-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GbIrylOKXuT1fU/olvlaAQIZEBBX9EXvFgin780FUdtSARDXSFItCqqSS3olD4L+ +9njD5WumKx9TKal/6lKMg== 0001420349-08-000002.txt : 20080804 0001420349-08-000002.hdr.sgml : 20080804 20080804160104 ACCESSION NUMBER: 0001420349-08-000002 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20080804 DATE AS OF CHANGE: 20080804 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GlenRose Instruments Inc. CENTRAL INDEX KEY: 0001340095 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 203521719 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-83792 FILM NUMBER: 08988104 BUSINESS ADDRESS: BUSINESS PHONE: 781.622.1120 MAIL ADDRESS: STREET 1: 45 FIRST AVENUE CITY: WALTHAM STATE: MA ZIP: 02451 FORMER COMPANY: FORMER CONFORMED NAME: Glenrose Instruments Inc. DATE OF NAME CHANGE: 20050928 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Blum Strategic GP IV, L.L.C. CENTRAL INDEX KEY: 0001420349 IRS NUMBER: 260588693 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 909 MONTOGOMERY STREET STREET 2: SUITE 400 CITY: SAN FRANCISCO STATE: CA ZIP: 94133 BUSINESS PHONE: 415 434 1111 MAIL ADDRESS: STREET 1: 909 MONTOGOMERY STREET STREET 2: SUITE 400 CITY: SAN FRANCISCO STATE: CA ZIP: 94133 SC 13D 1 glenrose13d.txt FORM 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 GLENROSE INSTRUMENTS INC. ----------------- (Name of Issuer) Common Stock, Par Value $0.01 Per Share ----------------------------- (Title of Class of Securities) Not Applicable --------- (CUSIP Number) Gregory D. Hitchan Blum Capital Partners, L.P. 909 Montgomery Street, Suite 400 San Francisco, CA 94133 (415) 434-1111 -------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 25, 2008 -------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 10 CUSIP NO. Not Applicable SCHEDULE 13D Page 2 of 10 - ------------------------------------------------------------------------------ 1. NAME OF REPORTING PERSON BLUM STRATEGIC PARTNERS IV, L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) 26-0588744 - ------------------------------------------------------------------------------ 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x] (b) [x] - ------------------------------------------------------------------------------ 3. SEC USE ONLY - ------------------------------------------------------------------------------ 4. SOURCE OF FUNDS* See Item 3 - ------------------------------------------------------------------------------ 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------ 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ 7. SOLE VOTING POWER -0- NUMBER OF ----------------------------------------------------------- SHARES 8. SHARED VOTING POWER 1,714,286** BENEFICIALLY OWNED BY EACH ----------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER -0- ----------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 1,714,286** - ------------------------------------------------------------------------------ 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,714,286** - ------------------------------------------------------------------------------ 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ------------------------------------------------------------------------------ 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 35.5%** - ------------------------------------------------------------------------------ 14. TYPE OF REPORTING PERSON PN, IA - ------------------------------------------------------------------------------ ** See Item 5 * * * * * * CUSIP NO. Not Applicable SCHEDULE 13D Page 3 of 10 - ----------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON BLUM STRATEGIC GP IV, L.L.C. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) 26-0588693 - ----------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x] (b) [x] - ----------------------------------------------------------------------------- 3. SEC USE ONLY - ----------------------------------------------------------------------------- 4. SOURCE OF FUNDS* See Item 3 - ----------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ----------------------------------------------------------------------------- 7. SOLE VOTING POWER -0- NUMBER OF ---------------------------------------------------------- SHARES 8. SHARED VOTING POWER 1,714,286** BENEFICIALLY OWNED BY EACH ---------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER -0- ---------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 1,714,286** - ----------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,714,286** - ----------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ----------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 35.5%** - ----------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON OO (Limited Liability Company) - ----------------------------------------------------------------------------- ** See Item 5 * * * * * * CUSIP NO. Not Applicable SCHEDULE 13D Page 4 of 10 - ----------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON BLUM STRATEGIC GP IV, L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) 26-0588732 - ----------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x] (b) [x] - ----------------------------------------------------------------------------- 3. SEC USE ONLY - ----------------------------------------------------------------------------- 4. SOURCE OF FUNDS* See Item 3 - ----------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ----------------------------------------------------------------------------- 7. SOLE VOTING POWER -0- NUMBER OF ---------------------------------------------------------- SHARES 8. SHARED VOTING POWER 1,714,286** BENEFICIALLY OWNED BY EACH ---------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER -0- ---------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 1,714,286** - ----------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,714,286** - ----------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ----------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 35.5%** - ----------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - ----------------------------------------------------------------------------- ** See Item 5 * * * * * * CUSIP NO. Not Applicable SCHEDULE 13D Page 5 of 10 Item 1. Security and Issuer - ---------------------------- This Schedule 13D relates to shares of common stock, $0.01 par value per share (the "Common Stock") and 4% Convertible Debentures Due 2013 ("Debentures") of GlenRose Instruments Inc., a Delaware corporation (the "Issuer"). The principal executive office and mailing address of the Issuer is 45 First Avenue, Waltham, Massachusetts 02451. Item 2. Identity and Background - -------------------------------- This Schedule 13D is being filed by Blum Strategic GP IV, L.L.C., a Delaware limited liability company ("Blum GP IV"), whose principal business is acting as the general partner of Blum Strategic GP IV L.P., a Delaware limited partnership ("Blum GP IV LP"), whose principal business is acting as the general partner of Blum Strategic Partners IV, L.P., a Delaware limited partnership ("Blum Strategic IV") whose principal office is 909 Montgomery Street, Suite 400, San Francisco, California 94133. The principal business office address of Blum GP IV and Blum GP IV LP is 909 Montgomery Street, Suite 400, San Francisco, California 94133. The names of the managing members and members of Blum GP IV, their addresses, citizenship and principal occupations are as follows: Name and Business Citizen- Principal Occupation Office Held Address ship or Employment - -------------------- ----------------------- --------- ------------------- Richard C. Blum 909 Montgomery St. USA President & Chairman, Managing Member Suite 400 Blum LP San Francisco, CA 94133 Nils Colin Lind 909 Montgomery St. USA & Managing Partner, Managing Member Suite 400 Norway Blum LP San Francisco, CA 94133 John H. Park 909 Montgomery St. USA Partner, Managing Member Suite 400 Blum LP San Francisco, CA 94133 Gregory L. Jackson 909 Montgomery St. USA Partner, Managing Member Suite 400 Blum LP San Francisco, CA 94133 Jane J. Su 909 Montgomery St. USA Partner, Member Suite 400 Blum LP San Francisco, CA 94133 David H.S. Chung 909 Montgomery St. USA Partner, Member Suite 400 Blum LP San Francisco, CA 94133 Nadine Terman 909 Montgomery St. USA Partner, Member Suite 400 Blum LP San Francisco, CA 94133 CUSIP NO. Not Applicable SCHEDULE 13D Page 6 of 10 Name and Business Citizen- Principal Occupation Office Held Address ship or Employment - -------------------- ----------------------- --------- ------------------- Gregory D. Hitchan 909 Montgomery St. USA Partner, Chief Managing Member Suite 400 Operating Officer, San Francisco, CA 94133 General Counsel & Secretary Blum LP Marc T. Scholvinck 909 Montgomery St. USA Partner & Chief Member Suite 400 Financial Officer, San Francisco, CA 94133 Blum LP To the best knowledge of the Reporting Persons, none of the entities or persons identified in this Item 2 has, during the past five years, been convicted of any criminal proceeding (excluding traffic violations or similar misdemeanors), nor been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Considerations - ----------------------------------------------------------- The source of funds for the purchases of securities was the working capital of Blum Strategic IV. Item 4. Purpose of Transaction - ------------------------------- The Issuer reported, in its Form 8-K dated July 29, 2008, that on July 25, 2008, it entered into subscription agreements with four (4) investors for the sale of the Debentures (the "Private Placement") in the aggregate principal amount of $14,875,000. As part of the Private Placement, Blum Strategic IV acquired $12 million in aggregate principal amount of the Debentures pursuant to a Subscription Agreement, dated July 25, 2008, between Blum Strategic IV and the Issuer. A form of such agreement is attached hereto as Exhibit B (the "Subscription Agreement"). For details concerning the Debentures, see the "4% Convertible Debenture Due 2013", attached hereto as Exhibit C. The Debentures bear interest at 4%, payable quarterly in cash, and mature on July 25, 2013. They are convertible, at the option of Blum Strategic IV, at any time on or prior to maturity, into shares of Common Stock at an initial conversion price equal to $7.00 per share. In the event that the Reporting Persons convert the Debentures into shares of Common Stock, the Reporting Persons would own approximately 35.5% of the Common Stock. See also Item 5 below. In connection with the Subscription Agreement, Blum Strategic IV entered into an Investor Rights Agreement, dated July 25, 2008 (the "Rights Agreement" attached hereto as Exhibit D) with the Issuer. The Rights Agreement provides CUSIP NO. Not Applicable SCHEDULE 13D Page 7 of 10 Blum Strategic IV with certain registration rights for all of the shares of Common Stock they would own upon conversion of the Debentures subject to certain conditions. Pursuant to the Rights Agreement, Blum Strategic IV is subject to certain transfer restrictions and agreed not to sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock for a period not to exceed one hundred eighty (180) days following the effective date of certain registrations of the Issuer's Common Stock. Additionally, pursuant to the Rights Agreement, Blum Strategic IV shall have the right to nominate one nominee to the Issuer's board of directors ("Board Designee") so long as the Reporting Persons beneficially own at least $6 million principal amount of the Debentures or 857,143 shares of Common Stock. John H. Park, who is a managing member of Blum GP IV, was appointed as the initial Board Designee and became a member of the board of directors of the