EXHIBIT 10.2
[EXECUTION COPY]
STOCK PURCHASE AGREEMENT
ATS Medical, Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
The undersigned (the "INVESTOR") hereby confirms its agreement with you as
follows:
1. This Stock Purchase Agreement is made as of the date set forth below
between ATS Medical, Inc., a Minnesota corporation (the "COMPANY"), and the
Investor.
2. The Company has authorized the sale and issuance of up to four million
four hundred thousand (4,400,000) shares (the "SHARES") of the common stock of
the Company, $.01 par value per share (the "COMMON STOCK"), to certain investors
in a private placement (the "OFFERING").
3. The Company and the Investor agree that the Investor will purchase from
the Company and the Company will issue and sell to the Investor _______ Shares
at a purchase price of $2.80 per Share, or an aggregate purchase price of
$_____________ (the "PURCHASE PRICE"), subject to the Terms and Conditions for
Purchase of Shares attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein. Unless otherwise requested by the
Investor in Exhibit A, certificates representing the Shares purchased by the
Investor will be registered in the Investor's name and address as set forth
below.
4. The Investor represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or its affiliates, (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any National Association of Securities
Dealers, Inc. ("NASD") member. Exceptions:
________________________________________________________________________________
(If no exceptions, write "none." If left blank, response will be deemed to be
"none.")
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
DATED AS OF: August 6, 2003
_______________________________
[Investor Name]
By:____________________________
Name:
Title:
Address:_______________________
_______________________________
_______________________________
AGREED AND ACCEPTED:
ATS Medical, Inc.
By: ____________________________
Name:
Title:
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[EXECUTION COPY]
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. AGREEMENT TO SELL AND PURCHASE THE SHARES; SUBSCRIPTION DATE.
1.1 PURCHASE AND SALE. At the Closing (as defined in
Section 2), the Company will sell to the Investor, and the Investor will
purchase from the Company, upon the terms and subject to the conditions set
forth herein, and at the Purchase Price, the number of Shares described in
paragraph 3 of the Stock Purchase Agreement attached hereto (collectively with
this Annex I and the other exhibits attached hereto, this "AGREEMENT").
1.2 OTHER INVESTORS. As part of the Offering, the Company
proposes to enter into Stock Purchase Agreements in the same form as this
Agreement with certain other investors (the "OTHER INVESTORS"), and the Company
expects to complete sales of Shares to them. The Investor and the Other
Investors are sometimes collectively referred to herein as the "INVESTORS," and
this Agreement and the Stock Purchase Agreements executed by the Other Investors
are sometimes collectively referred to herein as the "AGREEMENTS." The Company
may accept executed Agreements from Investors for the purchase of Shares
commencing upon the date on which the Company provides the Investors with the
proposed purchase price per Share and concluding upon the date (the
"SUBSCRIPTION DATE") on which the Company has notified U.S. Bancorp Xxxxx
Xxxxxxx Inc. (in its capacity as placement agent for the Shares, the "PLACEMENT
AGENT") in writing that it will no longer accept Agreements for the purchase of
Shares in the Offering, but in no event shall the Subscription Date be later
than August 8, 2003. Each Investor must complete a Stock Purchase Agreement, a
Stock Certificate Questionnaire (in the form attached as Exhibit A hereto) and
an Investor Questionnaire (in the form attached as Exhibit B hereto) in order to
purchase Shares in the Offering.
1.3 PLACEMENT AGENT FEE. The Investor acknowledges that
the Company intends to pay to the Placement Agent a fee in respect of the sale
of Shares to the Investor.
2. DELIVERY OF THE SHARES AT CLOSING. The completion of the
purchase and sale of the Shares (the "CLOSING") shall occur on a date specified
by the Company and the Placement Agent (the "CLOSING DATE"), which date shall
not be later than August 12, 2003 (the "OUTSIDE DATE"), and of which the
Investors will be notified in advance by the Placement Agent. At the Closing,
the Company shall deliver to the Investor one or more stock certificates
representing the number of Shares set forth in paragraph 3 of the Stock Purchase
Agreement, each such certificate to be registered in the name of the Investor
or, if so indicated on the Stock Certificate Questionnaire attached hereto as
Exhibit A, in the name of a nominee designated by the Investor. In exchange for
the delivery of the stock certificates representing such Shares, the Investor
shall deliver the Purchase Price to the Company by wire transfer of immediately
available funds pursuant to the Company's written instructions. On the Closing
Date, the Company shall cause counsel to the Company to deliver to the Investors
a legal opinion, dated the Closing Date, substantially in the form attached
hereto as Exhibit D (the "LEGAL OPINION").
The Company's obligation to issue and sell the Shares to the Investor
shall be subject to the following conditions, any one or more of which may be
waived by the Company: (a) prior receipt by the Company of an executed copy of
this Agreement; (b) completion of purchases and sales of Shares under the
Agreements with the Other Investors; (c) the accuracy of the representations and
warranties made by the Investor in this Agreement and the fulfillment of the
obligations of the Investor to be fulfilled by it
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under this Agreement on or prior to the Closing; and (d) the absence of any
order, writ, injunction, judgment or decree that questions the validity of the
Agreements or the right of the Company or the Investor to enter into such
Agreements or to consummate the transactions contemplated hereby and thereby.
The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) the completion of purchases and sales under the Agreements with
the Other Investors for an aggregate purchase price of not less than ten million
dollars ($10,000,000); (b) the delivery of the Legal Opinion to the Investor by
counsel to the Company; (c) the accuracy of the representations and warranties
made by the Company in this Agreement on the date hereof and, if different, on
the Closing Date; (d) the fulfillment of the obligations of the Company to be
fulfilled by it under this Agreement on or prior to the Closing; (e) the absence
of any order, writ, injunction, judgment or decree that questions the validity
of the Agreements or the right of the Company or the Investor to enter into such
Agreements or to consummate the transactions contemplated hereby and thereby;
and (f) the delivery to the Investor by the Secretary or Assistant Secretary of
the Company of a certificate stating that the conditions specified in this
paragraph have been fulfilled. In the event that the Closing does not occur on
or before the Outside Date as a result of the Company's failure to satisfy any
of the conditions set forth above (and such condition has not been waived by the
Investor), the Company shall return any and all funds paid hereunder to the
Investor no later than one Business Day following the Outside Date and the
Investors shall have no further obligations hereunder. For purposes of this
Agreement, "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which the New York Stock Exchange or commercial banks located in
Minneapolis, Minnesota are permitted or required by law to close.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as otherwise described in the Company's Annual Report on Form 10-K for
the year ended December 31, 2002 (and any amendments thereto filed at least two
Business Days prior to the date hereof), the Company's Proxy Statement for its
2003 Annual Meeting of Shareholders, or the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2003 (and any amendments thereto filed at
least two Business Days prior to the date hereof) or any of the Company's
Current Reports on Form 8-K filed since January 1, 2003 and at least two
Business Days prior to the date hereof (collectively, the "SEC REPORTS"), the
Company hereby represents and warrants to, and covenants with, the Investor as
of the date hereof and the Closing Date, as follows:
3.1 ORGANIZATION. The Company is duly incorporated and
validly existing in good standing under the laws of the State of Minnesota. The
Company has full power and authority to own, operate and occupy its properties
and to conduct its business as presently conducted and is registered or
qualified to do business and in good standing in each jurisdiction in which it
owns or leases property or transacts business and where the failure to be so
qualified would have a material adverse effect upon the Company and its
subsidiaries as a whole or the business, financial condition, properties,
operations or assets of the Company and its subsidiaries as a whole or the
Company's ability to perform its obligations under the Agreements in all
material respects ("MATERIAL ADVERSE EFFECT"), and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or qualification. The
Company has no "subsidiaries" (as defined in Rule 405 under the Securities Act
of 1933, as amended (the "SECURITIES ACT")), other than ATS Medical Sales, Inc.,
a Minnesota corporation, and ATS Medical France, SARL, a French corporation
(each, a "SUBSIDIARY" and, together, the "SUBSIDIARIES").
