Exhibit 4.1
COMMON STOCK PURCHASE
AGREEMENT
Dated as of January 5, 2005
by and among
ORTEC INTERNATIONAL, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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COMMON STOCK PURCHASE AGREEMENT...................................................................................1
ARTICLE I
Purchase and Sale of Common Stock and Warrants...........................................................1
Section 1.1 Purchase and Sale of Common Stock and Warrants......................................1
Section 1.2 Purchase Price and Closing..........................................................2
ARTICLE II
Representations and Warranties...........................................................................2
Section 2.1 Representations and Warranties of the Company.......................................2
Section 2.2 Representations and Warranties of the Purchasers...................................13
ARTICLE III
Covenants...............................................................................................15
Section 3.1 Securities Compliance..............................................................15
Section 3.2 Registration and Listing...........................................................15
Section 3.3 Inspection Rights..................................................................16
Section 3.4 Compliance with Laws...............................................................16
Section 3.5 Keeping of Records and Books of Account............................................16
Section 3.6 Reporting Requirements.............................................................16
Section 3.7 Other Agreements...................................................................16
Section 3.8 Use of Proceeds....................................................................16
Section 3.9 Reporting Status...................................................................17
Section 3.10 Disclosure of Transaction..........................................................17
Section 3.11 Disclosure of Material Information.................................................17
Section 3.12 Pledge of Securities...............................................................17
ARTICLE IV
Conditions..............................................................................................18
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and to Sell the
Securities.........................................................................18
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the
Securities.........................................................................18
ARTICLE V
Certificate Legend......................................................................................20
Section 5.1 Legend.............................................................................20
ARTICLE VI
Indemnification.........................................................................................21
Section 6.1 General Indemnity..................................................................21
Section 6.2 Indemnification Procedure..........................................................21
ARTICLE VII
Miscellaneous...........................................................................................22
Section 7.1 Fees and Expenses..................................................................22
TABLE OF CONTENTS
(continued)
Page
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Section 7.2 Specific Performance; Consent to Jurisdiction; Venue...............................23
Section 7.3 Entire Agreement; Amendment........................................................23
Section 7.4 Notices............................................................................23
Section 7.5 Waivers............................................................................24
Section 7.6 Headings...........................................................................24
Section 7.7 Successors and Assigns.............................................................25
Section 7.8 No Third Party Beneficiaries.......................................................25
Section 7.9 Governing Law......................................................................25
Section 7.10 Survival...........................................................................25
Section 7.11 Counterparts.......................................................................25
Section 7.12 Publicity..........................................................................25
Section 7.13 Severability.......................................................................25
Section 7.14 Further Assurances.................................................................25
ACCREDITED INVESTOR CERTIFICATION................................................................................iv
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT this ("Agreement"), dated as of
January 5, 2005 by and between Ortec International, Inc., a Delaware corporation
(the "Company"), and the purchasers listed on Exhibit A hereto (each a
"Purchaser" and collectively, the "Purchasers"), for the purchase and sale of
shares of the Company's common stock, par value $.001 per share (the "Common
Stock") by the Purchasers.
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock and Warrants
Section 1.1 Purchase and Sale of Common Stock and Warrants.
(a) Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase from the Company,
an aggregate of ______________ shares of Common Stock (the "Shares") at a price
per share of $.833 ($100,000 purchases 120,000 common shares) (the "Per Share
Purchase Price") for an aggregate purchase price of up to $7,000,000 (the
"Purchase Price"); provided, however, that the aggregate Purchase Price
hereunder shall be no less than $5,000,000; provided, further, that gross
proceeds of $1,439,161 received by the Company through the issuance of equity
securities pursuant to that certain special warrant offer whereby the Company
issued an aggregate of 1,432,296 shares of Common Stock (which number includes
935,308 shares of Common Stock issuable upon conversion of 233.8274 shares of
the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock") issued in lieu of Common Stock to purchasers who would own in excess of
9.99% of the Common Stock outstanding on the issuance date) and will issue
warrants to purchase an aggregate of 429,689 shares of Common Stock to the
former holders of Series B-1, Series B-2 and Series C warrants as more fully
described in the Form 8-K filed by the Company on December 9, 2004 shall
constitute a portion of the Purchase Price hereunder. The Company and the
Purchasers are executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded by Section
4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
(b) In the event that a Purchaser would own in excess of 9.99% of the
Common Stock outstanding on the Closing Date (as defined below), such Purchaser
shall purchase shares of Series D Preferred Stock set forth opposite its name on
Exhibit A hereto. This Agreement, including, without limitation, the
representations and warranties contained herein, shall apply to the purchase of
the Series D Preferred Stock and, accordingly, any reference in this Agreement
to "Shares" shall also be deemed to include such shares of the Series D
Preferred Stock and any shares of Common Stock issuable upon conversion of such
Series D
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Preferred Stock. The Series D Preferred Stock pays no dividends and shall
convert into Common Stock when such Purchaser's beneficial ownership percentage
falls below 9.99%.
(c) Upon the following terms and conditions, the Purchasers shall be
issued Series E Warrants, in substantially the form attached hereto as Exhibit B
(the "Warrants"), to purchase the number of shares of Common Stock set forth
opposite such Purchaser's name on Exhibit A hereto. The Warrants shall be
exercisable immediately upon issuance, shall have a term of five (5) years and
shall have an exercise price per share equal to the Warrant Price (as defined in
the Warrants). Any shares of Common Stock issuable upon exercise of the Warrants
(and such shares when issued) are herein referred to as the "Warrant Shares".
The Shares, the Warrants and the Warrant Shares are sometimes collectively
referred to herein as the "Securities".
