOMAS A SIML JT TEN
    	
 
    	
PETER   SHANES
    
	
MARJORIE   M MANSKE
    	
 
    	
PHILIP   E MANSKE
    
	
MARK   HEUER
    	
 
    	
PYRAMID   TOOL & DIE CO INC
    
	
R   RICHARD YODER
    	
 
    	
R   B BOSSICK CUST JESSICA JAYNE BOSSICK
    
	
R   WILLIAM TORHORST JR
    	
 
    	
R   B BOSSICK CUST RICHARD B BOSSICK II
    
	
R.   BALASUBRAMANIAM & USHA BALASUBRAMANIAM JT TEN
    	
 
    	
ROBERT   M WELLER FAMILY LLP
    
	
RADINE   SALLY OXLEY 1985 FAMILY TRUST
    	
 
    	
RODNEY   BELL
    
	
RAINWATER   CAPITAL PARTNERS LLC
    	
 
    	
ROGER   D MCDOWELL
    
	
RALPH   ARTHUR
    	
 
    	
RONALD   A MEYER & HERMINE S MEYER JT TEN
    
	
RALPH   GRIECO & HANNELORE GRIECO TR
    	
 
    	
RONALD   D CRAIG
    
	
RANDOLPH   G COLEMAN & MARGARET A COLEMAN JT TEN
    	
 
    	
RONALD   H FORSTER & C ONALEE FORSTER JT TEN
    
	
RANDY   ORDWAY & LESLEE ORDWAY
    	
 
    	
RONALD   L RODGERS & JEAN C RODGERS JT TEN
    
	
RAYMOND   JAMES & ASSOC INC CSND FBO QUENTIN F ERICKSON IRA
    	
 
    	
RONALD   RUNCK
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN DAN SCHULTE IRA
    	
 
    	
ROSE   GROSS LIVING TRUST ROSE M GROSS TR
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO BILL THOMPSON IRA
    	
 
    	
RTCO   AS EXCH AGENT FOR UNEX SHS OF VERTICAL HEALTH #5295
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO DOUGLAS MULHOLLAND IRA
    	
 
    	
RUITSON   OUYANG & YU-YEN OUYANG JT TEN
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO HOWARD MANSKE IRA
    	
 
    	
SAM   EVARISTO & LENA EVARISTO JT TEN
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO JANICE A WATERHOUSE IRA
    	
 
    	
SANDY   SKOCIR
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO JOHN KOSKI IRA
    	
 
    	
SARAH   P SHOOP
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO MAUREEN MOO-DODGE IRA
    	
 
    	
SASHA   C. GENTLING
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO RICHARD TURNQUIST IRA
    	
 
    	
SATYAKAAM   SANSKRITI SAGHA INC
    

 

 

	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO SCOTT HAPPE IRA
    	
 
    	
SCIENCE   OF SPIRITULITY INC
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO VAL BURDICK IRA
    	
 
    	
SCOTT   R JANDA & MARIA H JANDA JT TEN
    
	
RBC   CAPITAL MARKETS CORP CUSTODIAN FBO: DARYL MCNAB IRA
    	
 
    	
SCOTT   R PRIBNOW & ANITA L PRIBNOW JT TEN
    
	
RBC   CAPITAL MARKETS CORP; FBO DANA ANDERSON IRA
    	
 
    	
SEVERINA   DIONISIO
    
	
RBC   CAPITAL MARKETS CORP; FBO NATALIE ROBERTS IRA
    	
 
    	
SHANTI   KALIDINDI
    
	
RBC   CAPITAL MARKETS FBO LOUIS G. DOERING
    	
 
    	
SHELDON   GEIGER
    
	
RBC   CAPITAL MARKETS; FBO GREGORY RUETER IRA
    	
 
    	
SHERRY   MECKSTROTH
    
	
RBC   CAPITAL MARKETS; FBO MARK FINLEY WILDGEN SEP IRA
    	
 
    	
SMW   CAPITAL GROUP LP
    
	
RICHARD   B BOSSICK
    	
 
    	
STEPHEN   DEE DAWAHARE
    
	
RICHARD   BRAKE
    	
 
    	
STEPHEN   M WATTERS
    
	
RICHARD   ENGEL
    	
 
    	
STEPHEN   M. WATTERS
    
	
RICHARD   G MCLAUGHLIN
    	
 
    	
STEPHEN   WATTERS
    
	
RICHARD   J MOTT
    	
 
    	
STEVE   HURLEY & DOUGLAS HURLEY
    
	
RICHARD   KRANIAK
    	
 
    	
STEVE   JOHNSON
    
	
RICHARD   L LINDSTROM
    	
 
    	
STEVEN   C SPANCAKE
    
	
RICHARD   L ZIEGLER
    	
 
    	
STEVEN   D SHON
    
	
RICHARD   M JOKKEL
    	
 
    	
STEVEN   J OLSON REVOCABLE TRUST U/D/T JUNE 6 2008
    
	
RICHARD   O’LEARY
    	
 
    	
STIFEL   NICOLAUS CUSTODIAN FBO JENNIFER GUERNDT ROTH IRA
    
	
RICHARD   R PAVELSKI
    	
 
    	
STIFEL   NICOLAUS CUSTODIAN FBO JOHN GUERNDT ROTH IRA
    
	
RICHARD   RANDALL
    	
 
    	
SUSAN   CHAPPELL
    
	
RICHARD   SOLWITZ
    	
 
    	
SUSAN   H BONGIOVANNI
    
	
RICHARD   TOTTEN
    	
 
    	