Issuer on July 30, 2008. The purpose of the acquisition of Debentures is for investment, and the acquisitions of the Debentures were made in the ordinary course of business and were not made for the purpose of acquiring control of the Issuer. Although no Reporting Person has any specific plan or proposal to acquire or dispose of the Issuer's securities, other than as set forth above, consistent with its investment purpose, each Reporting Person at any time and from time to time may acquire additional Issuer securities or Common Stock or dispose of any or all of its Issuer securities or Common Stock depending upon an ongoing evaluation of the investment, prevailing market conditions, other investment opportunities, liquidity requirements of the Reporting Persons and/or other investment considerations. Also, consistent with the investment purpose, the Reporting Persons may engage in communications with one or more shareholders of the Issuer, one or more officers of the Issuer and/or one or more members of the board of directors of the Issuer and/or one or more representatives of the Issuer regarding the Issuer, including but not limited to, its operations. The Reporting Persons may discuss ideas that, if effected may result in any of the following: the acquisition by persons of Common Stock of the Issuer, an extraordinary corporate transaction involving the Issuer, and/or changes in the board of directors or management of the Issuer. Except as disclosed herein, none of the Reporting Persons has any plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto. The information set forth in this Item 4 is qualified in its entirety by reference to the full text of the Subscription Agreement (Exhibit B hereto), the 4% Convertible Debenture Due 2013 (Exhibit C hereto), and the Rights Agreement (Exhibit D hereto), each of which is incorporated by reference herein in its entirety. CUSIP NO. Not Applicable SCHEDULE 13D Page 8 of 10 Item 5. Interest in Securities of the Issuer - --------------------------------------------- (a), (b) According to the Issuer's Form 10-Q filed with the Securities and Exchange Commission on July 25, 2008, there were 3,117,647 shares of Common Stock issued and outstanding as of March 30, 2008. In the event that the Reporting Persons converted the Debentures into Common Stock, the Reporting Persons would be deemed to have beneficial ownership of an aggregate of 1,714,286 shares of the Common Stock, and the Issuer would be deemed to have 4,831,933 shares of Common Stock issued and outstanding. The Reporting Persons would thus be deemed to have beneficial ownership of approximately 35.5% of the Common Stock. Voting and investment power concerning the above securities are held solely by Blum GP IV. The Reporting Persons therefore may be deemed to be members in a group, in which case the group would be deemed to have beneficial ownership of an aggregate of 1,714,286 shares of the Common Stock, which is 35.5% of the outstanding Common Stock. The filing of this Schedule shall not be construed as an admission that any of the managing members and members of Blum GP IV and Blum GP IV LP, is, for any purpose, the beneficial owner of any of the securities that are beneficially owned by Blum GP IV LP, or Blum GP IV. (c) The Reporting Persons have not engaged in any transactions involving Common Stock or securities of the Issuer in the last 60 days other than the transaction described in Item 4 above. (d) and (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer - ------------------------------------------------------------------------------ None of the Reporting Persons or, to the best knowledge of the Reporting Persons, the other persons named in Item 2, is a party to any contract, arrangement, understanding or relationship with respect to any securities of the Issuer, including but not limited to the transfer or voting of any securities of the Issuer, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, except (i) as previously disclosed herein, or (ii) the Subscription Agreement, the 4% Convertible Debenture Due 2013, and the Rights Agreement, which are attached hereto as Exhibits B, C and D, respectively. * * * * * * CUSIP NO. Not Applicable SCHEDULE 13D Page 9 of 10 Item 7. Material to be Filed as Exhibits - ----------------------------------------- Exhibit A - Joint Filing Undertaking Exhibit B - Subscription Agreement Exhibit C - 4% Convertible Debenture Due 2013 Exhibit D - Investor Rights Agreement * * * * * * CUSIP NO. Not Applicable SCHEDULE 13D Page 10 of 10 SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: August 4, 2008 BLUM STRATEGIC GP IV, L.L.C. BLUM STRATEGIC GP IV, L.P. By: Blum Strategic GP IV, L.L.C., its General Partner By: /s/ Gregory D. Hitchan By: /s/ Gregory D. Hitchan --------------------------------- --------------------------------- Gregory D. Hitchan Gregory D. Hitchan Managing Member Managing Member BLUM STRATEGIC PARTNERS IV, L.P. By: Blum Strategic GP IV, L.P., its General Partner By: Blum Strategic GP IV, L.L.C.' its General Partner By: /s/ Gregory D. Hitchan --------------------------------- Gregory D. Hitchan Managing Member * * * * * * CUSIP NO. Not Applicable SCHEDULE 13D Page 1 of 1 Exhibit A JOINT FILING UNDERTAKING The undersigned, being duly authorized thereunto, hereby execute this agreement as an exhibit to this Schedule 13D to evidence the agreement of the below-named parties, in accordance with the rules promulgated pursuant to the Securities Exchange Act of 1934, to file this Schedule jointly on behalf of each such party. Dated: August 4, 2008 BLUM STRATEGIC GP IV, L.L.C. BLUM STRATEGIC GP IV, L.P. By: Blum Strategic GP IV, L.L.C., its General Partner By: /s/ Gregory D. Hitchan By: /s/ Gregory D. Hitchan --------------------------------- --------------------------------- Gregory D. Hitchan Gregory D. Hitchan Managing Member Managing Member BLUM STRATEGIC PARTNERS IV, L.P. By: Blum Strategic GP IV, L.P., its General Partner By: Blum Strategic GP IV, L.L.C.' its General Partner By: /s/ Gregory D. Hitchan --------------------------------- Gregory D. Hitchan Managing Member EX-2 3 exhibitb.txt EXHIBIT B EXHIBIT B GlenRose Instruments Inc. 4% Convertible Debentures Due 2013 Subscription Agreement Dear Sir or Madam: 1. Subscription. The undersigned, intending to be legally bound, irrevocably subscribes for and agrees to purchase the aggregate U.S. dollar amount of the 4% Convertible Debentures Due 2013 (each a "Debenture" and collectively, the "Debentures"), of GlenRose Instruments Inc., a Delaware corporation (the "Company"), indicated on the signature page hereof, on the terms and conditions described herein and in the Debenture. The undersigned herewith delivers to the Company the consideration ("Purchase Price") required to purchase the Debenture subscribed for hereunder by wire transfer funds payable to: GlenRose Instruments Inc., 45 First Avenue, Waltham, MA 02451. The minimum subscription is for $500,000 unless otherwise determined in the discretion of the Company. Capitalized terms not otherwise defined in this Agreement have the meanings specified in the Debenture. 2. Company Representations, Warranties and Covenants. Except as disclosed pursuant to the Company's publicly available reports filed with the Securities and Exchange Commission (the "SEC") pursuant to Sections 12, 13 and 15(d)of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company represents and warrants to the undersigned as follows as of the date hereof: 2.01 Organization and Standing of the Company. The Company is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction in which it was organized and has all requisite corporate power and authority for the ownership and operation of its properties and for the carrying on of its business as now conducted and as now proposed to be conducted. The Company is duly licensed or qualified and in good standing as a foreign corporation authorized to do business in all jurisdictions wherein the character of the property owned or leased, or the nature of the activities conducted, by it makes such licensing or qualification necessary except where the failure to have such licenses, qualifications or authority would not have a material adverse effect on the business of the Company ("Company Adverse Effect"). 2.02 Corporate Action and Valid Issuance. The Company has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Investor Rights Agreement executed as of the date hereof, the Debenture and any other agreements and instruments executed in connection herewith (collectively, the "Transaction Agreements"). All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of the Debentures, the authorization, execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated therein has been taken. The execution, delivery and performance of the Transaction Agreements by the Company, the issuance of the Common Stock (the "Conversion Shares") upon conversion of the Debentures in accordance with their terms and the consummation of the other transactions contemplated herein do not require any approval of the Company's stockholders (other than such approval as has been obtained). The Transaction Agreements have been duly executed and delivered by the Company and constitute, and all the covenants therein contained constitute the valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject only to the effect of bankruptcy, insolvency, moratorium, and similar laws affecting the rights of creditors generally. Neither the issuance of the Debentures, nor the issuance of shares of Common Stock upon the conversion of the Debentures, is subject to preemptive or other similar statutory or contractual rights and will not conflict with any provisions of any agreement or instrument to which the Company is a party or by which it is bound, including without limitation, the articles of incorporation and bylaws of the Company. 2.03 Securities Act. The Company has complied and will comply with all applicable federal and state securities laws in connection with the issuance of the Debentures and any Conversion Shares. Neither the Company nor anyone acting on its behalf has offered or will offer to sell the Debentures, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, so as to bring the issuance and sale of the Debentures or the issuance of the Conversion Shares under the registration provisions of the Securities Act or any state securities laws. 2.04 Employee Matters. Except as would not reasonably likely to result in a Company Adverse Effect, each benefit plan of the Company has been established and administered in accordance with its terms and in compliance with the applicable provisions of Employee Retirement Income Security Act of 1974, as amended, the Internal Revenue Code of 1986, as amended, and other applicable laws, rules and regulations. The Company and its subsidiaries are in compliance with all federal, state, local and foreign requirements regarding employment. 