(d) For a period of forty-five (45) days following the Closing Date,
each of the Purchasers shall have the right to purchase additional Shares equal
to twenty-five percent (25%) of such Purchaser's initial investment in the
Shares on the Closing Date on the same terms and conditions as set forth in this
Agreement (the "Additional Investment Right").
Section 1.2 Purchase Price and Closing. Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Purchasers and,
in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers,
severally but not jointly, agree to purchase the number of Shares and Warrants,
in each case, set forth opposite their respective names on Exhibit A. The
closing of the purchase and sale of the Shares and Warrants to be acquired by
the Purchasers from the Company under this Agreement shall take place at the
offices of Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP, The Chrysler Building, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Closing") at 10:00 a.m., New
York time (a) on or before January 7, 2005, provided, that all of the conditions
set forth in Article IV hereof and applicable to the Closing shall have been
fulfilled or waived in accordance herewith, or (b) at such other time and place
or on such date as the Purchasers and the Company may agree upon (the "Closing
Date"). At the Closing, the Company shall deliver or cause to be delivered to
each Purchaser (i) a certificate registered in the name of the Purchaser
representing the number of Shares that such Purchaser is purchasing pursuant to
the terms hereof and (ii) a Warrant to purchase such number of shares of Common
Stock as is set forth opposite the name of such Purchaser on Exhibit A. At the
Closing, each Purchaser shall deliver its Purchase Price by wire transfer to an
account designated by the Company.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, as of the date
hereof and the Closing Date, except as set forth on the Schedule of Exceptions
attached hereto with each numbered Schedule corresponding to the section number
herein:
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(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries or own
securities of any kind in any other entity except as set forth in Section 2.1(g)
hereto. The Company and its subsidiary is qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect. For the
purposes of this Agreement, "Material Adverse Effect" means any effect on the
business, operations, properties, assets, prospects or condition (financial or
otherwise) of the Company that is material and adverse to the Company and its
subsidiary, taken as a whole, and any condition, circumstance or situation that
would prohibit the Company from entering into and performing any of its
obligations hereunder and under the other Transaction Documents (as defined
below).
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and that certain Registration Rights Agreement by and among the Company
and the Purchasers, dated as of the date hereof, substantially in the form of
Exhibit C attached hereto (the "Registration Rights Agreement" and, together
with this Agreement and the Warrants, the "Transaction Documents") and to issue
and sell the Securities in accordance with the terms hereof. The execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company, its Board of Directors or stockholders is
required. When executed and delivered by the Company, each of the Transaction
Documents shall constitute a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company as of
the date of this Agreement consists of 200,000,000 shares of Common Stock, of
which 5,640,991 were issued and outstanding as of December 31, 2004, and
1,000,000 shares of preferred stock, of which 1,445.59367 were issued and
outstanding as of December 31, 2004. All of the outstanding shares of the Common
Stock and any other outstanding security of the Company have been duly and
validly authorized. Except as set forth in this Agreement and as set forth in
the Commission Documents, no shares of Common Stock or any other security of the
Company are entitled to preemptive rights or registration rights and there are
no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth in the Commission
Documents, there are no contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities or as provided in the Commission Documents, the
Company is not a
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party to or bound by any agreement or understanding granting registration or
anti-dilution rights to any person with respect to any of its equity or debt
securities except in connection with the sale or issuance of the Company's
Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock. The Company is not a party to, and it has
no knowledge of, any agreement or understanding restricting the voting or
transfer of any shares of the capital stock of the Company.
(d) Issuance of Securities. The Shares and the Warrants to be issued
at the Closing have been duly authorized by all necessary corporate action and,
when paid for and issued in accordance with the terms hereof and the Warrants,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate of Incorporation (the "Certificate") or
Bylaws (the "Bylaws"), each as amended to date, or its subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or its
subsidiary is a party or by which the Company or its subsidiary's respective
properties or assets are bound, or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or its subsidiary or by which any property or asset of the Company or
its subsidiary are bound or affected, except, in all cases, other than
violations pursuant to clauses (i) or (iii) (with respect to federal and state
securities laws) above, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiary is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations, which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. Neither the Company nor its subsidiary is required under federal, state,
foreign or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under the Transaction Documents or issue and sell the Securities in accordance
with the terms hereof (other than any filings, consents and approvals which may
be required to be made by the Company under applicable state and federal
securities laws, rules or regulations or any registration provisions provided in
the Registration Rights Agreement).
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
"Commission") pursuant to the registration and reporting requirements of the
Exchange Act and the Securities Act (all of the foregoing including filings
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incorporated by reference therein being referred to herein as the "Commission
Documents"). The Commission Documents include the Form 10-Q for the fiscal
quarters ended September 30, 2004, June 30, 2004 and March 31, 2004
(collectively, the "Form 10-Q"), the Form 10-K for the fiscal year ended
December 31, 2003 (the "Form 10-K"), the Company's registration statement on
Form S-2 which became effective September 21, 2004, and the Company's Current
Reports on Form 8-K filed on October 22, 2004, November 3, 2004, November 30,
2004, December 9, 2004 and December 14, 2004, all of which Commission Documents
at the time of their respective filings complied in all material respects with
the requirements of the Exchange Act and of the Securities Act and the rules and
regulations of the Commission promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such documents, and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the Notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiary as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The only subsidiary of the Company is Orcel, LLC,
which was formed under the laws of Delaware. The Company owns all of the
outstanding membership interests of Orcel LLC. All of the outstanding membership
interests of its subsidiary have been duly authorized and validly issued, and
are fully paid and nonassessable. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon its subsidiary for the purchase or acquisition of any membership
interests of its subsidiary or any other securities convertible into,
exchangeable for or evidencing the rights to subscribe for any such membership
interests. Neither the Company nor its subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
membership interests of its subsidiary or any convertible securities, rights,
warrants or options of the type described in the preceding sentence.