3.2 DUE AUTHORIZATION. The Company has all requisite
power and authority to execute, deliver and perform its obligations under the
Agreements. The execution and delivery of the Agreements, and the consummation
by the Company of the transactions contemplated hereby, have been
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duly authorized by all necessary corporate action and no further action on the
part of the Company or its Board of Directors or stockholders is required. The
Agreements have been validly executed and delivered by the Company and
constitute legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, except to the extent (i)
rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, (ii) such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 NON-CONTRAVENTION. The execution and delivery of the
Agreements, the issuance and sale of the Shares to be sold by the Company under
the Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not (A) result in a
conflict with or constitute a violation of, or default (with the passage of time
or otherwise) under, (i) any bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or the
Subsidiaries or their respective properties are bound, (ii) the Articles of
Incorporation, by-laws or other organizational documents of the Company, as
amended, or (iii) any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority binding upon the
Company or any Subsidiary or their respective properties or (B) result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or the Subsidiaries or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which it is bound or to which any of the property or
assets of the Company is subject. No consent, approval, authorization or other
order of, or registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body is required for the execution
and delivery of the Agreements by the Company and the valid issuance or sale of
the Shares by the Company pursuant to the Agreements, other than such as have
been made or obtained, and except for any filings required to be made under
federal or state securities laws.
3.4 CAPITALIZATION. The outstanding capital stock of the
Company as of March 31, 2003 is as described in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2003. The Company has not issued
any capital stock since March 31, 2003 other than pursuant to the purchase of
shares under the Company's employee stock purchase plan and the exercise of
outstanding warrants or stock options, in each case as disclosed in the SEC
Reports. The Shares to be sold pursuant to the Agreements have been duly
authorized, and when issued and paid for in accordance with the terms of the
Agreements, will be duly and validly issued, fully paid and nonassessable,
subject to no lien, claim or encumbrance (except for any such lien, claim or
encumbrance created, directly or indirectly, by the Investor). The outstanding
shares of capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, have been issued in compliance with the
registration requirements of federal and state securities laws, and were not
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase securities. The Company owns all of the outstanding capital stock of
each Subsidiary, free and clear of all liens, claims and encumbrances. There are
no outstanding rights (including, without limitation, preemptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, any unissued shares of capital stock or other equity interest in the
Company or any Subsidiary, or any contract, commitment, agreement, understanding
or arrangement of any kind to which the Company or any Subsidiary is a party and
providing for the issuance or sale of any capital stock of the Company or of any
Subsidiary, any such convertible or exchangeable securities or any such rights,
warrants or options. Without limiting the foregoing, no preemptive right,
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co-sale right, registration right, right of first refusal or other similar
right exists with respect to the issuance and sale of the Shares, except as
provided in the Agreements. There are no shareholders agreements, voting
agreements or other similar agreements with respect to the Common Stock to
which the Company is a party.
3.5 LEGAL PROCEEDINGS. There is no material legal or
governmental proceeding pending, or to the knowledge of the Company, threatened,
to which the Company or any Subsidiary is a party or of which the business or
property of the Company or any Subsidiary is subject that is required to be
disclosed and that is not so disclosed in the SEC Reports. Neither the Company
nor any Subsidiary is subject to any injunction, judgment, decree or order of
any court, regulatory body, administrative agency or other government body.
3.6 NO VIOLATIONS. Neither the Company nor any Subsidiary
is in violation of its Articles of Incorporation, bylaws or other organizational
documents, as amended, or in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect, and neither
the Company nor any Subsidiary is in default (and there exists no condition
which, with the passage of time or otherwise, would constitute a default) in the
performance of any bond, debenture, note or any other evidence of indebtedness
or any indenture, mortgage, deed of trust or any other material agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or such Subsidiary or their respective properties are bound, which
default is reasonably likely to have a Material Adverse Effect.
3.7 GOVERNMENTAL PERMITS, ETC. Each of the Company and
the Subsidiaries has all necessary franchises, licenses, certificates and other
authorizations from any foreign, federal, state or local government or
governmental agency, department or body that are currently necessary for the
operation of the business of the Company and the Subsidiaries as currently
conducted, except where the failure to currently possess such franchises,
licenses, certificates and other authorizations is not reasonably likely to have
a Material Adverse Effect.
3.8 INTELLECTUAL PROPERTY.
(a) Except for matters which are not reasonably
likely to have a Material Adverse Effect, (i) each of the Company and the
Subsidiaries has ownership of, or a license or other legal right to use, all
patents, copyrights, trade secrets, trademarks, customer lists, designs,
manufacturing or other processes, computer software, systems, data compilation,
research results or other proprietary rights used in the business of the Company
(collectively, "INTELLECTUAL PROPERTY") and (ii) all of the Intellectual
Property owned by the Company or by the Subsidiaries consisting of patents,
registered trademarks and registered copyrights have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights or the corresponding offices of other
jurisdictions and have been maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States
and/or such other jurisdictions.
(b) Except for matters which are not reasonably
likely to have a Material Adverse Effect, all material licenses or other
material agreements under which (i) the Company or any Subsidiary employs rights
in Intellectual Property, or (ii) the Company or any Subsidiary has granted
rights to others in Intellectual Property owned or licensed by the Company or
any Subsidiary are in full force and effect, and there is no default by the
Company with respect thereto.
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(c) The Company believes that it has taken all
steps reasonably required in accordance with sound business practice and
business judgment to establish and preserve the ownership of all material
Intellectual Property owned by the Company or any Subsidiary.
(d) Except for matters which are not reasonably
likely to have a Material Adverse Effect, to the knowledge of the Company, (i)
the present business, activities and products of the Company or any Subsidiary
do not infringe any intellectual property of any other person; (ii) neither the
Company nor any Subsidiary is making unauthorized use of any confidential
information or trade secrets of any person; and (iii) the activities of any of
the employees of the Company or any Subsidiary, acting on behalf of the Company
or such Subsidiary, do not violate any agreements or arrangements related to
confidential information or trade secrets of third parties.
