EXHIBIT 99.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
June 30, 2006 among Tutogen Medical, Inc., a Florida corporation (the
"Company"), and Azimuth Opportunity, Ltd., an international business company
incorporated under the laws of the British Virgin Islands (including its
successors and assigns, the "PURCHASER").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and Rule 506 promulgated thereunder, the Company desires
to issue and sell to the Purchaser, and the Purchaser desires to purchase from
the Company, securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Debenture (as defined herein), and (b) the following
terms have the meanings indicated in this Section 1.1:
"ACTION" shall have the meaning ascribed to such term in
Section 3.1(j).
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act. With respect to the
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as the Purchaser
will be deemed to be an Affiliate of the Purchaser.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"CLOSING DATE" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchaser's obligations to pay the Subscription Amount and (ii) the
Company's obligations to deliver the Securities issuable at the Closing
have been satisfied or waived.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.01 per share, and any other class of securities into which
such securities may hereafter have been reclassified or changed into.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
"CONVERSION PRICE" shall be the price determined in accordance
with Section 4(d) of the Debenture.
"DEBENTURE" means, the 5% Subordinated Convertible Debenture
due, subject to the terms therein, 366 days from their date of
issuance, issued by the Company to the Purchaser hereunder, in the form
of EXHIBIT A.
"DISCLOSURE SCHEDULES" shall have the meaning ascribed to such
term in Section 3.1.
"EFFECTIVE DATE" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCLUDED MATTER" means any one or more of the following: (i)
the effect of any change in the United States or foreign economies or
securities or financial markets in general, except to the extent the
Company is affected thereby to a disproportionately greater extent than
other Persons in the Company's industry; (ii) the effect of any change
that generally affects any industry in which the Company or any of its
Subsidiaries operates, except to the extent the Company is affected
thereby to a disproportionately greater extent than other Persons in
such industry; (iii) the effect of any action taken by Purchaser or its
Affiliates (provided such action was without the participation or
consent of the Company) with respect to the transactions contemplated
hereby or with respect to the Company or its Subsidiaries; (iv) the
effect of any changes in applicable laws or accounting rules to the
extent such changes affect and are made applicable to and imposed upon
all Persons operating in the Company's industry; (v) any effect
resulting from the public announcement of the transactions contemplated
by this Agreement, compliance with the terms of this Agreement or the
consummation of the transactions contemplated by this Agreement; and
(vi) the indirect or consequential effect of any generally applicable
change arising in connection with earthquakes or other natural
disasters, hostilities, acts of war, sabotage or terrorism or military
actions or any escalation or material worsening of any such earthquakes
or other natural disasters, hostilities, acts of war, sabotage or
terrorism or military actions existing or underway as
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of the date hereof, except to the extent the Company is affected
thereby to a disproportionately greater extent than other Persons in
the Company's industry.
"EXEMPT ISSUANCE" means (1) the granting or exercise of
options to employees, officers, consultants and directors of the
Company pursuant to any stock option plan duly adopted by a majority of
the non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, (2) the conversion of the Debenture or
exercise of the Warrant or the conversion or exercise of any other
security issued by the Company in connection with the offer and sale of
the Company's securities pursuant to the Purchase Agreement, (3) the
amendment, exercise, conversion or redemption of any Common Stock
Equivalent or Options issued and outstanding on the Closing Date, (4)
the payment of interest on any Senior Debt (as such term is defined in
the Debenture) in shares of the Company's Common Stock, (5) the
issuance of any shares or Common Stock Equivalent pursuant to the terms
of any convertible securities issued and outstanding on the Closing
Date, (6) the issuance of securities in connection with acquisitions,
leasing arrangements, collaborations, licensing arrangements or
strategic investments, the primary purpose of which is not to raise
capital, or (7) securities issued in connection with any stock split or
stock dividend or pursuant to the Company's shareholder rights plan.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"GT" means Xxxxxxxxx Xxxxxxx, LLP.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the
meanings ascribed to such terms in Section 4.8.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
to such term in Section 3.1(o).
"LEGEND REMOVAL DATE" shall have the meaning ascribed to such
term in Section 4.1(c).