(h) No Material Adverse Change. Since September 30, 2004, the Company
has not experienced or suffered any Material Adverse Effect, except for the use
of its cash in the regular course of its development stage activities, without
offsetting income.
(i) No Undisclosed Liabilities. Except as disclosed in the Commission
Documents, since September 30, 2004, neither the Company nor its subsidiary has
incurred any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise)
other than those incurred in the ordinary course of the Company's or its
subsidiary's respective businesses and which, individually or in the aggregate,
are not reasonably likely to have a Material Adverse Effect, except for the
5
Company's use of its cash since September 30, 2004 in the regular course of its
development stage activities, without offsetting income.
(j) No Undisclosed Events or Circumstances. Since September 30, 2004
except as disclosed in the Commission Documents, no event or circumstance has
occurred or exists with respect to the Company or its subsidiary or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. The Company's financial statements and other
information in the Commission Documents set forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company and its
subsidiary, or for which the Company or its subsidiary have commitments, except
for the Company's use of its cash since September 30, 2004 in the regular course
of its development stage activities, without offsetting income.
(l) Title to Assets. Each of the Company and its subsidiary has good
and marketable title to all of its real and personal property reflected in the
Commission Documents, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those, individually or in
the aggregate, do not cause a Material Adverse Effect. All said leases of the
Company and its subsidiary are valid and subsisting and in full force and
effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or its
subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the Company, threatened, against or
involving the Company, its subsidiary or any of their respective properties or
assets, which individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or its subsidiary or any officers or
directors of the Company or its subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(n) Compliance with Law. The business of the Company and its
subsidiary has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or such that,
individually or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The Company and its
subsidiary have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
6
(o) Taxes. Except as set forth in the Commission Documents, the
Company and its subsidiary have accurately prepared and filed all federal, state
and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and its subsidiary for all current taxes and
other charges to which the Company or its subsidiary is subject and which are
not currently due and payable. None of the federal income tax returns of the
Company or its subsidiary have been audited by the Internal Revenue Service. The
Company has no knowledge of any additional assessments, adjustments or
contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or its subsidiary for any
period, nor of any basis for any such assessment, adjustment or contingency.
(p) Certain Fees. Other than pursuant to the placement agency and
financial advisory agreements attached hereto as Schedule 2.1(p), the Company
has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement nor any other documents, schedules, certificates or instruments
furnished to the Purchasers by or on behalf of the Company or its subsidiary in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.
(r) Operation of Business. The Company and its subsidiary own or
possess the rights to all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Environmental Compliance. The Company and its subsidiary have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. "Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature. The
Company has all necessary governmental approvals required under all
Environmental Laws and used in its business or in the business of its
subsidiary, except for such instances as would not individually or in the
aggregate have a Material Adverse Effect. The Company and its subsidiary are
also in compliance with all other
7
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiary that violate or would be reasonably likely to violate any
Environmental Law after the Closing or that would be reasonably likely to give
rise to any Environmental Liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including, without limitation,
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
"Environmental Liabilities" means all liabilities of a person (whether such
liabilities are owed by such person to governmental authorities, third parties
or otherwise) whether currently in existence or arising hereafter which arise
under or relate to any Environmental Law.
(t) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its subsidiary accurately reflect in all material
respects the information relating to the business of the Company and its
subsidiary, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or its subsidiary. The Company and its subsidiary maintain a system of
internal accounting controls sufficient, in the judgment of the Company's board
of directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any
differences.
(u) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), or as disclosed in the Commission Documents, or as
would not be reasonably likely to have a Material Adverse Effect, (i) the
Company and its subsidiary have performed all obligations required to be
performed by them to date under any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, filed or required to be
filed with the Commission (the "Material Agreements") except for past due
amounts owed by the Company to (x) Cambrex Bio Science Walkersville, Inc.
("Cambrex") pursuant to the terms of the Cell Therapy Manufacturing Agreement
between the Company and Cambrex and (y) the Trustees of Columbia University
("Columbia") pursuant to the lease for the Company's offices in New York City,
(ii) neither the Company nor its subsidiary has received any notice of default
under any Material Agreement and, (iii) to the best of the Company's knowledge,
neither the Company nor its subsidiary is in default under any Material
Agreement now in effect except for the past due amounts owed by the Company to
Cambrex and Columbia.
(v) Transactions with Affiliates. Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, its subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other
8
hand, any officer, employee, consultant or director of the Company, or any
member of the immediate family of such officer, employee, consultant, or
director or any corporation or other entity controlled by such officer,
employee, consultant, or director, or a member of the immediate family of such
officer, employee, consultant, or director which, in each case, is required to
be disclosed in the Commission Documents or in the Company's most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
(w) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy any of the Securities or similar securities to,
or solicit offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.
(x) Governmental Approvals. Except for filing of any notice prior or
subsequent to the Closing that may be required under applicable state and/or
federal securities laws (which, if required, will be filed on a timely basis),
no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Securities, or for
the performance by the Company of its obligations under the Transaction
Documents.
(y) Employees. Neither the Company nor its subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Neither the Company nor its subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such subsidiary required
to be disclosed in the Commission Documents that is not so disclosed. Since June
2004 no officer, consultant or key employee of the Company or any subsidiary
whose termination, either individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect, has terminated or, to the knowledge of
the Company, has any present intention of terminating his or her employment or
engagement with the Company or its subsidiary.