(e) No proceedings are pending, or to the
knowledge of the Company, threatened, which challenge the rights of the Company
or any Subsidiary to the use of Intellectual Property, except for matters which
are not reasonably likely to have a Material Adverse Effect.
3.9 FINANCIAL STATEMENTS. The financial statements of the
Company and the related notes contained in the SEC Reports present fairly and
accurately in all material respects the financial position of the Company as of
the dates therein indicated, and the results of its operations, cash flows and
the changes in shareholders' equity for the periods therein specified, subject,
in the case of unaudited financial statements for interim periods, to normal
year-end audit adjustments. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis at the times and throughout the periods
therein specified, except that unaudited financial statements may not contain
all footnotes required by generally accepted accounting principles.
3.10 NO MATERIAL ADVERSE CHANGE. Except as disclosed in
the SEC Reports or in any press releases issued by the Company at least two (2)
Business Days prior to the date of this Agreement, since March 31, 2003, there
has not been (i) an event, circumstance or change that has had or is reasonably
likely to have a Material Adverse Effect, (ii) any obligation incurred by the
Company or any Subsidiary, direct or contingent, that is material to the
Company, (iii) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company, or (iv) any loss or damage (whether or not
insured) to the physical property of the Company or any Subsidiary which has had
a Material Adverse Effect.
3.11 NASDAQ COMPLIANCE. The Company's Common Stock is
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and is listed on the Nasdaq SmallCap Market (the
"NASDAQ STOCK MARKET"), and the Company has taken no action intended to, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq Stock Market. The issuance of the Shares does not require
shareholder approval, including, without limitation, pursuant to Nasdaq
Marketplace Rule 4350(i).
3.12 REPORTING STATUS. The Company has timely made all
filings required under the Exchange Act during the 12 months preceding the date
of this Agreement, and all of those documents complied in all material respects
with the SEC's requirements as of their respective filing dates, and the
information contained therein as of the respective dates thereof did not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The Company is
currently eligible to register the resale of Common Stock by the Investors
pursuant to a registration statement on Form S-3 under the Securities Act (the
"REGISTRATION STATEMENT").
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3.13 NO MANIPULATION; DISCLOSURE OF INFORMATION. The
Company has not taken and will not take any action designed to or that might
reasonably be expected to cause or result in an unlawful manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares. The
Company has not disclosed any material non-public information to the Investors.
3.14 ACCOUNTANTS. Ernst & Young LLP, who expressed their
opinion with respect to the consolidated financial statements to be incorporated
by reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 into the Registration Statement and the prospectus which forms
a part thereof (the "PROSPECTUS"), have advised the Company that they are, and
to the knowledge of the Company they are, independent accountants as required by
the Securities Act and the rules and regulations promulgated thereunder.
3.15 CONTRACTS. Except for matters which are not
reasonably likely to have a Material Adverse Effect and those contracts that are
substantially or fully performed or expired by their terms, the contracts listed
as exhibits to or described in the SEC Reports that are material to the Company
and all amendments thereto, are in full force and effect on the date hereof, and
neither the Company nor, to the Company's knowledge, any other party to such
contracts is in breach of or default under any of such contracts.
3.16 TAXES. Except for matters which are not reasonably
likely have a Material Adverse Effect, each of the Company and the Subsidiaries
has filed all necessary federal, state and foreign income and franchise tax
returns and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
3.17 TRANSFER TAXES. On the Closing Date, all stock
transfer or other taxes (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Shares hereunder will be, or
will have been, fully paid or provided for by the Company and the Company will
have complied with all laws imposing such taxes.
3.18 INVESTMENT COMPANY. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended, and will not be deemed an "investment company" as a result of
the transactions contemplated by this Agreement.
3.19 INSURANCE. Each of the Company and the Subsidiaries
maintains insurance of the types and in the amounts that the Company reasonably
believes is adequate for its businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company or
any Subsidiary against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against by similarly situated companies, all of
which insurance is in full force and effect.
3.20 OFFERING PROHIBITIONS. Neither the Company nor any
person acting on its behalf or at its direction has in the past or will in the
future take any action to sell, offer for sale or solicit offers to buy any
securities of the Company which would bring the offer or sale of the Shares as
contemplated by this Agreement within the provisions of Section 5 of the
Securities Act.
3.21 LISTING. The Company shall comply with all
requirements of the NASD with respect to the issuance of the Shares and the
listing thereof on the Nasdaq Stock Market.
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3.22 RELATED PARTY TRANSACTIONS. To the knowledge of the
Company, no transaction has occurred between or among the Company or any of its
affiliates, officers or directors or any affiliate or affiliates of any such
officer or director that with the passage of time will be required to be
disclosed pursuant to Section 13, 14 or 15(d) of the Exchange Act.
3.23 BOOKS AND RECORDS. The books, records and accounts of
the Company accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the operations of, the
Company. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances 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 accordance 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 action is taken with respect to any
differences.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
4.1 INVESTOR KNOWLEDGE AND STATUS. The Investor
represents and warrants to, and covenants with, the Company that: (i) the
Investor is an "accredited investor" as defined in Regulation D under the
Securities Act, is knowledgeable, sophisticated and experienced in making, and
is qualified to make decisions with respect to, investments in securities
presenting an investment decision similar to that involved in the purchase of
the Shares, and has requested, received, reviewed and considered all information
it deemed relevant in making an informed decision to purchase the Shares; (ii)
the Investor understands that the Shares are "restricted securities" and have
not been registered under the Securities Act and is acquiring the number of
Shares set forth in paragraph 3 of the Stock Purchase Agreement in the ordinary
course of its business and for its own account for investment only, has no
present intention of distributing any of such Shares and has no arrangement or
understanding with any other persons regarding the distribution of such Shares
(this representation and warranty not limiting the Investor's right to sell
Shares pursuant to the Registration Statement or otherwise, or other than with
respect to any claim arising out of a breach of this representation and
warranty, the Investor's right to indemnification under Section 6.3); (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions
in paragraph 4 of the Stock Purchase Agreement and the Investor Questionnaire
attached hereto as Exhibit B for use in preparation of the Registration
Statement and the answers thereto are true and correct as of the date hereof and
will be true and correct as of the Closing Date; (v) the Investor will notify
the Company promptly of any change in any of such information until such time as
the Investor has sold all of its Shares or until the Company is no longer
required to keep the Registration Statement effective; and (vi) the Investor
has, in connection with its decision to purchase the number of Shares set forth
in paragraph 3 of the Stock Purchase Agreement, relied only upon the
representations and warranties of the Company contained herein and the
information contained in the SEC Reports. The Investor understands that the
issuance of the Shares to the Investor has not been registered under the
Securities Act, or registered or qualified under any state securities law, in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the representations made by the Investor in this Agreement.