2.05 Capitalization; Status of Capital Stock (a) On the date of this Agreement and immediately prior to the issuance of Debentures contemplated by this Agreement, the Company has a total authorized capitalization consisting of: (i) 10,000,000 shares of Common Stock of which 3,117,647 are issued and outstanding and (ii) 3,000,000 shares of Preferred Stock, of which none are issued and outstanding. As of the date of this Agreement and immediately prior to the issuance of Debentures contemplated by this Agreement, 700,000 shares of Common Stock have been reserved for issuance in accordance with the Company's 2005 Stock Option and Incentive Plan. Of those shares the Company granted: (i) nonqualified options to purchase 230,000 shares of the Company's Common Stock that are currently not exercised and (ii) 15,000 shares of restricted common stock. (b) Schedule 2.05 sets forth the capitalization of the Company immediately following the issuance of the Debentures contemplated by this Agreement including the number of shares of the following: (i) issued and outstanding Common Stock; (ii) Common Stock reserved for issuance upon conversion of Debenture, including the names of the holders of the Debentures thereof; (iii) issued stock options, including vesting schedule and exercise price; (iv) stock options not yet issued but reserved for issuance; (v) issued and outstanding Preferred Stock; and (vi) warrants or stock purchase rights, if any. All of the outstanding shares of capital stock of the Company have been duly authorized, are validly issued and are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. The Debentures have been duly authorized, and when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued. The Company has duly reserved the Conversion Shares for issuance upon conversion of the Debentures, and the Conversion Shares, when issued and delivered upon conversion of the Debentures, will be duly authorized, validly issued and fully paid and non assessable. Except as set forth on Schedule 2.05, there are no options, warrants or rights to purchase shares of capital stock or other securities of the Company authorized, issued or outstanding, nor is the Company obligated in any other manner to issue shares of its capital stock or other securities. There are no restrictions on the transfer of shares of capital stock of the Company other than those imposed by the Transaction Agreements and state and federal securities laws. No holder of any security of the Company is entitled to preemptive or similar statutory or contractual rights, either arising pursuant to any agreement or instrument to which the Company is a party, or which are otherwise binding upon the Company, which have not been waived. The offer and sale of all shares of capital stock and other securities of the Company issued before the date hereof complied with or were exempt from all federal and state securities laws. 2.06 Government Consents and Filings. Assuming the accuracy of the representations made by the undersigned in Section 2 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement. 2.07 Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to the Company's knowledge, currently threatened against the Company which individually or in the aggregate would reasonably be expected to have a Company Adverse Effect, nor are there any orders, writs, injunctions, judgments or decrees outstanding of any court or governmental agency or instrumentality and binding upon the Company that would reasonably be expected to have a Company Adverse Effect. To the Company's knowledge, the Company is not currently subject to any investigation by any governmental body with respect to any allegation of "backdating" options granted to any employees or directors that would reasonably be expected to have a Company Adverse Effect. 2.08 Intellectual Property. Except as would not reasonably be expected to have a Company Adverse Effect: (a) the Company owns, or possesses sufficient rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, trade secrets, licenses, domain names, mask works, information and proprietary rights and processes as are necessary to the conduct of the Company's business as now conducted and as presently proposed to be conducted (collectively, "Company Intellectual Property") necessary for the conduct of its business as currently conducted; (b) to the Company's knowledge, the use by the Company of any Company Intellectual Property used in the conduct of the Company's business as currently conducted does not infringe on or otherwise violate the rights of any person; (c) the use of any licensed Company Intellectual Property by the Company is in accordance with applicable licenses pursuant to which the Company acquired the right to use such Company Intellectual Property and (d) to the knowledge of the Company, no person is challenging, infringing on or otherwise violating any right of the Company with respect to any Company Intellectual Property owned by and/or exclusively licensed to the Company. 2.09 Compliance with Other Instruments. The Company is not in violation or default (a) of any provisions of its articles of incorporation or bylaws, (b) of any instrument, judgment, order, writ or decree, or (c) under any agreement to which it is a party or by which it is bound, or of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Company Adverse Effect. 2.10 Absence of Liens. The property and assets that the Company owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. 2.11 Tax Returns and Payments. There are no federal, state, county, local or foreign taxes dues and payable by the Company which have not been timely paid. There are no accrued and unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year. 2.12 Permits. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Company Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority. 2.13 No Brokers or Finders. No person other than Ladenburg Thalman & Co. Inc. has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by the Company or any agent of the Company. 2.14 SEC Reports; Financial Statements. The Company has filed all required registration statements, prospectuses, reports, schedules, forms, statements and other documents required to be filed by it with the SEC (the "SEC Reports") since November 2006. The information contained or incorporated by reference in the SEC Reports was true and correct in all material respects as of the respective dates of the filing thereof with the SEC (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing); and, as of such respective dates, the SEC Reports did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All of the SEC Reports, as of their respective dates, complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder. The financial statements of the Company included in the SEC Reports (collectively, the "Financial Statements") fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates indicated, and the results of its operations and cash flows for the periods therein specified, all in accordance with United States generally accepted accounting principles applied on a consistent basis ("GAAP") throughout the periods therein specified (except as otherwise noted therein, and in the case of quarterly financial statements except for the absence of footnote disclosure and subject, in the case of interim periods, to normal year-end adjustments). Except as disclosed in the SEC Reports, the Company and its Subsidiaries have not incurred any liabilities that are of a nature that would be required to be disclosed on a balance sheet of the Company and its Subsidiaries or the footnotes thereto prepared in conformity with GAAP, other than (i) liabilities incurred in the ordinary course of business since October 1, 2006, and (ii) liabilities that would not reasonably be expected to have a Company Material Adverse Effect. 2.15 Absence of Changes. Since March 30, 2008, there have not been any changes, circumstances, conditions or events which individually or in the aggregate have had or would reasonably be expected to have a Company Material Adverse Effect. 2.16 Officers' Conversion of Debt. Immediately prior to the execution of this Agreement, all officers, directors, managers and affiliates of the Company who had outstanding loans to the Company converted all such loans into the same Debentures and each such persons has executed an Investors Rights Agreement with the same "lockup" provision to which the undersigned has agreed. 3. Investor Representations, Warranties and Covenants. The undersigned hereby acknowledges, represents and warrants to, and agrees with the Company as follows as of the date hereof: (a) The undersigned is acquiring the Debenture for the undersigned's own account as principal, for investment purposes only, and not with a view to, or for, resale or distribution of all or any part of the Debenture or any shares of the Company's Common Stock, par value $0.01 per share, issued upon conversion of the Debenture (the "Underlying Shares")(the "Debenture and the Underlying Shares are collectively referred to herein as the "Securities"), and no other person has a direct or indirect beneficial interest in the Securities; (b) The undersigned acknowledges its understanding that the offering and sale of the Debentures is intended to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), by virtue of Sections 4(2) of the Securities Act and Rule 505 of Regulation D ("Regulation D") promulgated thereunder and Section 4(6) of the Securities Act, and, in furtherance thereof, the undersigned represents and warrants to and agrees with the Company that the undersigned has the financial ability to bear the economic risk of the undersigned's investment, has adequate means for providing for the undersigned's current needs and contingencies and has no need for liquidity with respect to the undersigned's investment in the Debenture. (c) The undersigned is an "accredited investor" as defined in Rule 501(a) of Regulation D under the Securities Act; (d) The undersigned: (1) The undersigned understands and has evaluated the risks of a purchase of the Debenture; (2) has been given the opportunity to ask questions of and receive answers from the Company concerning the terms and conditions of the offering of the Debentures, and has been given the opportunity to obtain such information as the undersigned has deemed necessary regarding the Company, the Debenture or the Underlying Shares to the extent that the Company possesses such information or can acquire it without unreasonable effort; (3) has not relied on any oral representation, warranty or information in connection with the offering of the Debentures by the Company, or any officer, employee, agent or affiliate of the Company; (4) has determined that the Debenture is a suitable investment for the undersigned and that at this time the undersigned can bear a complete loss of the undersigned's investment therein; (5) has such knowledge and experience in financial and business matters that the undersigned is capable of evaluating the merits and risks of the undersigned's investment in the Debenture; (e) If the undersigned is a corporation, limited liability company, partnership, trust, qualified plan or other entity, it is authorized and qualified to become a holder of the Securities, and the person signing this Subscription Agreement on behalf of such entity has been duly authorized to do so; (f) Any information which the undersigned has heretofore furnished and herewith furnishes to the Company with respect to the undersigned's financial position and business experience is correct and complete as of the date of this Agreement and if there should be any material change in such information prior to issuance to the undersigned of the Debenture, the undersigned will immediately furnish such revised or corrected information to the Company; (g) The foregoing acknowledgments, representations, warranties and agreements shall survive the closing at which the Debenture is issued; (h) The undersigned acknowledges that the undersigned has not purchased the Debenture as a result of any general solicitation or general advertising; and (i) The undersigned's overall commitment to investments which are not readily marketable is not disproportionate to the undersigned's net worth, and the undersigned's investment in the Debenture and will not cause such overall commitment to become excessive. 