(z) Absence of Certain Developments. Except as contemplated by this
Agreement, or as disclosed in the Commission Documents, or pursuant to
outstanding warrants or options of the Company having been exercised, or
outstanding convertible securities having been converted since September 30,
2004, neither the Company nor its subsidiary has:
9
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto except:
(A) 1,432,296 shares of Common Stock (which number includes
935,308 shares of Common Stock issuable upon conversion of
233.8274 shares of the Company's Series D Convertible
Preferred Stock) and Series E Warrants which are to be
issued to purchase an additional 429,689 shares of Common
Stock, all of which Common Stock, Series D Convertible
Preferred Stock and Series E Warrants were or will be issued
to participants in the special warrant offer referred to in
Section 1.1(a) above;
(B) 414,270 shares of Common Stock (which number includes
137,250 shares of Common Stock issuable upon conversion of
34.3128 shares of the Company's Series D Convertible
Preferred Stock) to be issued to holders of $9,206,000 of
the Company's promissory notes for extension of the maturity
dates of such notes; and
(C) 27,500 shares of Common Stock issued in connection with
securing loans for the Company.
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock,
in each case in excess of $50,000 individually or $100,000 in the aggregate;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in each case in excess of $250,000, except in the
ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $250,000, or disclosed any proprietary
confidential information to any person except to customers in the ordinary
course of business or to the Purchasers or their representatives, or in
connection with a sales agency agreement between the Company and Cambrex Bio
Science Walkersville, Inc. (the "Cambrex Sales Agreement");
10
(vii) suffered any material losses or waived any rights of material
value, except in the ordinary course of business, or suffered the loss of any
material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate
in excess of $500,000;
(x) entered into any material transaction, whether or not in the
ordinary course of business, except the Cambrex Sales Agreement;
(xi) made charitable contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take any of
the foregoing actions, except the Cambrex Sales Agreement.
(aa) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(bb) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or its subsidiary
which is or would be materially adverse to the Company and its subsidiary. The
execution and delivery of this Agreement and the issuance and sale of the Shares
and the Warrants will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as
amended, provided that, if any of the Purchasers, or any person or entity that
owns a beneficial interest in any of the Purchasers, is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a "party in interest" (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(cc), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or its subsidiary or by any trade or business, whether
or not incorporated, which, together with the
11
Company or its subsidiary, is under common control, as described in Section
414(b) or (c) of the Code.
(cc) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents. The decision of each Purchaser
to purchase Securities pursuant to this Agreement has been made by such
Purchaser independently of any other purchase and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its subsidiary which
may have made or given by any other Purchaser or by any agent or employee of any
other Purchaser, and no Purchaser or any of its agents or employees shall have
any liability to any Purchaser (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company further
acknowledges that nothing contained herein, or in any Transaction Document, and
no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. For reasons
of administrative convenience only, the Transaction Documents have been prepared
by counsel for one of the Purchasers. Such counsel does not represent all of the
Purchasers but only such Purchaser and the other Purchasers may retain their own
individual counsel with respect to the transactions contemplated hereby. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers. The Company acknowledges that
such procedure with respect to the Transaction Documents in no way creates a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
(dd) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or its subsidiary take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings. The Company does not have any registration
statement pending before the Commission or currently under the Commission's
review.
(ee) Xxxxxxxx-Xxxxx Act. The Company is in compliance with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are effective
and intends to comply with other
12
applicable provisions of the Xxxxxxxx-Xxxxx Act, and the rules and regulations
promulgated thereunder, upon the effectiveness of such provisions.
Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby represents and warrants to the Company with respect solely
to itself and not with respect to any other Purchaser as follows as of the date
hereof and as of the Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by each Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by the Purchaser and the consummation by the Purchaser of
the transactions contemplated thereby and hereby do not and will not (i) violate
any provision of the Purchaser's charter or organizational documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Purchaser is a party or by which the
Purchaser's respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Purchaser or by which any property or asset of
the Purchaser are bound or affected, except, in all cases, other than violations
pursuant to clauses (i) or (iii) (with respect to federal and state securities
laws) above, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, materially and adversely affect the Purchaser's ability to perform
its obligations under the Transaction Documents.
(d) Acquisition for Investment. Each Purchaser is purchasing the
Shares and Warrants solely for its own account for the purpose of investment and
not with a view to or for sale in connection with distribution. Each Purchaser
does not have a present intention to sell any of the Shares or Warrants, nor a
present arrangement (whether or not legally binding) or intention to effect any
distribution of any of the Shares or Warrants to or through any person or
entity; provided, however, that by making the representations herein, such
Purchaser does not
13
agree to hold the Shares or the Warrants for any minimum or other specific term
and reserves the right to dispose of the Shares or the Warrants at any time in
accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it (i) has such knowledge and
experience in financial and business matters such that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company, (ii)
is able to bear the financial risks associated with an investment in the
Securities and (iii) has been given full access to such records of the Company
and its subsidiary and to the officers of the Company and its subsidiary as it
has deemed necessary or appropriate to conduct its due diligence investigation.
(e) Rule 144. Each Purchaser understands that the Securities must be
held indefinitely unless such Shares are registered under the Securities Act or
an exemption from registration is available. Each Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Each Purchaser understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Each Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
(g) No General Solicitation. Each Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications.
(h) Accredited Investor. Each Purchaser is an "accredited investor"
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Each Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk. Each
Purchaser has completed or caused to be completed the Investor Questionnaire
Certification attached hereto as Exhibit D certifying as to its status as an
"accredited investor" and understands that the Company is relying upon the truth
and accuracy of the Purchaser set forth therein to determine the suitability of
such Purchaser to acquire the Securities.