"LIENS" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"MATERIAL ADVERSE EFFECT" means a state of fact, occurrence,
change or effect that has or is reasonably likely to have or result in
a material adverse effect on (i) the legality, validity or
enforceability of any Transaction Document, (ii) the results of
operations, assets, business, prospects or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) the Company's
ability to perform its obligations under any Transaction Document;
provided, however, that, in determining whether there has been a
Material Adverse Effect, any effect resulting from an Excluded Matter
shall be disregarded.
"MATERIAL PERMITS" shall have the meaning ascribed to such
term in Section 3.1(m).
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"MAXIMUM RATE" shall have the meaning ascribed to such term in
Section 5.16.
"PERMITTED LIENS" means (i) statutory liens for taxes,
assessments and other governmental charges which are not yet due and
payable or are due but not delinquent or are being contested in good
faith by appropriate proceedings, (ii) statutory or common law liens to
secure landlords, sublandlords, licensors or sublicensors under leases
or rental agreements, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment
insurance, old age pension or other social security programs mandated
under applicable laws, (iv) statutory or common law liens in favor of
carriers, warehousemen, mechanics, workmen, repairmen and materialmen
to secure claims for labor, materials or supplies and other like liens,
(v) restrictions on transfer of securities imposed by applicable state
and federal securities laws, (vi) any other encumbrance affecting any
asset which does not materially impede or otherwise affect the
ownership or operation of such asset, (vii) liens resulting from a
filing by a lessor as a precautionary filing for a true lease, (viii)
deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds an
other obligations of a like nature incurred in the ordinary course of
business, (ix) vendor's liens to secure payment, or (x) rights or
claims of customers or tenants under licenses or leases.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the date hereof, between the Company and the
Purchaser, in the form of EXHIBIT B attached hereto.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale of the Underlying Shares by the Purchaser as
provided for in the Registration Rights Agreement.
"REQUIRED APPROVALS" shall have the meaning ascribed to such
term in Section 3.1(e).
"REQUIRED MINIMUM" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially
issuable in the future pursuant to the Transaction Documents, including
any Underlying Shares issuable upon exercise or conversion in full of
the Warrant and Debenture.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
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"SECURITIES" means the Debenture, the Warrant and the
Underlying Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SHORT SALES" shall include all "short sales" as defined in
Rule 200 of Regulation SHO under the Exchange Act.
"SUBSCRIPTION AMOUNT" means, $3,000,000, in United States
Dollars and in immediately available funds.
"SUBSIDIARY" means any subsidiary of the Company as set forth
on Schedule 3.1(a).
"TRADING DAY" means a day on which the Common Stock is traded
on a Trading Market.
"TRADING MARKET" means, as applicable, the following markets
or exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the American Stock Exchange, the New York
Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market
or the OTC Bulletin Board.
"TRANSACTION DOCUMENTS" means this Agreement, the Debenture,
the Warrant, the Registration Rights Agreement and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of the Debenture and upon exercise of the Warrant and
issued and issuable in lieu of the cash payment of interest on the
Debenture in accordance with the terms of the Debenture.
"VARIABLE RATE TRANSACTION" shall have the meaning ascribed to
such term in Section 4.10. "VOLUME LIMITATION" shall have the meaning
ascribed to such term in Section 4.11(b).
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board,
the volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the "Pink Sheets"
published by the National
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Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Purchaser and
reasonably acceptable to the Company.
"WARRANT" means the Common Stock purchase warrant in the form
of Exhibit C] to be delivered to the Purchaser at the Closing in
accordance with Section 2.2(a)(iii) hereof.
ARTICLE II
PURCHASE AND SALE
2.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchaser agrees to purchase
$3,000,000 principal amount of the Debenture. On the Closing Date, the Purchaser
shall deliver to the Company via wire transfer of immediately available funds
equal to the Subscription Amount and the Company shall deliver to the Purchaser
the Debenture and Warrant as determined pursuant to Section 2.2(a) and the other
items set forth in Section 2.2 issuable at the Closing. Upon satisfaction of the
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of GT, or such other location as the parties shall mutually agree.