4. Investor Awareness. The undersigned acknowledges that: (a) No federal or state agency has passed upon the Securities or made any finding or determination as to the fairness of this investment; (b) There is no established market for the Securities of and no assurance has been given that any public market for them will develop; (c) The Securities may not be sold, pledged or otherwise transferred, except as may be permitted under the Securities Act and applicable state securities laws pursuant to registration or exemption therefrom; and accordingly, the undersigned may be required to bear the financial risks of an investment in the Securities for an indefinite period of time; (d) The undersigned consents to (i) the placing of a legend substantially in the form set forth below on the certificates representing the Underlying Shares stating that the Underlying Shares have not been registered and setting forth the restriction on transfer contemplated hereby, and (ii) the placing of a stop transfer order on the books of the Company with respect to the Securities. "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. These shares have been acquired for investment and not with a view to distribution or resale and may not be sold, mortgaged, pledged, hypothecated or otherwise transferred without an effective registration statement for such sales under the Securities Act of 1933, or an opinion of counsel for the corporation that registration is not required under such Act. The shares represented by this certificate are also subject to the provisions of a certain Investor Rights Agreement dated July 25, 2008 and may not be transferred except in accordance with the provisions of that agreement." 5. Miscellaneous. (a) Indemnity by Investor. The investor agrees to indemnify and hold harmless the Company, its affiliates, directors, officers, employees, agents and controlling persons (the Company and each such person being a ("Company Indemnified Party"), from and against any and all losses, claims, damages, liabilities and expenses whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever), joint or several, as incurred, to which such Company Indemnified Party may become subject under any applicable United States federal or state law or the laws of any other domestic or foreign jurisdiction, or otherwise, and related to or arising out of or based upon any false representation, warranty or acknowledgment, or breach or failure by the undersigned to comply with any covenant or agreement made by the undersigned herein or in any other document furnished by the undersigned to any of the foregoing in connection with this transaction. (b) Indemnity by the Company. The Company agrees to indemnify and hold harmless the undersigned, its affiliates, directors, officers, employees, agents and controlling persons (the undersigned and each such person being an "Investor Indemnified Party"), from and against any and all losses, claims, damages, liabilities and expenses whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever), joint or several, as incurred, to which such Investor Indemnified Party may become subject arising out of or resulting from (1) any inaccuracy or breach of the Company's representations and warranties in this Agreement or (2) the Company's breach of agreements or covenants made by the Company in this Agreement or (3) any action, suit, proceeding or investigation by any governmental entity or any other person relating to this Agreement or the transactions contemplated hereby. (c) Modification. Except as otherwise provided herein, neither this Agreement nor any provisions hereof shall be modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. (d) Binding Effect. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and assigns. If the undersigned is more than one person, the obligation of the undersigned shall be joint and several and the agreements, covenants, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors, administrators and successors. (e) Entire Agreement. This instrument contains the entire agreement of the parties and there are no representations, warranties, acknowledgments, covenants or other agreements except as stated or referred to herein. (f) Assignability. This Agreement is not transferable or assignable by the undersigned. (g) Governing Law and Forum. Notwithstanding the place where this Agreement may be executed by any of the parties hereto, all the terms and provisions hereof shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts, without giving effect to its conflict of law principles. Any dispute which may arise out of or in connection with this Agreement shall be adjudicated before a court located in Middlesex County, Massachusetts and the parties hereby submit to the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts located in Boston, Massachusetts and of the federal courts in Boston, Massachusetts with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the Shares, and the undersigned consents to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, in care of the address set forth below or such other address as the undersigned shall furnish in writing to the Company. In the event any such action is brought, whether at law or in equity, then the prevailing party shall be paid its reasonable attorney's fees, expenses and disbursements arising out of such action. The undersigned hereby waives trial by jury in any action or proceeding involving, directly or indirectly, any matter (whether sounding in tort, contract, fraud or otherwise) in any way arising out of or in connection with this Agreement or the Holder's purchase of the Shares. (h) Expenses and Other Rights. The Company shall pay reasonable out-of-pocket fees and expenses up to $15,000 incurred by the undersigned in connection with the Transaction Agreements. The Company agrees that if it enters into an agreement in connection with the Debentures with another investor that provides for a material economic benefit or material right that is not provided to the undersigned in the Transaction Agreements, the undersigned shall be automatically entitled to such material economic benefit or right without the execution of any amendment to the Transaction Agreements. [The balance of this page has been intentionally left blank.] IN WITNESS WHEREOF, the undersigned has executed this Agreement on this 25th day of July, 2008. Manner in which Title is to be held (Please Check One): 1. ___ Individual 2. ___ Joint Tenants With Right of Survivorship 3. ___ Community Property 4. ___ Tenants in Common 5. ___ Married with Separate Property EXECUTION BY NATURAL PERSONS _________________________________________________________________ Exact Name(s) in Which Title is to be Held (If Joint Tenant or Tenants in Common, both persons must sign and this page must contain all information for both persons). ___________________________________ ___________________________________ Signature Signature ___________________________________ ___________________________________ Name (Please Print) Name (Please Print) __________________________________ __________________________________ Residence: Number and Street Residence: Number and Street ___________________________________ ___________________________________ City, State, Zip Code City, State, Zip Code ___________________________________ ___________________________________ Social Security Number Social Security Number ___________________________________ Telephone Number ___________________________________ Email Accepted this _____ day of July 2008, on behalf of the Company. GLENROSE INSTRUMENTS INC. By: __________________________ Name: Anthony S. Loumidis Title: Chief Financial Officer EXECUTION BY SUBSCRIBER THAT IS AN ENTITY (Corporation, Limited Liability Company, Partnership, Trust, Etc.) Blum Strategic Partners IV, L.P., a Delaware limited partnership Name of Entity (Please Print) Date of Incorporation or Organization: July 25, 2007 State of Principal Offices: 909 Montgomery St., Suite 400 San Francisco, California 94133 Federal Taxpayer Identification Number: ________________ Blum Strategic Partners IV, L.P. By: Blum Strategic GP IV, L.P., its general partner By: Blum Strategic GP IV, L.L.C., its general partner By: /s/ Gregory D. Hitchan Name: Gregory D. Hitchan Title: Managing Member Accepted this 25th day of July 2008, on behalf of the Company. GLENROSE INSTRUMENTS INC. By: /s/ Anthony S. Loumidis Name: Anthony S. Loumidis Title: Chief Financial Officer EX-3 4 exhibitc.txt EXHIBIT C EXHIBIT C THE 4% CONVERTIBLE DEBENTURE DUE 2013 REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDERS OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. GlenRose Instruments Inc. 4% Convertible Debenture Due 2013 No. 1 $12,000,000 This Debenture (the "Debenture") is one of a duly authorized issue of Debentures of GlenRose Instruments Inc., a corporation duly incorporated under the laws of the State of Delaware, and having its principal address at 45 First Avenue, Waltham, Massachusetts 02451 (the "Company"), designated as its 4% Convertible Debentures due 2013, in an aggregate principal amount of up to $22,875,000, which amount may be increased at the discretion of the Company (the "Debentures"). FOR VALUE RECEIVED, the Company promises to pay to the order of Blum Strategic Partners IV, L.P., or its registered assigns (the "Holder"), the principal sum of Twelve Million United States Dollars (U.S. $12,000,000) (the "Principal Amount") on July 25, 2013, subject to earlier payment as otherwise provided herein (the "Maturity Date"), and to pay interest on the Principal Amount outstanding under this Debenture (the "Outstanding Principal Amount"), at the rate of 4% per annum, due and payable quarterly in arrears on the 15th day of October, January, April and July of each year, commencing on October 15, 2008 (each an "Interest Payment Date") and on the Maturity Date. Interest shall be calculated based on a 360-day year. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance and shall continue until the following Interest Payment Date. Except as otherwise provided herein, the interest so payable will be paid to the person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of the Debentures (the "Debenture Register") at the close of business on the record date for interest payable on such Interest Payment Date. The record date for any interest payment is the close of business on the date fifteen days prior to the Interest Payment Date, unless such date shall not be a business day, in which case on the next preceding business day. The Company shall be entitled to withhold from all payments of interest on this Debenture any amounts required to be withheld under the applicable provisions of the United States income tax laws as evidenced by an opinion of counsel of the Company. The Company agrees to pay additional interest on overdue principal, and, to the extent lawful, overdue installments of interest at the rate per annum of 2%. Payments in respect of the Debenture shall be made by the Company by wire transfer of immediately available funds to the account specified by the Holder. The Company will pay, in cash, the Outstanding Principal Amount and all accrued and unpaid interest (the "Outstanding Amount") due upon this Debenture on the Maturity Date. This Debenture is subject to the following additional provisions: 1. Exchange. The Debentures are exchangeable for an equal aggregate principal amount of Debentures of different denominations as requested by the Holder surrendering the same. No fees will be charged for such exchange. Notwithstanding the foregoing, the Company shall have no obligation to issue new Debentures unless and until requested by the Holders thereof. 