14
(i) Certain Fees. The Purchasers have not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. Except as may be disclosed in any filings
with the Commission by any Purchaser under Section 13 and/or Section 16 of the
Exchange Act, no Purchaser has agreed to act with any other Purchaser for the
purpose of acquiring, holding, voting or disposing of the Securities purchased
hereunder for purposes of Section 13(d) under the Exchange Act, and each
Purchaser is acting independently with respect to its investment in the
Securities.
(k) No Shorting. No Purchaser has engaged in any short sales of the
Common Stock or instructed any third parties to engage in any short sales of the
Common Stock on its behalf prior to the Closing Date. Each Purchaser covenants
and agrees that it will not be in a net short position with respect to the
shares of Common Stock.
(l) Information Provided. Each Purchaser acknowledges that it has
reviewed the Commission Documents and has had a reasonable opportunity to ask
questions of and receive answers from persons acting on behalf of the Company
concerning the transactions to be consummated hereby and if such opportunity was
taken, all such questions have been answered to the full satisfaction of such
Purchaser. Each Purchaser and its advisors, if any, have had the opportunity to
request, receive and consider all information relating to the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and information relating to the offer and sale of the
Securities deemed relevant by them.
ARTICLE III
Covenants
The Company covenants with each Purchaser as follows, which covenants
are for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company shall use its
reasonable best efforts to cause its Common Stock to continue to be registered
under Sections 12(b) or 12(g) of the Exchange Act, to comply in all respects
with its reporting and filing obligations under the Exchange Act, to comply with
all requirements related to any registration statement filed pursuant to this
Agreement, and to not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company shall use its
15
reasonable best efforts to continue the listing or trading of its Common Stock
on the OTC Bulletin Board or any successor market.
Section 3.3 Inspection Rights. The Company shall permit, during normal
business hours and upon reasonable request and reasonable notice, each Purchaser
or any employees, agents or representatives thereof, so long as such Purchaser
shall be obligated hereunder to purchase the Shares or shall beneficially own
any Shares or Warrant Shares, for purposes reasonably related to such
Purchaser's interests as a stockholder to examine and make reasonable copies of
and extracts from the records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company and its subsidiary,
and to discuss the affairs, finances and accounts of the Company and its
subsidiary with any of its officers, consultants, directors, and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and cause
its subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which would be reasonably likely to have a Material
Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiary on a consolidated basis, and in
which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
Section 3.6 Reporting Requirements. If the Commission shall cease
making the Company's periodic reports available via the Internet without charge,
then the Company shall furnish the following to each Purchaser so long as such
Purchaser shall be obligated hereunder to purchase the Securities or shall
beneficially own Shares or Warrant Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon
as available, and in any event within forty-five (45) days after the end of each
of the first three fiscal quarters of the Company;
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within ninety (90) days after the end of each fiscal
year of the Company; and
(c) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or its subsidiary under any
Transaction Document.
Section 3.8 Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company for working capital and general corporate purposes
except in connection
16
with redemptions of the Company's Series C Convertible Preferred Stock held by
certain Purchasers.
Section 3.9 Reporting Status. So long as a Purchaser beneficially owns
any of the Securities, the Company shall timely file all reports required to be
filed with the Commission pursuant to the Exchange Act, and the Company shall
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
Section 3.10 Disclosure of Transaction. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") as soon as practicable after the Closing; provided,
however, that if Closing occurs after 4:00 P.M. Eastern Time on any Trading Day
but in no event later than one hour after the Closing, the Company shall issue
the Press Release no later than 9:00 A.M. Eastern Time on the first Trading Day
following the Closing Date. The Company shall also file with the Commission a
Current Report on Form 8-K (the "Form 8-K") describing the material terms of the
transactions contemplated hereby (and attaching as exhibits thereto this
Agreement, the Registration Rights Agreement and the form of Warrant) as soon as
practicable following the Closing Date but in no event more than two (2) Trading
Days following the Closing Date, which Press Release and Form 8-K shall be
subject to prior review and comment by the Purchasers. "Trading Day" means any
day during which the OTC Bulletin Board (or other principal exchange on which
the Common Stock is traded) shall be open for trading.
Section 3.11 Disclosure of Material Information. The Company covenants
and agrees that neither it nor any other person acting on its behalf has
provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
Section 3.12 Pledge of Securities. The Company acknowledges and agrees
that the Securities may be pledged by a Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Common Stock. The pledge of Common Stock shall not be deemed to be a transfer,
sale or assignment of the Common Stock hereunder, and no Purchaser effecting a
pledge of Common Stock shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order to
effect a sale, transfer or assignment of Common Stock to such pledgee. At the
Purchasers' expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Common Stock may reasonably request in
connection with a pledge of the Common Stock to such pledgee by a Purchaser,
subject to applicable federal securities laws.
17
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Securities. The obligation hereunder of the Company to
close and issue and sell the Securities to the Purchasers at the Closing Date is
subject to the satisfaction or waiver, at or before the Closing of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Shares
shall have been delivered to the Company on the Closing Date.
(e) Delivery of Transaction Documents. The Transaction Documents shall
have been duly executed and delivered by the Purchasers to the Company.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Securities. The obligation hereunder of each
Purchaser (x) to acquire and pay for the Securities is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below, and (y) to exercise the Additional Investment Right and to acquire
and pay for the Shares issuable upon exercise of the Additional Investment Right
is subject to the satisfaction or waiver, at the closing of the exercise of the
Additional Investment Right, of each of the conditions set forth below. These
conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak as
of a particular date, which shall be true and correct in all material respects
as of such date.