No person (including without limitation the Placement Agent) is authorized by
the Company to provide any representation that is inconsistent with or in
addition to those contained herein or in the SEC Reports, and the Investor
acknowledges that it has not received or relied on any such representations.
4.2 TRANSFER OF SHARES. The Investor agrees that it will
not make any sale, transfer or other disposition of the Shares (a "DISPOSITION")
other than Dispositions that are made pursuant to the
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Registration Statement or that are exempt from registration under the Securities
Act and, if made pursuant to the Registration Statement, without complying with
any applicable prospectus delivery requirements.
4.3 POWER AND AUTHORITY. The Investor represents and
warrants to the Company that (i) the Investor has full right, power, authority
and capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this Agreement
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.
4.4 SHORT POSITION. The Investor has not, prior to the
Closing Date, established any hedge or other position in the Common Stock that
is outstanding on the Closing Date and that is designed to or could reasonably
be expected to lead to or result in a Disposition by the Investor or any other
person or entity. For purposes hereof, a "hedge or other position" would
include, without limitation, effecting any short sale or having in effect any
short position (whether or not such sale or position is against the box and
regardless of when such position was entered into) or any purchase, sale or
grant of any right (including, without limitation, any put or call option) with
respect to the Common Stock or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the Common Stock.
4.5 NO INVESTMENT, TAX OR LEGAL ADVICE. The Investor
understands that nothing in the SEC Reports, this Agreement, or any other
materials presented to the Investor in connection with the purchase and sale of
the Shares constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Shares.
4.6 CONFIDENTIAL INFORMATION. The Investor covenants that
from the date hereof it will maintain in confidence all material non-public
information regarding the Company received by the Investor from the Company,
including the receipt and content of any Suspension Notice (as defined in
Section 6.2(c)) until such information (a) becomes generally publicly available
other than through a violation of this provision by the Investor or its agents
or (b) is required to be disclosed in legal proceedings (such as by deposition,
interrogatory, request for documents, subpoena, civil investigation demand,
filing with any governmental authority or similar process); provided, however,
that before making any disclosure in reliance on this Section 4.6, the Investor
will give the Company at least 15 days prior written notice (or such shorter
period as required by law) specifying the circumstances giving rise thereto and
will furnish only that portion of the non-public information which is legally
required and will exercise its commercially reasonable efforts to ensure that
confidential treatment will be accorded any non-public information so furnished.
The parties acknowledge and agree that as of the date hereof and as of the
Closing Date, the Company has not disclosed any material non-public information
to the Investor.
4.7 ACKNOWLEDGMENTS REGARDING PLACEMENT AGENT. The
Investor acknowledges that the Placement Agent has acted solely as placement
agent for the Company in connection with the Offering of the Shares by the
Company, and that the Placement Agent has made no representation or warranty
whatsoever with respect to the accuracy or completeness of information, data or
other related disclosure material that has been provided to the Investor. The
Investor further acknowledges that in making its decision to enter into this
Agreement and purchase the Shares, it has relied on its own examination of the
Company and the terms of, and consequences of holding, the Shares. The Investor
8
further acknowledges that the provisions of this Section 4.7 are for the benefit
of, and may be enforced by, the Placement Agent.
4.8 ADDITIONAL ACKNOWLEDGEMENT. The Investor acknowledges
that it has independently evaluated the merits of the transactions contemplated
by this Agreement, that it has independently determined to enter into the
transactions contemplated hereby, that it is not relying on any advice from or
evaluation by any other Investor, and that it is not acting in concert with any
other Investor in making its purchase of the Shares hereunder. The Investor and,
to its knowledge, the Company acknowledge that the Investors have not taken any
actions that would deem the Investors to be members of a "group" for purposes of
Section 13(d) of the Exchange Act.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Shares being purchased and the
payment therefor, and a party's reliance on such representations and warranties
shall not be affected by any investigation made by such party or any information
developed thereby.
6. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES
ACT.
6.1 REGISTRATION PROCEDURES AND EXPENSES. The Company
shall:
(a) subject to receipt of necessary information
from the Investors, prepare and file with the Securities and Exchange Commission
("SEC"), within fifteen (15) Business Days after the Closing Date (the "REQUIRED
FILING DATE"), a Registration Statement on Form S-3 to enable the resale of the
Shares by the Investors from time to time;
(b) use its best efforts, subject to receipt of
necessary information from the Investors, to cause the Registration Statement to
become effective as soon as practicable, but in no event later than sixty (60)
days after the Registration Statement is filed by the Company. If the
Registration Statement (i) has not been filed by the Required Filing Date or
(ii) has not been declared effective by the SEC on or before the date that is
120 days after the Closing Date (the "REQUIRED EFFECTIVE DATE"), the Company
shall, on the Business Day immediately following the Required Filing Date or the
Required Effective Date, as the case may be, and each 30th day thereafter, make
a payment to the Investor as partial compensation for such delay (the "LATE
REGISTRATION PAYMENTS") equal to 1% of the purchase price paid for the Shares
purchased by the Investor and not previously sold by the Investor until the
Registration Statement is filed or declared effective by the SEC, as the case
may be; provided, however, that in no event shall the payments made pursuant to
this paragraph (b), if any, exceed in the aggregate 5% of such purchase price.
Late Registration Payments will be prorated on a daily basis during each 30 day
period and will be paid to the Investor by wire transfer or check within five
Business Days after the earlier of (i) the end of each 30 day period following
the Required Effective Date or (ii) the effective date of the Registration
Statement;
(c) use its best efforts to prepare and file
with the SEC such amendments and supplements to the Registration Statement and
the Prospectus as may be necessary to keep the Registration Statement current
and effective for a period ending on the earlier of (i) the second anniversary
of the Closing Date, (ii) the date on which the Investor may sell Shares
pursuant to paragraph (k) of Rule 144 under the Securities Act or any successor
rule ("RULE 144") or (iii) such time as all Shares purchased by such Investor in
this Offering have been sold pursuant to a registration statement or Rule 144,
and to notify each Investor promptly upon the Registration Statement and each
post-effective amendment thereto, being declared effective by the SEC;
9
(d) furnish to the Investor such number of
copies of the Registration Statement and the Prospectus (including supplemental
prospectuses) as the Investor may reasonably request, in order to facilitate the
public sale or other disposition of all or any of the Shares by the Investor;
(e) file documents required of the Company for
normal blue sky clearance in states specified in writing by the Investor;
provided, however, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented;
(f) bear all expenses (other than underwriting
discounts and commissions, if any) in connection with the procedures in
paragraph (a) through (e) of this Section 6.1 and the registration of the Shares
pursuant to the Registration Statement;
(g) advise the Investors, promptly after it
shall receive notice or obtain knowledge of the issuance of any stop order by
the SEC delaying or suspending the effectiveness of the Registration Statement
or of the initiation of any proceeding for that purpose; and it will promptly
use its commercially reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued; and
(h) With a view to making available to the
Investor the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit the Investor to sell Shares to the public without
registration, the Company covenants and agrees to use its commercially
reasonable efforts to: (i) make and keep public information available, as those
terms are understood and defined in Rule 144, until the earlier of (A) such date
as all of the Investor's Shares may be resold pursuant to Rule 144(k) or any
other rule of similar effect or (B) such date as all of the Investor's Shares
shall have been resold; (ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and under
the Exchange Act; and (iii) furnish to the Investor upon request, as long as the
Investor owns any Shares, (A) a written statement by the Company that it has
complied with the reporting requirements of the Securities Act and the Exchange
Act, (B) a copy of the Company's most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, and (C) such other information as may be
reasonably requested in order to avail the Investor of any rule or regulation of
the SEC that permits the selling of any such Shares without registration.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6.1 that the Investor shall furnish to
the Company such information regarding itself, the Shares to be sold by
Investor, and the intended method of disposition of such securities as shall be
required to effect the registration of the Shares.