2. Transfers. This Debenture has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged only (a) in compliance with the Securities Act of 1933, as amended (the "Act"), and applicable state securities laws, and (b) in accordance with applicable provisions hereof. Prior to due presentment for transfer of this Debenture, the Company may treat the person in whose name this Debenture is duly registered on the Company's Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and all other purposes, whether or not this Debenture is then overdue, and the Company shall not be affected by notice to the contrary. 3. Definitions. For purposes hereof the following definitions shall apply: "2008 Private Placement" The Company's private placement of up to $22,875,000 of Debentures. "Common Stock" shall mean the Common Stock, $0.01 par value per share, of the Company. "Company" shall have the meaning set forth in the first introductory paragraph. "Conversion Notice" shall have the meaning set forth in Paragraph 5(c). "Conversion Price" shall mean $7.00, subject to adjustment from time to time as set forth in Paragraph 7 hereof. "Debenture" shall have the meaning set forth in the first introductory paragraph. "Debenture Register" shall have the meaning set forth in the second introductory paragraph. "Debentures" shall have the meaning set forth in the first introductory paragraph. "Events of Default" shall have the meaning set forth in Paragraph 14. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Final Closing Date" shall mean the final closing date of the 2008 Private Placement (such date being July 25, 2008). "Fundamental Change" shall have the meaning set forth in Paragraph 6(b). "Fundamental Change Purchase Date" shall have the meaning set forth in Paragraph 6(b). "Holder" shall have the meaning set forth in the second introductory paragraph. "Holder Conversion Date" shall have the meaning set forth in Paragraph 5(c). "Interest Payment Date" shall have the meaning set forth in the second introductory paragraph. "Investor Rights Agreement" shall have the meaning set forth in the Subscription Agreement. "Maturity Date" shall have the meaning set forth in the second introductory paragraph. "Outstanding Amount" shall have the meaning set forth in the third introductory paragraph. "Outstanding Principal Amount" shall have the meaning set forth in the second introductory paragraph. "Principal Amount" shall have the meaning set forth in the second introductory paragraph. "Qualified Offering" shall mean the Company's first firm commitment underwritten public offering of its Common Stock registered under the Securities Act "Qualified Registration" shall mean the registration of the Company's securities on Form 10 pursuant to Section 12(b) or 12(g) of the Exchange Act. "Redemption Date" shall have the meaning set forth in Paragraph 6(a)(iii). "Redemption Debentures" shall have the meaning set forth in Paragraph 6(d). "Redemption Price" shall have the meaning set forth in Paragraph 6(c). "Redemption Notice" shall have the meaning set forth in Paragraph 6(a). "Securities Act" means the Securities Act of 1933, as amended. "Subscription Agreement" shall mean the agreement entered into by and between the Company and the Holder for the purchase of the Debenture. "Underlying Shares" shall mean the shares of Common Stock into which this Debenture is convertible. In addition, other terms defined in the Subscription Agreement and not otherwise defined herein shall have the same meanings herein as are set forth for such terms in the Subscription Agreement. 4. Maturity. On the Maturity Date, the Outstanding Amount of this Debenture shall be payable in cash. 5. Conversion. This Debenture is subject to conversion as follows: (a) Holder's Right to Convert. The Outstanding Amount of this Debenture shall be convertible at any time, in whole or in part, at the option of the Holder hereof, into fully paid, validly issued and nonassessable shares of Common Stock. (b) Conversion Price for Converted Shares. Subject to Paragraph 5(a), the Outstanding Amount of this Debenture that is converted into shares of Common Stock shall be convertible into the number of shares of Common Stock calculated by dividing the Outstanding Amount of this Debenture submitted for conversion by the Conversion Price. (c) (i) Mechanics of Conversion. In order to convert this Debenture (in whole or in part) into shares of Common Stock, the Holder shall surrender this Debenture, by either overnight courier or two-day courier, to the Company, and shall give written notice in the form of Exhibit 2 hereto (the "Conversion Notice") by facsimile (with the original of such notice forwarded with the foregoing courier) to the Company that the Holder elects to convert all or the portion of the Outstanding Amount of this Debenture specified therein, which such notice and election shall be irrevocable by the Holder; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless this Debenture with evidence of the principal amount hereof to be converted is delivered to the Company as provided above, or the Holder notifies the Company that this Debenture has been lost, stolen or destroyed and promptly executes an agreement reasonably satisfactory to the Company to indemnify the Company from any loss which may be incurred by it in connection with this Debenture. The date on which a Conversion Notice is given (the "Holder Conversion Date") shall be deemed to be the date the Company received by facsimile the Conversion Notice, as evidenced by a printed confirmation of receipt received by the Holder or confirmed by telephone conference between the Holder and the Company. (ii) Issuance of Certificates. In the case of any Conversion Notice given by the Holder to the Company, the Company shall issue and deliver as promptly as practicable and in no event later than five (5) business days after delivery to the Company of the Debenture, or after receipt of such agreement and indemnification, to such Holder or to its designee, a certificate or certificates for the number of shares of Common Stock to which the Holder shall be entitled, together with a Debenture for the Outstanding Amount not submitted for conversion, if any. The person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Holder Conversion Date. 6. Redemption. (a) Company Option to Redeem. Any portion of this Debenture may be redeemed at the Company's option expressed by a written notice (a "Redemption Notice") to the Holder; provided that: (i) a registration statement under the Securities Act and a registration with a U.S. national securities exchange are then in effect covering the Underlying Shares; (ii) the average closing bid price per share of Common Stock, as reported on such national securities exchange, shall have been not less than $14.00 per share for a minimum of twenty (20) out of thirty (30) trading days prior to the date of the Redemption Notice; and (iii) the Redemption Notice delivered by the Company shall be received by the Holder at least ten (10) trading days (but not more than thirty (30) trading days) prior to the date of redemption (the "Redemption Date"). (b) Holder Option to Redeem. If there shall occur a Fundamental Change (the "Fundamental Change"), the Holder shall have the right, at such Holder's option, to require the Company to purchase for cash all or any portion of such Holder's Debenture on a date selected by the Company (the "Fundamental Change Purchase Date"), which Fundamental Change Purchase Date shall be no later then thirty (30) calendar days after the occurrence of such Fundamental Change, at the redemption price specified below in Section 6(c). A Fundamental Change shall be deemed to have occurred at such time as any of the following events shall occur: (i) any person or group (as defined under Section 13(d) of the Exchange Act), other than the Company, its subsidiaries or any employee benefits plan of the Company or its subsidiaries, files a Schedule 13D or Schedule TO or any successor schedule, form or report pursuant to the Exchange Act, disclosing that such person has become the beneficial owner of shares with a majority of the total voting power of the Company's outstanding voting securities; unless such beneficial ownership arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act; (ii) the Company consolidates with or merges with or into another person (other than a subsidiary of the Company), or sells, conveys, transfers, leases or otherwise disposes of all or substantially all of its properties and assets to any person (other than a subsidiary of the Company) or any person (other than a subsidiary of the Company) consolidates with or merges with or into the Company, and the outstanding voting securities of the Company are reclassified into, converted for or converted into the right to receive any other property or security, provided that none of these circumstances will be a Fundamental Change if persons that beneficially own the voting securities of the Company immediately prior to the transaction own, directly or indirectly, shares with a majority of the total voting power of all outstanding voting securities of the surviving or transferee person immediately after the transaction in substantially the same proportion as their ownership of the Company's voting securities immediately prior to the transaction; or (iii) the Company's stockholders or Board of Directors adopts a plan for the liquidation or dissolution of the Company. (c) Redemption Price. The redemption price for the portion of this Debenture being redeemed shall equal one hundred percent (100%) of the Outstanding Principal Amount of this Debenture being so redeemed (the "Redemption Price"), along with any accrued but unpaid interest. The Redemption Price shall be payable in cash in United States Dollars. (d) Mechanics of Redemption-Company Option in Redeem. In the case of redemption pursuant to Section 6(a), if less than all of the Outstanding Amount of Debentures are to be redeemed at any time, the selection of Debentures for redemption will be made by the Company on a pro rata basis. In the event the Company shall be required or elects to redeem any part or all of the Outstanding Amount of the Debentures, the Company shall send by either overnight courier or two-day courier (with a copy sent by facsimile) confirmation of such determination or obligation to the record Holders of the Debentures being redeemed (the "Redemption Debentures"), which confirmation shall be included in the Redemption Notice. Such confirmation shall specify the Redemption Date, which shall be at least ten (10) business days (but not more than thirty (30) business days) after receipt by the Holder of the Redemption Notice. On the Redemption Date, the Redemption Debentures shall be redeemed automatically without any further action by the Holders of such Debentures and whether or not the Debentures are surrendered to the Company; provided, that the Company shall be obligated to pay the cash consideration due to a Holder of such Debentures upon redemption only when such Debentures are either delivered to the principal office of the Company or the Holder notifies the Company that such Debentures have been lost, stolen or destroyed and executes an agreement reasonably satisfactory to the Company to indemnify the Company from any loss which may be incurred by it in connection with such Debenture. Thereupon, there shall be promptly issued and delivered to such Holder, within seven (7) business days after the Redemption Date and delivery to the Company of such Debentures, or after receipt of such agreement and indemnification, at the address of such Holder on the books of the Company, payment in immediately available funds to the name as shown on the books of the Company in the amount of the Redemption Price as calculated as set forth in Paragraph 6(b). Notwithstanding anything to the