18
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or its subsidiary, or any of the officers, directors or affiliates
of the Company or its subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Opinion of Counsel. The Purchasers shall have received an opinion
of counsel to the Company, dated the date of such Closing, substantially in the
form of Exhibit E hereto, with such exceptions and limitations as shall be
reasonably acceptable to counsel to the Purchasers.
(g) Shares and Warrants. At or prior to the Closing, the Company shall
have delivered to the Purchasers certificates representing the Shares (in such
denominations as each Purchaser may request) and the Warrants, in each case,
being acquired by the Purchasers at the Closing.
(h) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(i) Officer's Certificate. On the Closing Date, the Company shall have
delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of the Closing Date, confirming the accuracy of
the Company's representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Company
19
with the conditions precedent set forth in paragraphs (a)-(e) of this Section
4.2 as of the Closing Date (provided that, with respect to the matters in
paragraphs (d) and (e) of this Section 4.2, such confirmation shall be based on
the knowledge of the executive officer after due inquiry).
(j) Registration Rights Agreement. As of the Closing Date, the Company
shall have duly executed and delivered the Registration Rights Agreement in the
form of Exhibit C attached hereto.
(k) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
ARTICLE V
Certificate Legend
Section 5.1 Legend. Each certificate representing the Securities shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or "blue
sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR ORTEC
INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing any of the
Shares and the Warrant Shares, without the legend set forth above if at such
time, prior to making any transfer of any such Shares or Warrant Shares, such
holder thereof shall give written notice to the Company describing the manner
and terms of such transfer and removal as the Company may reasonably request.
Such proposed transfer and removal will not be effected until: (a) either (i)
the Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Shares or Warrant Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and has
become effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or "blue sky" laws of any state is not required in
connection with such proposed disposition, or (ii)
20
compliance with applicable state securities or "blue sky" laws has been effected
or a valid exemption exists with respect thereto. The Company will respond to
any such notice from a holder within five (5) Business Days. In the case of any
proposed transfer under this Section 5.1, the Company will use reasonable
efforts to comply with any such applicable state securities or "blue sky" laws,
but shall in no event be required, (x) to qualify to do business in any state
where it is not then qualified or (y) to take any action that would subject it
to tax or to the general service of process in any state where it is not then
subject. The restrictions on transfer contained in this Section 5.1 shall be in
addition to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Agreement. Whenever a certificate
representing the Shares or Warrant Shares is required to be issued to a
Purchaser without a legend, in lieu of delivering physical certificates
representing the Shares or Warrant Shares, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, the Company shall use its best efforts to cause its
transfer agent to electronically transmit the Shares or Warrant Shares to a
Purchaser by crediting the account of such Purchaser's Prime Broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system (to the extent
not inconsistent with any provisions of this Agreement).
ARTICLE VI
Indemnification
Section 6.1 General Indemnity. The Company agrees to indemnify and
hold harmless each Purchaser (and its respective directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) ("Losses")
incurred by each Purchaser as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. The
Purchasers severally but not jointly agree to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all Losses incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Purchasers herein. The maximum aggregate liability of each Purchaser
pursuant to its indemnification obligations under this Article VI shall not
exceed the portion of the Purchase Price paid by such Purchaser hereunder.
Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between it
and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate
21
counsel for the indemnified parties), to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will not defend any
action, proceeding or claim for indemnification hereunder, or fails, within
thirty (30) days of receipt of any indemnification notice to notify, in writing,
such person of its election to defend, settle or compromise, at its sole cost
and expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VI shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
ARTICLE VII
Miscellaneous
Section 7.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided
that the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of this
Agreement, the Warrants, the Registration Rights Agreement and the transactions
contemplated thereunder, which payment shall be made at Closing, (ii) the filing
and declaration of effectiveness by the Commission of the Registration Statement
(as defined in the Registration Rights Agreement) and (iii) any
22
amendments, modifications or waivers of this Agreement or any of the other
Transaction Documents. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchasers in connection with the enforcement of
this Agreement or any of the other Transaction Documents, including, without
limitation, all reasonable attorneys' fees and expenses.
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Securities, this
Agreement or the Registration Rights Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers holding at least a majority
of all Shares then held by the Purchasers. Any amendment or waiver effected in
accordance with this Section 7.3 shall be binding upon each Purchaser (and their
permitted assigns) and the Company. No consideration shall be offered or paid to
any Purchaser to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration is also
offered to all of the Purchasers to the Transaction Documents.
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be
23
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Ortec International, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Chief Financial Officer
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Feder, Kaszovitz, Issacson, Weber,
Scala & Bass
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement.
with copies to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq. Tel
No.: (000) 000-0000
Fax No.: (000) 000-0000
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto.
Section 7.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
24
Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Subject to Section 5.1 hereof, the Purchasers may assign the Securities and its
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto without the consent of the Company.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers shall survive the execution and delivery hereof and
the Closing until the second anniversary of the Closing Date, except the
agreements and covenants set forth in Articles I, III, V, VI and VII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.
Section 7.12 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the names of the Purchasers
without the consent of the Purchasers, which consent shall not be unreasonably
withheld or delayed, or unless and until such disclosure is required by law,
rule or applicable regulation, and then only to the extent of such requirement.
Section 7.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably
25
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement, the Warrants and the Registration Rights
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
ORTEC INTERNATIONAL, INC.