SWENEY   CARTWRIGHT & CO
    
	
ROBERT &   SUSAN DURANTE
    	
 
    	
TAMMY   J KALAMETS ADMIN OF THE ESTATE OF JACQUELINE A WILLISON
    
	
ROBERT   BENEDICT & CHRISTINE BENEDICT JT TEN
    	
 
    	
TERRY   DUNAY
    
	
ROBERT   E COOPER TTEE FBO ROBERT E COOPER REVOCABLE TRUST
    	
 
    	
TERRY   R THIRION
    
	
ROBERT   FRIJOUF
    	
 
    	
THADDEUS   J SHALEK
    
	
ROBERT   J CARLSTROM & JEAN R CARLSTROM
    	
 
    	
THE   R K FAMILY LTD PARTNERSHIP A PARTNERSHIP
    
	
ROBERT   J HUTMAN & JEAN A HUTMAN JT TEN
    	
 
    	
THEODORE   L TILTON TRUST U/A DTD 03/29/1996
    
	
ROBERT   J SZUCH & PATRICIA SZUCH JT TEN
    	
 
    	
THOMAS   A ROSENBERG
    
	
ROBERT   K. MCKELVEY
    	
 
    	
THOMAS   J MILL
    
	
TIM   FEDERWITZ & CINDY FEDERWITZ JT TEN
    	
 
    	
THOMAS   L VANDEHEY
    
	
TIMOTHY   FRALEY & RICHARD BRAKE JT TEN
    	
 
    	
THOMAS   MICHAEL REYNOLDS
    
	
TIMOTHY   L SCHERTZ
    	
 
    	
THOMAS   W BARNETZKE & LORRIE R BARNETZKE JT TEN
    
	
TIMOTHY   M DALLY & LINDA L DALLY JT TEN
    	
 
    	
WELLS   FARGO BANK ROTH C/F GREGORY D FARNAM
    
	
TIMOTHY   S BEAM
    	
 
    	
WILFRED   H GANGER
    
	
TODD   TRAUTMANN & LINDA TRAUTMANN JT TEN
    	
 
    	
WILLARD   P FRISSELL
    

 

 

	
TONY   A PISCITELLI & ANNA PISCITELLI
    	
 
    	
WILLIAM   H HOUSE & ANNA L HOUSE JT TEN
    
	
TRUST   FBO MITCHELL GEORGE
    	
 
    	
WILLIAM   HELMUTH & FANNIE HELMUTH JT TEN
    
	
TRUST   FBO SUZANNA GEORGE
    	
 
    	
WILLIAM   L TREM
    
	
UMAMAHESWAR   S PRASAD
    	
 
    	
WILLIAM   LAGAMBA
    
	
VAL   BURDICK
    	
 
    	
WILLIAM   LAGAMBA CUST FOR ANTHONY LAGAMBA UGMA FL
    
	
VENKATA   RAO & VARALAXMI EMANDI JT TEN
    	
 
    	
WILLIAM   LAGAMBA CUST FOR COURTNEY LAGAMBA UGMA FL
    
	
VENTURE   PARTNERS LLC
    	
 
    	
WILLIAM   LAGAMBA CUST FOR NICHOLL LAGAMBA UGMA FL
    
	
W   BRUCE ERICKSON REVOCABLE TRUST
    	
 
    	
WILLIAM   N GOODWIN
    
	
WALTER   HOUSTON JR & MARY HOUSTON JT TEN
    	
 
    	
WILLIAM   PRIEDMAN
    
	
WANDA   WELCH BASHAM
    	
 
    	
WILLIAM   T CAVANAUGH
    
	
WAYNE   EDGAR HELFRICH
    	
 
    	
WRIGHT &   ASSOC PROFIT SHARING PLAN
    
	
T &   R INC
    	
 
    	
 
    

 

 

Exhibit B

 

Plan of Distribution

 

The selling stockholders (and any of their donees, pledgees, transferees or other successors-in-interest of a selling stockholder selling shares of our common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer) may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions.  These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

 

The Selling Stockholders may use any one or more of the following methods when disposing of shares or interests therein:

 

·                  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

·                  block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

 

·                  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

·                  an exchange distribution in accordance with the rules of the applicable exchange;

 

·                  privately negotiated transactions;

 

·                  short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the Commission;

 

·                  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

·                  broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; and

 

·                  a combination of any such methods of sale.

 

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors-in-interest as selling stockholders under this prospectus.  The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus.

 

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders

 

B-1

 

(or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

 

The Company has advised the selling stockholders that they may not use shares registered on this registration statement to cover short sales of common stock made prior to the date on which this registration statement is declared effective by the Securities and Exchange Commission.  After the registration statement has been declared effective, in connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume.  The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The selling stockholders will receive the aggregate proceeds from the sale of the common stock offered by them.  The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any.  Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents.  We will not receive any of the proceeds from the sale of common stock in this offering.  We may receive proceeds from holders who exercise their warrants and pay the applicable cash exercise price in connection with those exercises.

 

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

 

The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act.  Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act.  Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

 

To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

 

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers.  In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

 

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of shares in the market and to the activities of the

 

B-2

 

selling stockholders and their affiliates.  In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.  The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares of common stock against certain liabilities, including liabilities arising under the Securities Act.

 

We will pay all expenses incident to registration other than commissions, fees and discounts of underwriters, brokers, dealers and agents.  We will pay for offering expenses including the Commission registration fee, accounting fees, legal fees, printing expenses and other related miscellaneous expenses. We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

 

We have agreed with the selling stockholders to keep the registration statement of which this Prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144 of the Securities Act.

 

B-3

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