The Company understands that the Investor disclaims being an
underwriter, but acknowledges that a determination by the SEC that the Investor
is deemed an underwriter shall not relieve the Company of any obligations it has
hereunder.
6.2 TRANSFER OF SHARES AFTER REGISTRATION; SUSPENSION.
(a) The Investor agrees that it will not effect
any Disposition of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act other than
transactions exempt from the registration requirements of the Securities Act, as
contemplated in the Registration Statement and as described below, and that it
will promptly notify the Company of any material changes in the information set
forth in the Registration Statement regarding the Investor or its plan of
distribution.
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(b) Except in the event that paragraph (c) below
applies, the Company shall: (i) if deemed necessary by the Company, prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that, as thereafter delivered to purchasers of the Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) provide the Investor copies of any documents
filed pursuant to Section 6.2(b)(i); and (iii) upon request, inform each
Investor who so requests that the Company has complied with its obligations in
Section 6.2(b)(i) (or that, if the Company has filed a post-effective amendment
to the Registration Statement which has not yet been declared effective, the
Company will notify the Investor to that effect, will use its best efforts to
secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify the Investor pursuant to Section 6.2(b)(i)
hereof when the amendment has become effective).
(c) Subject to paragraph (d) below, in the
event: (i) of any request by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or related Prospectus or
for additional information; (ii) of the issuance by the SEC or any other federal
or state governmental authority of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose; (iii) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Shares for sale in any jurisdiction or the initiation of any proceeding for
such purpose; or (iv) of any event or circumstance which necessitates the making
of any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; then the Company shall promptly deliver a certificate
in writing to the Investor (the "SUSPENSION NOTICE") to the effect of the
foregoing and, upon receipt of such Suspension Notice, the Investor will refrain
from selling any Shares pursuant to the Registration Statement (a "SUSPENSION")
until the Investors are advised in writing by the Company that the current
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
reasonable best efforts to cause the use of the Prospectus so suspended to be
resumed as soon as reasonably practicable after delivery of a Suspension Notice
to the Investors. In addition to and without limiting any other remedies
(including, without limitation, at law or at equity) available to the Investor,
the Investor shall be entitled to specific performance in the event that the
Company fails to comply with the provisions of this Section 6.2(c).
(d) Notwithstanding the foregoing paragraphs of
this Section 6.2, the Company shall use its commercially reasonable efforts to
ensure that (i) a Suspension shall not exceed thirty (30) days individually,
(ii) no more than two (2) Suspensions shall occur during any twelve month period
and (iii) each Suspension shall be separated by a period of at least thirty (30)
days from a prior Suspension (each Suspension that satisfies the foregoing
criteria being referred to herein as a "QUALIFYING SUSPENSION"). In the event
that there occurs a Suspension (or part thereof) that does not constitute a
Qualifying Suspension, the Company shall pay to the Investor, on the thirtieth
(30th) day following the first day of such Suspension (or the first day of such
part), and on each thirtieth (30th) day thereafter, an
11
amount equal to 1% of the purchase price paid for the Shares purchased by the
Investor and not previously sold by the Investor (prorated in each such case for
partial thirty day periods); provided, however, that in no event shall the
payments made pursuant to this paragraph (d), if any, exceed in the aggregate 5%
of such purchase price.
(e) If a Suspension is not then in effect, the
Investor may sell Shares under the Registration Statement, provided that it
complies with any applicable prospectus delivery requirements. Upon receipt of a
request therefor, the Company will provide an adequate number of current
Prospectuses to the Investor and to any other parties requiring such
Prospectuses.
(f) In the event of a sale of Shares by the
Investor, unless such requirement is waived by the Company in writing, the
Investor must also deliver to the Company's transfer agent, with a copy to the
Company, a Certificate of Subsequent Sale substantially in the form attached
hereto as Exhibit C, so that the shares may be properly transferred.
(g) The Company agrees that it shall,
immediately prior to the Registration Statement being declared effective,
deliver to its transfer agent an opinion letter of counsel, opining that at any
time the Registration Statement is effective, the transfer agent shall issue, in
connection with the sale of the Shares, certificates representing such Shares
without restrictive legend, provided the Shares are to be sold pursuant to the
prospectus contained in the Registration Statement and the transfer agent
receives a Certificate of Subsequent Sale in the form attached hereto as Exhibit
C. Upon receipt of such opinion, the Company shall cause the transfer agent to
confirm, for the benefit of the Investor, that no further opinion of counsel is
required at the time of transfer in order to issue such Shares without
restrictive legend.
The Company shall cause its transfer agent to issue a
certificate without any restrictive legend to a purchaser of any Shares from the
Investor, if (a) the sale of such Shares is registered under the Registration
Statement (including registration pursuant to Rule 415 under the Securities Act)
and the Investor has delivered a Certificate of Subsequent Sale to the Transfer
Agent; (b) the holder has provided the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Shares may be
made without registration under the Securities Act; or (c) such Shares are sold
in compliance with Rule 144 under the Securities Act. In addition, the Company
shall, at the request of the Investor, remove the restrictive legend from any
Shares held by the Investor following the expiration of the holding period
required by Rule 144(k) under the Securities Act (or any successor rule).