2.2 DELIVERIES.
(a) At or prior to the Closing Date, unless otherwise
indicated below, the Company shall deliver or cause to be delivered to
the Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a Debenture with a principal amount equal to the
Subscription Amount, registered in the name of the Purchaser;
(iii) a Warrant registered in the name of the
Purchaser to purchase up to 175,000 shares of Common Stock,
with an exercise price equal to the Conversion Price, subject
to adjustment therein;
(iv) the Registration Rights Agreement duly executed
by the Company; and
(v) payment of the reasonable and actual fees and
expenses documented by legal counsel to the Purchaser, not to
exceed $50,000, by wire transfer of immediately available
funds to an account designated by GT.
(b) On the Closing Date, the Purchaser shall deliver or cause
to be delivered to the Company the following:
(i) this Agreement duly executed by the Purchaser;
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(ii) the Subscription Amount for the Closing by wire
transfer to the account as specified in writing by the
Company;
(iii) the Registration Rights Agreement duly executed
by the Purchaser.
2.3 CLOSING CONDITIONS.
(a) The obligations of the Company hereunder in connection
with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made
and on the Closing Date of the representations and warranties
of the Purchaser contained herein;
(ii) all obligations, covenants and agreements of the
Purchaser required to be performed at or prior to the Closing
Date shall have been performed; and
(iii) the delivery by the Purchaser of the items set
forth in Section 2.2(b) of this Agreement.
(b) The obligations of the Purchaser hereunder in connection
with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the
Closing Date of the representations and warranties of the
Company contained herein;
(ii) all obligations, covenants and agreements of the
Company required to be performed at or prior to the Closing
Date shall have been performed;
(iii) the delivery by the Company of the items set
forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect
with respect to the Company since the date hereof; and
(v) from the date hereof to the Closing Date, trading
in the Common Stock shall not have been suspended by the
Commission or the Company's principal Trading Market (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 shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose
trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by
the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of
such magnitude in its effect on, or any material adverse
change in, any financial market which, in each
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case, in the reasonable judgment of the Purchaser, makes it
impracticable or inadvisable to purchase the Debenture at the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchaser concurrently herewith (the "DISCLOSURE SCHEDULES") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to the Purchaser.
(a) SUBSIDIARIES. All of the direct and indirect subsidiaries
of the Company are set forth on SCHEDULE 3.1(A). The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) ORGANIZATION AND QUALIFICATION. The Company and each of
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in any
Material Adverse Effect and to the Company's knowledge 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.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part
of the Company. Each Transaction Document has been (or upon delivery
will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid
and binding obligation of the Company enforceable against the Company
in accordance with its terms except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general
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application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited
by applicable law.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the other transactions contemplated thereby do not and will
not: (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) except as set forth on
Schedule 3.1(d), conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights
of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other written understanding to which
the Company or any Subsidiary is a party or is bound, or (iii) subject
to the Required Approvals and the accuracy of the representations and
warranties of the Purchaser contained herein, conflict with or result
in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including
United States securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. Except as set forth on
Schedule 3.1(e), the Company is not required under applicable law to
obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than (i) filings required
by applicable law, (ii) the filing with the Commission of the
Registration Statement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the trading
thereon in the time and manner required thereby and (iv) the filing of
Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the "REQUIRED
APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the
Transaction Documents. The Underlying Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the
Transaction Documents. The Company has reserved from its duly
authorized
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capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least equal to the Required Minimum on the date
hereof.
(g) CAPITALIZATION. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of May 31,
2006 is as set forth on SCHEDULE 3.1(G). No Person has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of
the Securities or as set forth on SCHEDULE 3.1(G), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving
any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to
issue shares of Common Stock or other securities to any Person (other
than the Purchaser) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or
reset price under such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued
in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is
required for the issuance and sale of the Securities. Except as
disclosed in SCHEDULE 3.1(G), customary transfer restrictions contained
in agreements entered into by the Company to sell restricted securities
or as set forth in the SEC Reports, there are no stockholders
agreements, voting agreements or other similar agreements with respect
to the Company's capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company's
stockholders.