By:_____________________________________
Name:
Title:
PURCHASER:
By:_____________________________________
Name:
Title:
EXHIBIT A
LIST OF PURCHASERS
Names and Addresses Number of Shares
of Purchasers & Warrants Purchased
------------- --------------------
EXHIBIT B
FORM OF WARRANT
ii
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
iii
EXHIBIT D
INVESTOR QUESTIONNAIRE CERTIFICATION
ORTEC INTERNATIONAL, INC.
ACCREDITED INVESTOR CERTIFICATION
PURCHASE OF THE UNREGISTERED COMMON STOCK AND WARRANTS INVOLVES
SIGNIFICANT RISKS AND IS A SUITABLE INVESTMENT ONLY FOR CERTAIN TYPES OF
POTENTIAL INVESTORS.
The purchase of Unregistered Common Stock and Warrants is suitable only
for investors who have no need for liquidity in their investments and who have
adequate means of providing for their current needs and contingencies even if
the investment in the Unregistered Common Stock and Warrants results in a total
loss. Unregistered Common Stock and Warrants will be sold only to prospective
investors which are "accredited investors" promulgated under the Securities Act.
"Accredited Investors" are those investors which make certain written
representations that evidence the investor comes within one of the following
categories:
(Initial the appropriate category)
____ Any bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934, as amended; any insurance
company as defined in Section 2(13) of the Securities Act; any
investment company registered under the Investment Company Act of 1940,
as amended, or a business development company as defined in Section
2(a)(48) of that act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958, as amended; any plan
established and maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its political subdivisions,
for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, as amended, if the
investment decision is made by a plan fiduciary, as defined in Section
3(21) of such act, which plan fiduciary is either a bank, savings and
loan association, insurance company, or registered investment adviser,
or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
____ Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended;
____ Any natural person whose individual net worth or joint net worth with
that person's spouse, at the time of investment in the Unregistered
Common Stock and Warrants, exceeds $1,000,000;
iv
____ Any natural person who had an individual income in excess of $200,000
in each of the two most recent calendar years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching that same income level in the
current year;
____ Any partnership or trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Unregistered
Common Stock and Warrants, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D
and who has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of an
investment in the units; or
____ Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or
____ Any entity in which all of the equity owners are accredited investors.
As used in this Common Stock Purchase Agreement the term "net worth"
means the excess of total assets over total liabilities. In determining income,
an investor should add to his or her adjusted gross income any amounts
attributable to tax exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for depletion, contributions to
an XXX or Xxxxx retirement plan, alimony payments and without any amount by
which income from long-term capital gains has been reduced in arriving at
adjusted gross income.
The Company may make or cause to be made such further inquiry and
obtain such additional information as it deems appropriate with regard to the
suitability of prospective investors. The Company may reject subscriptions in
whole or in part if, in its discretion, it deems such action to be in the best
interests of the Company.
If any information furnished or representations made by a prospective
investor or others acting on its behalf mislead the Company or the Company as to
the suitability or other circumstances of such investor, of if, because of any
error or misunderstanding as to such circumstances, a copy of the Common Stock
Purchase Agreement is delivered to any such prospective investor, the delivery
of the Common Stock Purchase Agreement to such prospective investor shall not be
deemed to be an offer and the Common Stock Purchase Agreement must be returned
to the Company immediately.
v
Purchaser:
By:__________________________
Name:____________________
Title:____________________
vi
EXHIBIT E
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Shares and the Warrants. The execution, delivery and performance of each of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors is required. Each of the Transaction Documents
have been duly executed and delivered and each of the Transaction Documents
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms. The Shares are not
subject to any preemptive rights under the Certificate of Incorporation or the
Bylaws.
3. The Shares and the Warrants have been duly authorized and, the
Shares when delivered against payment in full as provided in the Purchase
Agreement, will be validly issued, fully paid and nonassessable. The shares of
Common Stock issuable upon exercise of the Warrants have been duly authorized
and reserved for issuance, and when delivered against payment in full as
provided in the Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Shares and the
Warrants do not (a) violate any provision of the Certificate of Incorporation or
Bylaws, (b) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party and
which is known to us, (c) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment known to us to
which the Company is a party or by which the Company is bound or by which any of
its respective properties or assets are bound, or (d) result in a violation of
any Federal, state, local or foreign statute, rule, regulation, order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except, in all cases other than violations
pursuant to clauses (a) and (d) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the
vii
Transaction Documents, or the offer, sale or issuance of the Shares and the
Warrants other than filings as may be required by applicable Federal and state
securities laws and regulations and the Nasdaq rules and regulations.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto. There is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Shares and the Warrants are
exempt from the registration requirements of the Securities Act of 1933, as
amended.
viii
Schedule 2.1(p)
Placement Agent Agreement
Xx. Xxx Xxxxxxxx January 4, 2005
Chief Executive Officer
Ortec International Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
This letter Agreement (the "Agreement") confirms the engagement of Xxxxxxx Hill
Partners ("BHP"), a division of Pali Capital, Inc., by Ortec International (the
"Company") to act as its exclusive placement agent and in connection with the
private placement of common stock and Series D Convertible Preferred Stock and
warrants with an initial closing anticipated to be completed on or around
January 5th 2005 (the, "Financing").
As compensation related to the Financing, the Company shall pay to BHP a cash
fee equal to ten (10%) percent of the gross proceeds received by the Company
with respect to new cash investments made in the Financing. In addition, for a
period of thirty-six (36) months from the Closing, BHP shall receive a cash fee
equal to six (6%) percent of the gross proceeds raised from future cash
exercises of currently outstanding investor common stock purchase warrants and
common stock purchase warrants issued in connection with the Financing.