6.3 INDEMNIFICATION. For the purpose of this Section 6.3:
(a) the term "SELLING STOCKHOLDER" shall mean
the Investor and each person, if any, who controls the Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act;
(b) the term "REGISTRATION STATEMENT" shall
include any final Prospectus, exhibit, supplement or amendment included in or
relating to, and any document incorporated by reference in, the Registration
Statement (or deemed to be a part thereof) referred to in Section 6.1; and
(c) the term "UNTRUE STATEMENT" shall mean any
untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
12
(d) (i) The Company agrees to indemnify and
hold harmless each Selling Stockholder from and against any losses, claims,
damages or liabilities to which such Selling Stockholder may become subject
(under the Securities Act or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon (i) any untrue statement of a material fact contained in the
Registration Statement, (ii) any inaccuracy in the representations and
warranties of the Company contained in the Agreement or the failure of the
Company to perform its obligations hereunder or (iii) any failure by the Company
to fulfill any undertaking included in the Registration Statement, and the
Company will reimburse such Selling Stockholder for any reasonable legal expense
or other actual accountable out of pocket expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in such Registration Statement in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Stockholder specifically for use in preparation of the
Registration Statement, or any inaccuracy in representations made by such
Selling Stockholder in the Investor Questionnaire or the failure of such Selling
Stockholder to comply with its covenants and agreements contained in Sections
4.1, 4.2, 4.3, 4.4 or 6.2 hereof or any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the Selling
Stockholder prior to the pertinent sale or sales by the Selling Stockholder.
(ii) The Investor agrees to indemnify
and hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any failure to comply with the covenants and agreements
contained in Section 4.1, 4.2, 4.3, 4.4 or 6.2 hereof, or (ii) any untrue
statement of a material fact contained in the Registration Statement if, and
only if, such untrue statement was made in reliance upon and in conformity with
written information furnished by or on behalf of the Investor specifically for
use in preparation of the Registration Statement, and the Investor will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any reasonable legal expense or other actual accountable
out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim. The obligation to
indemnify shall be limited to the net amount of the proceeds received by the
Investor from the sale of the Shares pursuant to the Registration Statement.
(iii) Promptly after receipt by any
indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 6.3, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, but the omission to so notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party under this Section
6.3 (except to the extent that such omission materially and adversely affects
the indemnifying party's ability to defend such action) or from any liability
otherwise than under this Section 6.3. Subject to the provisions hereinafter
stated, in case any such action shall be brought against an indemnified person,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, shall
be entitled to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof (unless it has
failed to assume the defense thereof and appoint counsel reasonably satisfactory
to the indemnified party), such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
13
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the reasonable opinion of counsel to the indemnified person,
for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified
person shall be entitled to retain its own counsel at the expense of such
indemnifying person; provided, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable in respect of any amounts paid
in settlement of any action unless the indemnifying person shall have approved
the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying person shall, without the prior written
consent of the indemnified person, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified person is or could
reasonably have been a party and indemnification could have been sought
hereunder by such indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability on claims
that are the subject matter of such proceeding.
(iv) If the indemnification provided for
in this Section 6.3 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (d)(i) or (d)(ii) above in respect of any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Investor on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, in the case of an untrue statement, whether the untrue
statement relates to information supplied by the Company on the one hand or the
Investor on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement. The
Company and the Investor agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Investors were treated as one entity for such purpose)
or by any other method of allocation which does not take into account the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
the Investor shall not be required to contribute any amount in excess of the
amount by which the gross amount received by the Investor from the sale of the
Shares to which such loss relates exceeds the amount of any damages which the
Investor has otherwise been required to pay by reason of such untrue statement.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Investors'
obligations in this subsection to contribute are several in proportion to their
sales of Shares to which such loss relates and not joint.
The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 6.3, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 6.3 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Securities
Act and the Exchange Act.
14
6.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. The
conditions precedent imposed by Section 4 or this Section 6 upon the
transferability of the Shares shall cease and terminate as to any particular
number of the Shares when such Shares shall have been effectively registered
under the Securities Act and sold or otherwise disposed of in accordance with
the intended method of disposition set forth in the Registration Statement
covering such Shares or at such time as an opinion of counsel satisfactory to
the Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
6.5 INFORMATION AVAILABLE. So long as the Registration
Statement is effective covering the resale of Shares owned by the Investor, the
Company will furnish (or, to the extent such information is available
electronically through the Company's filings with the SEC, the Company will make
available) to the Investor:
(a) as soon as practicable after it is
available, one copy of (i) its Annual Report to Shareholders (which Annual
Report shall contain financial statements audited in accordance with generally
accepted accounting principles by a national firm of certified public
accountants) and (ii) if not included in substance in the Annual Report to
Shareholders, its Annual Report on Form 10-K (the foregoing, in each case,
excluding exhibits);
(b) upon the reasonable request of the Investor,
all exhibits excluded by the parenthetical to subparagraph (a)(ii) of this
Section 6.5 as filed with the SEC and all other information that is made
available to shareholders; and
(c) upon the reasonable request of the Investor,
an adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses; and the Company, upon the reasonable request of the
Investor, will meet with the Investor or a representative thereof at the
Company's headquarters during the Company's normal business hours to discuss all
information relevant for disclosure in the Registration Statement covering the
Shares and will otherwise reasonably cooperate with the Investor conducting an
investigation for the purpose of reducing or eliminating the Investor's exposure
to liability under the Securities Act, including the reasonable production of
information at the Company's headquarters; provided, that the Company shall not
be required to disclose any confidential information to or meet at its
headquarters with the Investor until and unless the Investor shall have entered
into a confidentiality agreement in form and substance reasonably satisfactory
to the Company with the Company with respect thereto.
6.6 PUBLIC STATEMENTS. The Company agrees to disclose on
a Current Report on Form 8-K the existence of the Offering and the material
terms, thereof, including pricing, within one (1) Business Day after the
Closing. Such Current Report on Form 8-K shall include a form of this Agreement
as an exhibit thereto. The Company will not issue any public statement, press
release or any other public disclosure listing the Investor as one of the
purchasers of the Shares without the Investor's prior written consent, except as
may be required by applicable law or rules of any exchange on which the
Company's securities are listed.
6.7 LIMITS ON ADDITIONAL ISSUANCES. Except for the
issuance of stock options under the Company's stock option plans, the issuance
of common stock under the Company's employee stock purchase plan or upon
exercise of outstanding options and warrants and the offering contemplated
hereby, the Company will not, for a period of six months following the Closing
Date, offer for sale or sell any securities unless, in the opinion of the
Company's counsel, such offer or sale does not jeopardize the availability of
exemptions from the registration and qualification requirements under applicable
securities laws with respect to the Offering. The foregoing shall not apply to
securities issued in connection with any acquisition, including by way of
merger, or purchase of stock or all or substantially all of the assets of
15
any third party. Except for the issuance of stock options under the Company's
stock option plans, the issuance of common stock under the Company's employee
stock purchase plan or upon exercise of outstanding options and warrants, the
issuance of common stock purchase warrants, and the offering contemplated
hereby, the Company has not engaged in any such offering during the six months
prior to the date of this agreement. The foregoing provisions shall not prevent
the Company from filing a "shelf" registration statement pursuant to Rule 415
under the Securities Act, but the foregoing provisions shall apply to any sale
of securities thereunder.
7. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be delivered (A) if within
the United States, by first-class registered or certified airmail, or nationally
recognized overnight express courier, postage prepaid, or by facsimile, or (B)
if from outside the United States, by International Federal Express (or
comparable service) or facsimile, and shall be deemed given (i) if delivered by
first-class registered or certified mail domestic, upon the Business Day
received, (ii) if delivered by nationally recognized overnight carrier, one (1)
Business Day after timely delivery to such carrier, (iii) if delivered by
International Federal Express (or comparable service), two (2) Business Days
after timely delivery to such carrier, (iv) if delivered by facsimile, upon
electric confirmation of receipt and shall be addressed as follows, or to such
other address or addresses as may have been furnished in writing by a party to
another party pursuant to this paragraph:
(a) if to the Company, to:
ATS Medical, Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx, President and CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
Suite 1500, 00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Investor, at its address on the
signature page to the Stock Purchase Agreement.
8. AMENDMENTS; WAIVER. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Company and
the Investor. Any waiver of a provision of this Agreement must be in writing and
executed by the party against whom enforcement of such waiver is sought.
9. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
10. ENTIRE AGREEMENT; SEVERABILITY. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersedes all prior and
16
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. If any provision
contained in this Agreement is determined to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
11. 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 the principles of conflicts of law.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
17
EXHIBIT A
ATS MEDICAL, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4 of the Agreement, please provide us with the
following information:
1. The exact name in which your Shares are ________________________
to be registered (this is the name that
will appear on your stock
certificate(s)). You may use a nominee
name if appropriate:
2. If a nominee name is listed in response ________________________
to item 1 above, the relationship between
the Investor and such nominee:
3. The mailing address of the registered ________________________
holder listed in response to item 1
above:
4. The Social Security Number or Tax ________________________
Identification Number of the registered
holder listed in the response to item 1
above:
1
EXHIBIT B
ATS MEDICAL, INC.
INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
To: ATS Medical, Inc.,
This Investor Questionnaire ("QUESTIONNAIRE") must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $.01 per share (the "SHARES"), of ATS Medical, Inc. (the
"COMPANY"). The Shares are being offered and sold by the Company without
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and the securities laws of certain states, in reliance on the exemptions
contained in Section 4 of the Securities Act and on Regulation D promulgated
thereunder and in reliance on similar exemptions under applicable state laws.
The Company must determine that a potential investor meets certain suitability
requirements before offering or selling Shares to such investor. The purpose of
this Questionnaire is to assure the Company that each investor will meet the
applicable suitability requirements. The information supplied by you will be
used in determining whether you meet such criteria, and reliance upon the
private offering exemption from registration is based in part on the information
herein supplied.
This Questionnaire does not constitute an offer to sell or a
solicitation of an offer to buy any security. Your answers will be kept strictly
confidential. However, by signing this Questionnaire you will be authorizing the
Company to provide a completed copy of this Questionnaire to such parties as the
Company deems appropriate in order to ensure that the offer and sale of the
Shares will not result in a violation of the Securities Act or the securities
laws of any state and that you otherwise satisfy the suitability standards
applicable to purchasers of the Shares. All potential investors must answer all
applicable questions and complete, date and sign this Questionnaire. Please
print or type your responses and attach additional sheets of paper if necessary
to complete your answers to any item.
A. BACKGROUND INFORMATION
Name:___________________________________________________________________________
Business Address:_______________________________________________________________
(Number and Street)
________________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number: ( )______________________________________________________
Residence Address:______________________________________________________________
(Number and Street)
________________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number: ( )______________________________________________________
If an individual:
Age:_____ Citizenship:__________ Where registered to vote:__________
If a corporation, partnership, limited liability company, trust or other entity:
Type of entity:_________________________________________________________________
State of formation:______________ Date of formation:_________________
Social Security or Taxpayer Identification No.__________________________________
Send all correspondence to (check one): ______ Residence Address
______ Business Address
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B. STATUS AS ACCREDITED INVESTOR
The undersigned is an "accredited investor" as such term is defined in
Regulation D under the Securities Act, because at the time of the sale of the
Shares the undersigned falls within one or more of the following categories
(Please initial one or more, as applicable):
_____ (1) a bank as defined in Section 3(a)(2) of the Securities Act, or
a 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; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that act; a 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; a 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 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which 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 the investment decisions made
solely by persons that are accredited investors;(1)
_____ (2) a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
_____ (3) an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares
offered, with total assets in excess of $5,000,000;
_____ (4) a natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of such person's purchase of the
Shares exceeds $1,000,000;
_____ (5) a natural person who had an individual income in excess of
$200,000 in each of the two most recent 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 the same income level in the current year;
_____ (6) a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Shares offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D; and
_____ (7) an entity in which all of the equity owners are accredited
investors (as defined above).
--------------------------
(1) As used in this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
subsection (4), the principal residence of the investor must be valued at cost,
including cost of improvements, or at recently appraised value by a professional
appraiser. In determining income, the investor should add to the investor's
adjusted gross income any amounts attributable to tax exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depreciation, contributions to an XXX or XXXXX retirement plan,
alimony payments, and any amount by which income from long-term capital gains
has been reduced in arriving at adjusted gross income.
B-2
C. REPRESENTATIONS
The undersigned hereby represents and warrants to the Company as follows:
1. Any purchase of the Shares would be solely for the account of
the undersigned and not for the account of any other person or with a view to
any resale, fractionalization, division, or distribution thereof.
2. The information contained herein is complete and accurate and
may be relied upon by the Company, and the undersigned will notify the Company
immediately of any material change in any of such information occurring prior to
the closing, if any, with respect to the purchase of Shares by the undersigned
or any co-purchaser.
3. There are no suits, pending litigation, or claims against the
undersigned that could materially affect the net worth of the undersigned as
reported in this Questionnaire.
4. The undersigned acknowledges that there may occasionally be
times when the Company, based on the advice of its counsel, determines that it
must suspend the use of the Prospectus forming a part of the Registration
Statement (as such terms are defined in the Stock Purchase Agreement to which
this Questionnaire is attached) until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Securities and Exchange Commission or until the Company has amended or
supplemented such Prospectus. The undersigned is aware that, in such event, the
Shares will not be subject to ready liquidation, and that any Shares purchased
by the undersigned would have to be held during such suspension. The overall
commitment of the undersigned to investments which are not readily marketable is
not excessive in view of the undersigned's net worth and financial
circumstances, and any purchase of the Shares will not cause such commitment to
become excessive. The undersigned is able to bear the economic risk of an
investment in the Shares.
5. The undersigned has carefully considered the potential risks
relating to the Company and a purchase of the Shares and fully understands that
the Shares are speculative investments which involve a high degree of risk of
loss of the undersigned's entire investment. Among others, the undersigned has
carefully considered each of the risks described in the Company's Annual Report
on Form 10-K for the year ended December 31, 2002.
6. The following is a list of all states and other jurisdictions
in which blue sky or similar clearance will be required in connection with the
undersigned's purchase of the Shares:
____________________________________
____________________________________
____________________________________
The undersigned agrees to notify the Company in writing of any additional states
or other jurisdictions in which blue sky or similar clearance will be required
in connection with the undersigned's purchase of the Shares.