contrary contained herein, the Holders' rights of conversion pursuant to Paragraph 5 hereof shall not be limited in any manner by the Company's rights of redemption pursuant to this Paragraph 6. (e) Mechanics of Redemption-Holder Right to Redeem. In the case of redemption pursuant to Section 6(b), as promptly as practicable following the date the Company publicly announces the Fundamental Change transaction, but in no event less than 10 business days prior to the anticipated effective date of a Fundamental Change in the case of a Fundamental Change within the control of the Company or of which the Company has at least 10 business days prior notice, the Company shall mail a written notice of Fundamental Change by first-class mail to the Holder. If the Holder so elects, the Company shall purchase from the Holder the Debenture at the redemption price specified in Section 6(c) on the Fundamental Change Purchase Date. 7. Adjustments to the Conversion Price. (a) Adjustment for Subdivisions, Combinations, etc. If the Company shall subdivide its outstanding Common Stock by split-up, spin-off, or otherwise, or combine its outstanding Common Stock, then the number of shares issuable upon conversion of this Debenture and the Conversion Price in effect as of the date of such subdivision, split-up, spin-off, or combination shall be proportionally adjusted to give effect thereto. (b) Adjustment for Dividends and Distributions. In the event the Company at any time or from time to time after the Final Closing Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in Common Stock (or rights to acquire Common Stock), then and in each such event, provision shall be made so that the Holders of Debentures shall receive upon conversion thereof pursuant to Paragraph 5 hereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of such other securities of the Company to which a Holder on the relevant record or payment date, as applicable, of the number of shares of Common Stock so receivable upon conversion would have been entitled, plus any dividends or other distributions which would have been received with respect to such securities, had such Holder thereafter, during the period from the date of such event to and including the Holder Conversion Date retained such securities, subject to all other adjustments called for during such period under this Paragraph 7 with respect to the rights of the Holders of the Debentures. For purposes of this Paragraph 7(b), the number of shares of Common Stock so receivable upon conversion shall be deemed to be that number which the Holder would have received upon conversion of the entire Outstanding Amount hereof if the Holder Conversion Date had been the day the Company set as the record date for such dividend or distribution. (c) Adjustment for Merger, Reorganization, etc. In the event that at any time or from time to time after the Final Closing Date, the Common Stock issuable upon conversion of the Debentures is changed into the same or a different number of shares of any class or classes of stock, whether in connection with a merger or consolidation, by recapitalization, reclassification, reorganization or otherwise (other than a subdivision, combination of shares or stock dividend provided for elsewhere in this Paragraph 7), then and in each such event each Holder of Debentures shall have the right, for a period of thirty (30) days following receipt of the Company's notice of such adjustment, to convert such Debentures into the kind of securities receivable by a holder of Common Stock upon such merger, recapitalization, reclassification or other change, all subject to further adjustment as provided herein. (d) Certificate as to Adjustments. Upon each occurrence of an adjustment pursuant to this Paragraph 7, the Company at its expense shall furnish to each Holder a certificate setting forth (i) in reasonable detail the facts upon which such adjustment is based, and (ii) the number of shares of Common Stock and the amount of other property or securities that after giving effect thereto would be received by the Holder upon conversion of this Debenture. (e) Minimum Adjustments. No adjustment of the Conversion Price shall be made unless such adjustment would require an increase or decrease of at least $.10 in such price; provided that any adjustments which by reason of this Paragraph 7(f) are not required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment(s) so carried forward, shall require an increase or decrease of at least $.10 in the Conversion Price then in effect hereunder. (f) Board Discretion. Any determination as to whether an adjustment in the Conversion Price in effect hereunder is required pursuant to Paragraph 7, or as to the amount of any such adjustment, if required, shall be binding upon the holders of this Debenture and the Company if made in good faith by the Board of Directors of the Company, absent manifest error. 8. Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares of Common Stock shall be issuable hereunder. The number of shares of Common Stock that are issuable upon any conversion shall be rounded down to the nearest whole share, and the Company shall pay the Holder in cash with respect to any fractional shares. 9. Reservation of Stock Issuable Upon Conversion. Reservation Requirement. The Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, shares of Common Stock for the purpose of enabling the Company to satisfy any obligation to issue shares of its Common Stock upon conversion of the Debentures. 10. Other Covenants of the Company. (a) The Company shall not intentionally take any action, which would be reasonably likely to impair the contractual rights and privileges of the Debentures set forth herein or of the Holders thereof. (b) The Company shall not redeem (other than pursuant to Paragraph 6), retire, purchase or otherwise acquire, directly or indirectly, Debentures held by any Holder unless the Company shall have offered to redeem, retire, purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of Debentures held by each other Holder of Debentures at the time outstanding upon the same terms and conditions and such offer shall remain open for a period of at least thirty (30) business days. (c) The Company shall not, without the consent of a majority in interest of the Holders of any outstanding Debentures, (i) consolidate with or merger with or into any person or (ii) sell, convey, transfer, or otherwise dispose of or lease all or substantially all of its assets in one transaction or a series of related transactions to any person; provided, however, that this Section 10(c) shall not be applicable in the event of a consolidation or merger of a wholly-owned subsidiary of the Company with and into the Company. 11. Obligations Absolute. No provision of this Debenture, other than conversion as provided herein, shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Debenture at the time, place and rate, and in the manner, herein prescribed. 12. Waivers of Demand, Etc. The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of intent to accelerate, prior notice of bringing of suit and diligence in taking any action to collect amounts called for hereunder and will be directly and primarily liable for the payments of all sums owing and to be owing hereon, regardless of and without any notice (except as required by law), diligence, act or omission as or with respect to the collection of any amount called for hereunder. 13. Replacement Debentures. In the event that the Holder notifies the Company that its Debenture has been lost, stolen or destroyed, a replacement Debenture identical in all respects to the original Debenture (except for registration number and Outstanding Amount, if different than that shown on the original Debenture) shall be issued to the Holder, provided that the Holder executes and delivers to the Company an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with the Debenture and provided that the Company is provided a form of Debenture for such replacement purposes. 14. Defaults. If one or more of the following described "Events of Default" shall occur: (a) Any of the representations or warranties made by the Company in this Debenture, the Subscription Agreement or the Investor Rights Agreement, or in any certificate or financial statements of the Company furnished by or on behalf of the Company in connection with the execution and delivery of this Debenture, the Subscription Agreement or the Investor Rights Agreement shall be false or (when taken together with other information furnished by or on behalf of the Company) misleading at the time made; or (b) The Company shall fail to perform or observe any covenant or agreement in this Debenture, the Subscription Agreement or the Investor Rights Agreement, or any other covenant, term, provision, condition, agreement or obligation of the Company under this Debenture, and such failure shall continue uncured for a period of fifteen (15) business days after notice from the Holder of such failure; or (c) The Company shall fail to make payments of principal or interest when due, including upon a Fundamental Change Purchase Date, and any such failure shall continue uncured for a period of five (5) days after the due date; or (d) The Company shall (1) admit in writing its inability to pay its debts generally as they mature; (2) make a general assignment for the benefit of creditors or commence proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee, liquidator or receiver for it or for a substantial part of its property or business; or (e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or (f) Any governmental agency or any court of competent jurisdiction shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company or any of its subsidiaries and shall not be dismissed within sixty (60) days thereafter; or (g) Bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings, or relief under any bankruptcy law or any law for the relief of debt, shall be instituted by or against the Company and, if instituted against the Company or any of its subsidiaries, shall not be dismissed within sixty (60) days after such institution, or the Company or any of its subsidiaries shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit to any material allegations of, or default in answering a petition filed in, any such proceeding; or (h) the failure by the Company or any of its subsidiaries to make any payment by the end of any applicable grace period after maturity of any principal and/or accrued interest with respect to debt, where the amount of such unpaid and due principal and/or accrued interest is in an aggregate amount in excess of $325,000 or (ii) there is an acceleration of any principal and/or accrued interest is in an amount in excess of $325,000 because of a default with respect to such debt; or (i) the failure by the Company to provide the notice specified in Section 6(e) on a timely basis; or (j) the failure by the Company to deliver all cash and any shares of Common Stock when such cash and Common Stock, if any, are required to be delivered upon conversion of the Debenture, and the Company does not remedy such default within ten (10) days; then, or at any time thereafter prior to the date on which all continuing Events of Default have been cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default), at the option of the Holder and in the Holder's sole discretion, the Holder may, by notice to the Company declare this Debenture immediately due and payable, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. In such event, the Debenture shall be redeemed at a redemption price per Debenture equal to the Redemption Price provided in Paragraph 6(c). 