(h) SEC REPORTS; FINANCIAL STATEMENTS. Except as set forth in
the SEC Reports or SCHEDULE 3.1(H), (i) the Company has filed all
reports, schedules, forms, statements and other documents required to
be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the twelve months preceding the date hereof
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the "SEC REPORTS") on a timely basis or has
received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension; (ii) as
of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the
SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and (iii)
the financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as
in effect at the time of
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filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto
and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects
the financial position of the Company and its consolidated subsidiaries
as of and for 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, immaterial, year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the Company's most
recent financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has
not incurred any liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required
to be reflected in the Company's financial statements pursuant to GAAP,
(iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash
or other property to its stockholders or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option plans.
(j) LITIGATION. Except as set forth in the SEC Reports, or
Schedule 3.1(j), there is no action, suit, inquiry, written notice of
violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"ACTION") which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. To
the Company's knowledge, neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty. To the
Company's knowledge, there has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has
not been waived that, with
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notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received written notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or
any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and
local laws applicable to its business except in each case as could not
have or reasonably be expected to result in a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect
("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has
received any written notice of proceedings relating to the revocation
or modification of any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case which the failure to so have could have a
Material Adverse Effect and free and clear of all Liens, except as set
forth on Schedule 3.1(n) and except for Liens as do not materially
affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company
and the Subsidiaries and Permitted Liens. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid and subsisting leases and are in full force
and effect in all material respects.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for
use in connection with their respective businesses as described in the
SEC Reports and which the failure to so have could have a Material
Adverse Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS").
Except as set forth in the SEC Reports, neither the Company nor any
Subsidiary has received a written notice (i) that the Intellectual
Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person, or (ii) of any infringement by
another Person with respect to the Intellectual Property Rights used by
the Company.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged
including, but not limited to, directors and officers insurance
coverage at least equal to the Subscription Amount. Neither the Company
nor any Subsidiary has any
12
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost, other than changes
affecting other Persons engaged in the same or similar business as the
Company.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in the SEC Reports, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts, service
arrangements or other continuing transactions exceeding $120,000
between (a) the Company or any Subsidiary, on the one hand, and (b) any
person or entity who would be covered by Item 404(a) of Regulation S-K,
on the other hand. Except as disclosed in the SEC Reports, there are no
outstanding amounts payable to or receivable from, or advances by the
Company or any of its Subsidiaries to, and neither the Company nor any
of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than 5% of the outstanding shares of Common
Stock, or any director, employee or affiliate of the Company or any of
its Subsidiaries, other than (i) reimbursement for reasonable expenses
incurred on behalf of the Company or any of its Subsidiaries or (ii) as
part of the normal and customary terms of such persons' employment or
service as a director with the Company or any of its Subsidiaries.
(r) XXXXXXXX-XXXXX: INTERNAL ACCOUNTING CONTROLS. Except as
set forth on Schedule 3.1(r), the Company is in material compliance
with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are
applicable to it and with which it is required to comply as of the
Closing Date. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient 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 GAAP and to maintain accountability for assets, (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. The
Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms. The Company's certifying officers have
evaluated the effectiveness of the Company's disclosure controls and
procedures as of the end of the period covered by the Company's most
recently filed periodic report under the Exchange Act (such date, the
"EVALUATION Date"). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no changes in the Company's
internal control over financial reporting (as such term is defined in
the Exchange Act) that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over
financial reporting.
13
(s) CERTAIN FEES. On the Closing Date, the Company shall pay
to Reedland Capital Partners, an Institutional Division of the
Financial West Group, Member NASD/SIPC, as placement agent, a cash fee
equal to three percent (3%) of the gross proceeds received by the
Company from the Purchaser for the Securities purchased hereunder. No
other brokerage or finder's fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by this Agreement. Purchaser shall
have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the
Purchaser's representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchaser as contemplated
hereby.
(u) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the
Securities, will not be or be an Affiliate of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not
become subject to the Investment Company Act.
(v) REGISTRATION RIGHTS. Other than the Purchaser, no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(w) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common
Stock is registered pursuant to Section 12(b) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. Except as set forth in the SEC Reports and on Schedule
3.1(w), the Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such
Trading Market. Except as set forth in the SEC Reports, the Company is,
and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the
14
Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become
applicable to the Purchaser as a result of the Purchaser and the
Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation as a result of
the Company's issuance of the Securities and the Purchaser's ownership
of the Securities.