B-3
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this _______
day of _________, 2003, and declares under oath that it is truthful and correct.
Print Name
By:____________________________________
Signature
Title:_________________________________
(required for any purchaser that
is a corporation, partnership,
trust or other entity)
B-4
EXHIBIT C
ATS MEDICAL, INC.
CERTIFICATE OF SUBSEQUENT SALE
[Transfer Agent]
___________________________
___________________________
RE: Sale of Shares of Common Stock of ATS Medical, Inc. (the
"Company") pursuant to the Company's Prospectus dated
________________, 2003 (the "Prospectus")
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares
of Common Stock of the Company included in the table of Selling Shareholders in
the Prospectus, that the undersigned has sold the Shares pursuant to the
Prospectus and in a manner described under the caption "Plan of Distribution" in
the Prospectus and that such sale complies with all applicable securities laws,
including, without limitation, the Prospectus delivery requirements of the
Securities Act of 1933, as amended.
Selling Stockholder (the beneficial owner):____________________________
Record Holder (e.g., if held in name of nominee):______________________
Restricted Stock Certificate No.(s):___________________________________
Number of Shares Sold:_________________________________________________
Date of Sale:__________________________________________________________
In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you
should place a stop transfer on your records with regard to such certificate.
Dated:_______________ Very truly yours,
By:________________________________
Print Name:________________________
Title:_____________________________
1
EXHIBIT D
FORM OF LEGAL OPINION
August __, 2003
To: The Investors in Common Stock of ATS Medical, Inc.
Ladies and Gentlemen:
We have acted as counsel for ATS Medical, Inc., a Minnesota
corporation (the "Company"), in connection with the issuance of 4,400,000 shares
(the "Shares") of the Company's Common Stock, $.01 par value per share, pursuant
to those certain Stock Purchase Agreements, dated as of August __, 2003,
including the annex and exhibits thereto (collectively, the "Agreement"),
between the Company and the Investors named therein. This opinion is being
delivered to you pursuant to Section 2 of the Agreement. Capitalized terms used
herein are as defined in the Agreement unless otherwise specifically provided
herein.
We have examined such documents and have reviewed such
questions of law as we have considered necessary or appropriate for the purpose
of this opinion.
In rendering our opinion below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements and instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreement or instruments, that such agreements
or instruments have been duly authorized by all requisite action (corporate or
otherwise), executed and delivered by such parties and that such agreements or
instruments are the valid, binding and enforceable obligations of such parties.
As to questions of fact material to our opinion, we have relied, without
independent verification, on the representations and warranties contained in the
Agreement and on certificates of officers of the Company and public officials.
Our opinions expressed below as to certain factual matters are
qualified as being limited "to our knowledge" or by other words to the same or
similar effect. Such words, as used herein, mean the information known to the
attorneys in this firm who have represented the Company in connection with the
matters addressed herein. In rendering such opinions, we have not conducted any
independent investigation or consulted with other attorneys in our firm with
respect to the matters covered by the Agreement. No inference as to our
knowledge with respect to such matters should be drawn from the fact of our
representation of the Company.
Based on the foregoing, we are of the opinion that:
1. The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Minnesota, with the corporate power to
conduct any lawful business activity. The Company has the
corporate power to execute, deliver and perform the Agreement
including, without limitation, the issuance and sale of the
Shares.
1
2. The Agreement has been duly authorized by
all requisite corporate action, executed and delivered by the
Company. The Agreement constitutes the valid and binding
agreement of the Company enforceable in accordance with its
terms.
3. The Shares have been duly authorized and,
upon issuance, delivery and payment therefor as described in
the Agreement, will be validly issued, fully paid and
nonassessable.
4. As of the date hereof, the authorized
capital stock of the Company consists of ___________shares of
undesignated capital stock.
5. The execution, delivery and performance of
the Agreement and the issuance and sale of the Shares in
accordance with the Agreement will not: (a) violate or
conflict with, or result in a breach of or default under, the
Articles of Incorporation or by-laws of the Company, (b)
violate or conflict with, or constitute a default under any
material agreement or instrument (limited, with your consent,
to agreements filed with the Securities and Exchange
Commission under the Exchange Act and applicable rules and
regulations) to which the Company is a party, or (c) violate
any law of the United States or the State of Minnesota, any
rule or regulation of any governmental authority or regulatory
body of the United States or the State of Minnesota, or any
judgment, order or decree known to us and applicable to the
Company of any court, governmental authority or arbitrator.
6. To our knowledge, no consent, approval,
authorization or order of, and no notice to or filing with,
any governmental agency or body or any court is required to be
obtained or made by the Company for the issue and sale of the
Shares pursuant to the Agreement, except such as have been
obtained or made and such as may be required under the federal
securities laws or the Blue Sky laws of the various states.
7. Assuming the representations made by the
Investors and the Company set forth in the Agreement and the
exhibits thereto are true and correct and subject to the
Placement Agent's compliance with applicable securities laws
and regulations (including, without limitation, the
requirements of Regulation D under the Securities Act), the
offer, sale, issuance and delivery of the Shares to the
Investors, in the manner contemplated by the Agreement, is
exempt from the registration requirements of the Securities
Act, it being understood that no opinion is expressed as to
any subsequent resale of such shares.
8. We know of no pending or overtly threatened
lawsuit or claim against the Company which is required to be
described in the reports filed by the Company with the
Securities and Exchange Commission under the Exchange Act and
applicable rules and regulations thereunder that is not so
described as required.
The opinions set forth above are subject to the
following qualifications and exceptions:
(a) Our opinion in paragraph 2 above is subject
to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
application affecting creditors' rights.
(b) Our opinion in paragraph 2 above is subject
to the effect of general principles of equity, including
(without limitation) concepts of materiality,
2
reasonableness, good faith and fair dealing, and other similar
doctrines affecting the enforceability of agreements generally
(regardless of whether considered in a proceeding in equity or
at law).
(c) Our opinion in paragraph 2 above, insofar as
it relates to indemnification provisions, is subject to the
effect of federal and state securities laws and public policy
relating thereto.
(d) We express no opinion as to the compliance
or the effect of noncompliance by the Investors with any state
or federal laws or regulations applicable to the Investors in
connection with the transactions described in the Agreement or
the payment obligations of the Company under Sections 6.1(b)
and 6.2(d) of the Agreement if the payment obligations are
construed as unreasonable in relation to actual damages or
disproportionate to actual damages suffered by the Investor.
Our opinions expressed above are limited to the laws of the
State of Minnesota and the State of New York and the federal laws of the United
States of America.
The foregoing opinions are being furnished to you solely for
your benefit and may not be relied upon by any other person without our prior
written consent. Notwithstanding the foregoing, U.S. Bancorp Xxxxx Xxxxxxx Inc.
may rely on the opinions herein expressed as if this letter were addressed to
it.
Very truly yours,
3