15. Savings Clause. In case any provision of this Debenture is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Debenture will not in any way be affected or impaired thereby. 16. Entire Agreement. This Debenture and the agreements referred to in this Debenture constitute the full and entire understanding and agreement between the Company and the Holder with respect to the subject hereof. Neither this Debenture nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and a majority of the Outstanding Principal Amount of the Debentures. 17. Assignment, Etc. Subject to any applicable law and the requirements set forth in the legend set forth hereon, any Holder may, without notice, transfer or assign this Debenture. The Company agrees that, subject to compliance with the applicable law, after receipt by the Company of written notice of assignment from the Holder or from the Holder's assignee, all principal, interest, and other amounts which are then due and thereafter become due under this Debenture shall be paid to such assignee at the place of payment designated in such notice. This Debenture shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and assigns. 18. No Waiver. No failure on the part of the Holder to exercise, and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time. 19. Miscellaneous. Unless otherwise provided herein, any notice or other communication to a party hereunder shall be deemed to have been duly given if personally delivered or sent by registered or certified mail, return receipt requested, postage prepaid with a copy in each case sent on the same day to the party by facsimile, Federal Express or other overnight delivery service to said party at its address set forth herein or such other address as either may designate for itself in such notice to the other and communications shall be deemed to have been received when delivered personally or, if sent by mail, when actually received by the party to whom it is addressed. Copies of all notices to the Company shall be sent to GlenRose Instruments Inc., 45 First Avenue, Waltham, Massachusetts 02451, attention: President, and to William O. Flannery, Esq., Corporate Counsel, 945 Lenox Road, Richmond, Massachusetts, 01254, Facsimile No. (413) 698-3506. Whenever the sense of this Debenture requires, words in the singular shall be deemed to include the plural and words in the plural shall be deemed to include the singular. Paragraph headings are for convenience only and shall not affect the meaning of this document. 20. Choice of Law and Venue: Waiver of Jury Trial. THIS DEBENTURE SHALL BE CONSTRUED UNDER THE LAWS OF THE COMMONMWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW THEREOF. Each of the Company and the Holder hereby (i) irrevocably submits to the exclusive jurisdiction of the federal or state courts located in the Commonwealth of Massachusetts for the purposes of any suit, action or proceeding arising out of or relating to this Debenture and (ii) waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company or to the Holder, as the case may be, at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this paragraph shall affect or limit any right to serve process in any other manner permitted by law. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized. Dated: July 25, 2008 GlenRose Instruments Inc. /s/ Anthony S. Loumidis Name: Anthony S. Loumidis Title: Chief Financial Officer EXHIBIT 1 CONVERSION NOTICE FOR 4% CONVERTIBLE DEBENTURE DUE 2013 The undersigned, as Holder of the 4% Convertible Debenture due 2013 of GlenRose Instruments Inc. ("Company"), No. 1, in the Outstanding Principal Amount of U.S. $12,000,000 (the "Debenture"), hereby irrevocably elects to convert U.S. $__________ of the Outstanding Principal Amount of the Debenture and U.S.$__________ of interest accrued but unpaid under the Debenture, into shares of Common Stock, par value $0.01 per share (the "Common Stock"), of Company according to the conditions of the Debenture, as of the date written below. The undersigned hereby requests that share certificates for the Common Stock to be issued to the undersigned pursuant to this Conversion Notice be issued in the name of, and delivered to, the undersigned or its designee as indicated below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. Conversion Information: Name of Holder: _____________________ Signature: ___________________________________________ Name: ______________________________________________ Address: ____________________________________________ ____________________________________________________ ____________________________________________________ Issue Common Stock to: ________________________________ Address: ____________________________________________ ____________________________________________________ ____________________________________________________ Date of Conversion: ___________________________________ EX-4 5 exhibitd.txt EXHIBIT D EXHIBIT D GlenRose Instruments Inc. 4% Convertible Debenture Due 2013 Investor Rights Agreement To the purchaser of a Debenture (as such term is defined below) of GlenRose Instruments Inc., a Delaware corporation (the "Company"), identified on the signature page of this Agreement. Dear Sir or Madam: This will confirm that in consideration of your purchase of the Debenture, the Company covenants and agrees with you as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "2008 Private Placement" shall mean the private placement of the Debentures conducted by the Company commencing July 25, 2008. "Commission" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "Common Stock" shall mean the Common Stock, $0.01 par value per share, of the Company, as constituted as of the date of this Agreement. "Conversion Shares" shall mean shares of Common Stock issued upon conversion of the Debentures. "Debentures" shall mean the 4% Convertible Debentures Due 2013 of the Company issued pursuant to the Subscription Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Holder" shall mean each purchaser of a Debenture pursuant to the Subscription Agreement and each transferee of such securities or any Registrable Securities to whom any such securities or Registrable Securities are transferred in compliance with Section 2 of this Agreement. "Outstanding Options" shall have the meaning set forth in Section 10. "Registration Expenses" shall mean the expenses so described in Section 6. "Registrable Securities" shall mean the Conversion Shares or any shares issued upon any stock split, stock dividend, recapitalization or similar event with respect to such Conversion Shares, excluding Conversion Shares which have been (a) registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them, or (b) publicly sold pursuant to Rule 144 under the Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean the expenses so described in Section 6. "Subscription Agreement" shall mean the Subscription Agreement dated as of July 25, 2008 with respect to your purchase of the Debentures 2. Restrictions on Transfer. (a) The Holder agrees not to make any disposition of all or any portion of the Registrable Securities unless and until: (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) (A) the transferee has agreed in writing to be bound by the terms of this Agreement, (B) the Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. (b) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, (D) a Holder transferring to its affiliates provided such transfer is first approved by the Company and such approval not to be unreasonable withheld or delayed, or (E) an individual transferring to the Holder's family member or trust for the benefit of an individual Holder; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder. (c) Each certificate representing Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws): "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SALES UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE PROVISIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT DATED JULY 25, 2008 AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THAT AGREEMENT." (d) The Company shall be obligated to reissue promptly unlegended certificates at the request of the Holder if the Company has completed its Qualified Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend. (e) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal. 3. Required Registration. The Company shall use all reasonable efforts to file within one hundred twenty (120) days following the earlier of: (i) the date that shares of the Common Stock are first quoted on the OTC Bulletin Board, (ii) the Company's shares of Common Stock are first listed on a U.S. national securities exchange or (iii) the written request of the Holders who beneficially own $6,000,000 principal amount of the Debentures or 857,143 shares of Common Stock, a registration statement covering the sale of the Registrable Securities, and shall take all action necessary to qualify the Registrable Securities under state "blue sky" laws as hereinafter provided. The Company shall be entitled to include in any registration statement referred to in this Section 3 shares of Common Stock to be sold by the Company for its own account. 4. Registration Procedures. Whenever the Company is required by the provisions of Section 3 to use reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act, the Company will, as soon as reasonably possible: (a) prepare and file with the Commission a registration statement on "shelf" registration statement on Form S-1 or such other form of general applicability satisfactory to Company providing for the registration and sale on a continuous or delayed basis with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided); (b) 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 until the earliest to occur of (i) the date that all of the securities registered thereunder have been sold pursuant thereto or (ii) until, by reason of Rule 144(k) under the Securities Act or any other rule of similar effect, the securities registered thereunder are no longer required to be registered for the sale thereof by the Holder without restriction. (c) furnish to each seller of Registrable Securities and to each underwriter, if any, such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such registration statement; (d) use its best efforts to register or qualify the Registrable Securities covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of the Shares and the Registrable Securities or, in the case of an underwritten public offering, the managing underwriter reasonably shall request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) use its best efforts to cause the Registrable Securities to be quoted on the OTC Bulleting Board or to list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; and (f) make available for inspection by each seller of Registrable Securities, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. (g) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities from and after a date not later than the effective date of such Registration Statement. (h) cooperate with Holders including Registrable Securities in such registration and the managing underwriters, if any, to facilitate the timely preparation and delivery of amending or supplementing any prospectus supplement and any certificates representing Registrable Securities to be sold. (i) in the case of an underwritten offering, cause any one of the senior executive officers of the Company to participate in the customary "road show" presentations that may be reasonably requested by the underwriters and otherwise to facilitate, cooperate with and participate in each proposed offering contemplated herein and customary selling efforts related thereto. (j) in connection with each registration hereunder, each seller of Registrable Securities will furnish to the Company in writing such information with respect to such seller and the proposed distribution by such seller as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws. (k) in connection with each registration pursuant to Section 3 covering an underwritten public offering, the Company and the Holder agree to enter into a written agreement with the managing underwriter selected by the Company containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. 