In addition, BHP or their assigns shall be issued Placement Agent Warrants in an
amount equal to fifteen (15%) percent of the common shares (or common share
equivalents in connection with the Series D) issued in connection with the
Financing. For purposes of calculating the number of Placement Agent Warrants to
be issued, all common shares (inclusive of Series D) issued in connection with
and upon conversion of the currently outstanding promissory notes at their
original face value shall be included. Common shares issuable upon conversion of
the existing Series C shall be excluded from the Placement Agent Warrant
calculation. The Placement Agent Warrants shall be exercisable at $.95 per
share. The shares underlying the Placement Agent Warrants shall have standard
piggyback registration rights, a cashless exercise provision and shall be
non-redeemable.
Upon completion of the Financing, BHP shall act as the Company's exclusive
placement agent in connection with subsequent financing activity during the term
of this Agreement. In connection with subsequent financings with gross proceeds
in excess of $10 million, BHP's cash fee shall be reduced to eight (8%) percent
and the Placement Agent Warrant percentage shall be reduced to ten (10%)
percent.
In connection with a strategic transaction, defined as merger, acquisition,
consolidation, sale or disposition of all or substantially all of the Company's
assets, a licensing or similar transaction (a, "Strategic Transaction"), BHP
shall be paid a fee to be negotiated in good faith between the Company and BHP
based on industry standard fees for such transactions.
The Company shall provide to BHP quarterly reimbursement of all documented
out-of-pocket expenses, which amount shall not exceed $2,000 without the prior
written approval of the Company.
ix
Notice given pursuant to any of the provisions of this Agreement shall be given
in writing and shall be sent by recognized overnight courier or personally
delivered (a) if to the Company, to the Company's office at 0000 Xxxxxxxx, Xxx
Xxxx, XX 00000. Attention: Xxx Xxxxxxxx, Chief Executive Officer; and (b) if to
BHP, to its office at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000. Attention: Xxxxx
Xxxxxxx, Managing Director.
No advice or opinion rendered by BHP, whether formal or informal, may be
disclosed, in whole or in part, or summarized, excerpted from or otherwise
referred to without our prior written consent unless required by law, government
regulations, or legally required in court proceedings. In addition, BHP may not
be otherwise referred to without its prior written consent. Since BHP will be
acting on behalf of the Company in connection with its engagement hereunder, the
Company has entered into a separate letter Agreement, dated the date hereof,
providing for the indemnification by the Company of BHP and certain related
persons and entities.
BHP is a division of Pali Capital Inc., a European American Investment Group
Company. The letter agreement shall remain in full force and effect as to BHP
and the Company in the event that BHP becomes an independent entity. In
connection with this engagement, BHP is acting as an independent contractor with
duties owing solely to the Company. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of law principles thereof. This Agreement may not be amended or
modified except in writing signed by each of the parties hereto.
This letter and the indemnification Agreement contain the entire Agreement of
the parties with respect to the subject matter hereof and supersede and take
precedence over all prior Agreements or understandings, whether oral or written,
between BHP and the Company. The invalidity or unenforceability of any provision
of this letter Agreement shall not affect the validity or enforceability of any
other provisions of this Agreement or the indemnification Agreement, which shall
remain in full force and effect
We are delighted to accept this engagement and look forward to working with you
on this assignment. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
Agreement.
Very truly yours,
Xxxxxxx Xxxx Partners
By:
--------------------------------------
Name:
Title:
Accepted and Agreed to as of the date first written above:
Ortec International, Inc.
By:
----------------------------------------------------
Name: Xxx Xxxxxxxx
Title: Vice Chairman and Chief Executive Officer
x
Advisory Agreement
January 4, 2005
Xx. Xxx Xxxxxxxx
Chief Executive Officer
Ortec International Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
This letter Agreement (the "Agreement") confirms the engagement of Xxxxxxx Hill
Partners ("BHP"), a division of Pali Capital, Inc., by Ortec International, Inc.
(the "Company") to act as its financial advisor.
As compensation related to BHP's advisory services provided during the term of
this agreement, the Company shall pay to BHP, a fee of $250,000 (such cash
payment amount to be deferred until the Company's cash balance exceeds $10
million). For the period that ends ten (10) business day following the filing of
the Company's 2004 10-K, BHP or its assigns may in their sole discretion apply
the full fee amount, or any pro-rata portion thereof, to the purchase of the
securities at the same price and terms issued in the Company's January 2005
common stock and warrant financing.
BHP shall advise at the request of the Company with respect to issues related to
strategic business planning, balance sheet restructuring initiatives and
interacting with potential strategic partners.
Notice given pursuant to any of the provisions of this Agreement shall be given
in writing and shall be sent by recognized overnight courier or personally
delivered (a) if to the Company, to the address listed above Attention: Xxx
Xxxxxxxx; and (b) if to BHP, to its office at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX
00000. Attention: Managing Director.
BHP's advisory agreement hereunder shall expire on September 30th 2005.
BHP is a division of Pali Capital Inc., a European American Investment Group
Company. The letter agreement shall remain in full force and effect as to BHP
and the Company in the event that BHP becomes an independent entity. In
connection with this engagement, BHP is acting as an independent contractor with
duties owing solely to the Company. Each of BHP and the Company agrees that the
other party has no fiduciary duty to it or its stockholders, officers and
directors as a result of the engagement described in this Agreement. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of law principles thereof. This
Agreement may not be amended or modified except in writing signed by each of the
parties hereto.
We are delighted to accept this engagement and look forward to working with you
on this assignment. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
Agreement.
Very truly yours,
Xxxxxxx Hill Partners
By:
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Name:
Title:
xi
Accepted and Agreed to as of the date first written above:
Ortec International, Inc.
By:
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Name:
Title:
xii