(y) DISCLOSURE. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company confirms that neither it nor any other Person
acting on its behalf has provided the Purchaser or its agents or
counsel with any information that constitutes or might constitute
material, nonpublic information. The Company understands and confirms
that the Purchaser will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All
disclosure provided to the Purchaser regarding the Company, its
business and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, furnished by or on behalf of
the Company with respect to the representations and warranties made
herein are true and correct in all material respects with respect to
such representations and warranties and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that the Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2 hereof.
(z) NO INTEGRATED OFFERING. Assuming the accuracy of the
Purchaser's representations and warranties set forth in Section 3.2,
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 this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable shareholder approval provisions,
including without limitation, under the rules and regulations of any
Trading Market on which any of the Securities of the Company are listed
or designated.
(aa) TAX STATUS. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary
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.
(bb) NO GENERAL SOLICITATION. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchaser
and certain other "accredited investors" within the meaning of Rule 501
under the Securities Act.
(cc) FOREIGN CORRUPT PRACTICES. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made
any unlawful
15
payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company (or made by any person acting on its behalf of which the
Company is aware) which is in violation of law, or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended.
(dd) ACCOUNTANTS. The Company's accountants are set forth on
SCHEDULE 3.1(DD) of the Disclosure Schedule. To the Company's
knowledge, such accountants, who have expressed their opinion with
respect to the financial statements for the fiscal year ended September
30, 2005, are a registered public accounting firm as required by the
Securities Act.
(ee) SENIORITY. As of the Closing Date, except as set forth on
SCHEDULE 3.1(EE) of the Disclosure Schedule, no indebtedness or other
equity of the Company is senior to the Debenture in right of payment,
whether with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase liens for
equipment lease obligations (which is senior only as to the property
covered thereby) and purchases incurred in the normal course of the
Company's business consistent with past practices not to exceed
$250,000 in the aggregate (which is senior only as to the property
covered thereby).
(ff) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF
SECURITIES. The Company acknowledges and agrees that the Purchaser is
acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby.
The Company further acknowledges that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the
Purchaser's purchase of the Securities. The Company further represents
to the Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its
representatives.
(gg) MANIPULATION OF PRICE. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities (other than for the placement agent
placement of the Securities), or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other
securities of the Company.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants as of the date hereof and as of the Closing Date
to the Company as follows:
16
(a) ORGANIZATION; AUTHORITY. The Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by the Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of the Purchaser. Each Transaction
Document to which it is a party has been duly executed by the Purchaser, and
when delivered by the Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) OWN ACCOUNT. The Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and warranty
not limiting the Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws) in violation of the Securities Act or any applicable
state securities law. The Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. The Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(c) PURCHASER STATUS. At the time the Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises the Warrant or converts the Debenture it will be either: (i) an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a "qualified institutional buyer" as
defined in Rule 144A(a) under the Securities Act. The Purchaser is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.
(d) EXPERIENCE OF THE PURCHASER. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. The Purchaser is able to bear
the economic risk of an investment in the Securities and, at the present time,
is able to afford a complete loss of such investment. The Purchaser understands
that nothing in the SEC Documents, this Agreement or any other materials
presented to the Purchaser in connection with the purchase and sale of the
Securities
17
constitutes legal, tax or investment advice. The Purchaser 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 Securities.
(e) GENERAL SOLICITATION. The Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) NON-U.S. JURISDICTIONS. The Purchaser acknowledges,
represents and agrees that no action has been or will be taken in any
jurisdiction outside the United States by the Company that would permit
an offering of the Securities in any jurisdiction outside the United
States where legal action by the Company for that purpose is required.
The Purchaser will comply with all applicable laws and regulations in
each foreign jurisdiction, if any, in which it purchases, offers, sells
or delivers Securities or has in its possession or distributes any
offering material, in all cases at its own expense.