5. Suspension of Use of Registration Statement. The Holder agrees that, upon receipt of any notice from the Company of (A) the happening of any event which makes any statements made in the registration statement or related prospectus filed pursuant to this Investor Rights Agreement, or any document incorporated or deemed to be incorporated therein by reference, untrue in any material respect or which requires the making of any changes in such registration statement or prospectus so that, in the case of such registration statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstance under which they were made, not misleading or (B) that, in the judgment of the Company's Board of Directors, it is advisable to suspend use of the prospectus for a discrete period of time due to pending corporate developments which are or may be material to the Company but have not been disclosed in the registration statement or in relevant public filings with the Commission, or (C) the Commission has issued a stop order suspending the effectiveness of the registration statement, such Holder will forthwith discontinue disposition of such Registrable Securities covered by such registration statement or prospectus until it is advised in writing by the Company that use of the applicable prospectus may be resumed, and has received copies of any additional or supplemented filings that are incorporated or deemed to be incorporated by reference in such prospectus; provided, however, that the Company may not suspend use of the prospectus pursuant to the foregoing clause (B) more than 90 consecutive calendar days or an aggregate of 120 calendar days in any twelve-month period without incurring or accruing the obligation to pay additional interest pursuant to Section 10. The Company shall use all reasonable best efforts to insure that the use of the prospectus may be resumed as soon as practicable. 6. Expenses. All expenses incurred by the Company in complying with Section 3, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and fees and disbursements of one counsel for the sellers of Registrable Securities, but excluding any Selling Expenses, are called "Registration Expenses". All underwriting discounts and selling commissions applicable to the sale of Registrable Securities are called "Selling Expenses". The Company will pay all Registration Expenses in connection with the registration statement under Section 3. All Selling Expenses in connection with each registration statement under Section 3 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree. 7. Indemnification and Contribution. (a) In the event of the registration of any Registrable Securities under the Securities Act pursuant to Section 3, the Company will indemnify and hold harmless the Holder and each other seller of such Shares and Registrable Securities thereunder, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities were registered under the Securities Act pursuant to Section 3, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus. (b) In the event of a registration on behalf of the Holder of any of the Registrable Securities under the Securities Act pursuant to Section 3, the Holder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities was registered under the Securities Act pursuant to Section 3, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Holder will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to the Holder furnished in writing to the Company by the Holder specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Holder hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering, price of the shares sold by the Holder under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the proceeds received by the Holder from the sale of Registrable Securities covered by such registration statement. (c) Promptly after receipt by an indemnified party hereunder of notice of the. commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 6 and shall only relieve it from any liability which it may have to such indemnified party under this Section 6 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) the Holder exercising rights under this Agreement, or any controlling person of the Holder, makes a claim for indemnification pursuant to this Section 6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal to the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any the Holder or any such controlling person in circumstances for which indemnification is provided under this Section 6; then, and in each such case, the Company and the Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Holder is responsible for the portion represented by the percentage that the public offering price, if any, of its Registrable Securities offered by the registration statement bears to the public offering price, if any, of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A) the Holder will not be ruled to contribute any amount in excess of the public offering price, if any, of all such Registrable Securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (e) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect to which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. 8. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, at all times after 90 days after the Qualified Offering or the Qualified Registration shall have become effective, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (b) use reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as the Holder may reasonably request in availing the Holder of any rule or regulation of the Commission allowing the Holder to sell any Registrable Securities without registration. 9. "Lockup" Agreement. The Holder hereby agrees that such Holder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock (or other securities) of the Company held by the Holder for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of the Company's Qualified Offering or Qualified Registration. 10. Additional Interest. In the event that a registration statement has not become effective by the deadline specified in Section 3, additional interest will accrue on the Debentures at a rate per annum of 0.25% of the principal amount of the Debentures, payable quarterly in arrears on the 15th day of October, January, April and July of each year. 11. Board Designee and Information. The undersigned Holder shall have the right to nominate one nominee to the Company's board of directors (the "Board Designee"). The initial Board Designee of the Holder shall be John Park. At the meeting of the board of directors of the Company scheduled for July 30, 2008 or within one month thereafter, the Company shall appoint the Board Designee to the board of directors and shall, if necessary, expand the board of directors by one member to create a vacancy for such purpose. In the event that the Board Designee ceases to be a member of the board of directors, so long as the undersigned Holder and its affiliates collectively beneficially own at least $6,000,000 principal amount of the Debentures or 857,143 shares of Common Stock, the undersigned Holder may select another person as a nominee for the Board Designee to fill the vacancy created thereby. All obligations of the Company pursuant to this Section 11 shall terminate at such time as the undersigned and its affiliates collectively beneficially own less than $6,000,000 principal amount of the Debentures or 857,143 shares of Common Stock. In the event that the Company is no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall continue to provide the Holder, annual, quarterly and current reports or other information and documents containing substantially the same information as would have been required to be filed with the Commission had the Company continued to be subject to such reporting requirements. 12. Miscellaneous. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation permitted transferees of any Shares or Registrable Securities), whether so expressed or not. (b) All notices, requests, consents and other communications hereunder shall be in writing and shall be mailed by certified or registered mail, return receipt requested, postage prepaid, or telexed, in the case of non-U.S. residents, addressed as follows: if to the Company or any other party hereto, at the address of such party set forth in the Subscription Agreement; if to the Holder, at the address of the Holder set forth in the Subscription Agreement; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of the Holder) or to the Holder (in the case of the Company) in accordance with the provisions of this paragraph. (c) Notwithstanding the place where this Agreement may be executed by any of the parties hereto, all the terms and provisions hereof shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts, without giving effect to its conflict of law principles. Any dispute which may arise out of or in connection with this Agreement shall be adjudicated before a court located in Boston, Massachusetts and the parties hereby submit to the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts located in Boston, Massachusetts and of the federal courts in Boston, Massachusetts with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the Shares, and each of the undersigned consents to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, in care of the address set forth below or such other address as the undersigned shall furnish in writing to the Company. In the event any such action is brought, whether at law or in equity, then the prevailing party shall be paid its reasonable attorney's fees, expenses and disbursements arising out of such action. Each of the undersigned hereby waives trial by jury in any action or proceeding involving, directly or indirectly, any matter (whether sounding in tort, contract, fraud or otherwise) in any way arising out of or in connection with this Agreement or the Holder's purchase of a Debenture. (d) This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the Holders of at least a majority of the outstanding Registrable Securities, including Blum Strategic Partners IV, L.P. to the extent that Blum Strategic Partners IV, L.P. beneficially owns any Registrable Securities. (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) The obligations of the Company to register the Registrable Securities under this Agreement shall terminate on the date that the Holders or any transferees of such Holders who would require such registration to effect a sale of Registrable Securities no longer beneficially own Registrable Securities. (g) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. Please indicate your acceptance of the foregoing by signing and returning the enclosed counterpart of this letter, whereupon this Agreement shall be a binding agreement between the Company and you. Very truly yours, GlenRose Instruments Inc. /s/ Anthony S. Loumidis Name: Anthony S. Loumidis Title: Chief Financial Officer AGREED TO AND ACCEPTED as of the date first above written. Blum Strategic Partners IV, L.P. By: Blum Strategic GP IV, L.P., its general partner By: Blum Strategic GP IV, L.L.C., its general partner By: /s/ Gregory D. Hitchan Name: Gregory D. Hitchan Title: Managing Member -----END PRIVACY-ENHANCED MESSAGE-----