The Company acknowledges and agrees that the Purchaser does
not make or has not made any representations or warranties with respect
to the transactions contemplated hereby other than those specifically
set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement
or Rule 144, to the Company or to an affiliate of the Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall
have the rights of the Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE OR CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE
18
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that the Purchaser may
from time to time pledge pursuant to a bona fide margin agreement with
a registered broker-dealer or grant a security interest in some or all
of the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of this Agreement and the
Registration Rights Agreement and, if required under the terms of such
arrangement, the Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties, subject to applicable law. Such a
pledge or transfer would not be subject to approval of the Company and
no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the Purchaser's expense, the
Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities, including, if
the Securities are subject to registration pursuant to the Registration
Rights Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the
list of Selling Stockholders thereunder.
(c) Certificates evidencing the Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)
hereof): (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144, or (iii) if such Underlying Shares are eligible
for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal
of the legend hereunder. If all or any portion of the Debenture or
Warrant is converted or exercised (as applicable) at a time when there
is an effective registration statement to cover the resale of the
Underlying Shares, or if such Underlying Shares may be sold under Rule
144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations
thereof) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section
4.1(c), it will, following the delivery by the
19
Purchaser to the Company or the Company's transfer agent of a
certificate representing Underlying Shares, as applicable, issued with
a restrictive legend, deliver or cause to be delivered to the Purchaser
a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company
that enlarge the restrictions on transfer set forth in this Section.
Certificates for Securities subject to legend removal hereunder shall
be transmitted by the transfer agent of the Company to the Purchaser by
crediting the account of the Purchaser's prime broker with the
Depository Trust Company System.
(d) The Purchaser agrees that the removal of the restrictive
legend from certificates representing Securities as set forth in this
Section 4.1 is predicated upon the Company's reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom.
4.2 FURNISHING OF INFORMATION. Beginning on July 6, 2006 and for so
long as the Purchaser owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as the Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchaser and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchaser to sell the
Securities under Rule 144. Beginning on July 6, 2006 and for so long as the
Purchaser owns Securities, the Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchaser or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 CONVERSION AND EXERCISE PROCEDURES. The form of Notice of Exercise
included in the Warrant and the form of Notice of Conversion included in the
Debenture set forth the totality of the procedures required of the Purchaser in
order to exercise the Warrant or convert the Debenture. No additional legal
opinion or other information or instructions shall be required of the Purchaser
to exercise the Warrant or convert the Debenture. The Company shall honor
exercises of the Warrant and conversions of the Debenture and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.5 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company and the
Purchaser shall consult with each other in issuing any press releases with
respect to the transactions
20
contemplated hereby, and neither the Company nor the Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of the Purchaser, or
without the prior consent of the Purchaser, with respect to any press release of
the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchaser, or include the name of the Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior consent of the Purchaser, except (i) as required by federal securities
law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchaser with prior notice of such disclosure permitted under subclause (i)
or (ii).
4.6 SHAREHOLDER RIGHTS PLAN. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that the Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that the Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchaser. The Company shall conduct
its business in a manner so that it will not become subject to the Investment
Company Act.
4.7 NON-PUBLIC INFORMATION. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it nor any other Person acting on
its behalf will provide the Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto the Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that the Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
4.8 INDEMNIFICATION. Subject to the provisions of this Section 4.8,
each party (the "Indemnifying Party") will indemnify and hold the other party
and its directors, officers, shareholders, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such other party (within the meaning of Section 15 of the Securities
act and Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, an
"INDEMNIFIED PARTY") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Indemnified Party may suffer or incur as a
result of or relating to any breach of any of the representations, warranties,
covenants or agreements made by Indemnifying Party in this Agreement or in the
other Transaction Documents. If any action shall be brought against any
Indemnified Party in respect of which indemnity may be sought pursuant to this
Agreement, such Indemnified Party shall promptly notify the Indemnifying Party
in writing, and the Indemnifying
21
Party shall have the right to assume the defense thereof with counsel of its own
choosing. Any Indemnified Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position
of the Indemnifying Party and the position of such Indemnified Party. The
Indemnifying Party will not be liable to any Indemnified Party under this
Agreement (i) for any settlement by an Indemnified Party effected without the
Indemnifying Party's prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Indemnified Party's breach of
any of the representations, warranties, covenants or agreements made by the
Indemnified Party in this Agreement or in the other Transaction Documents.
4.9 RESERVATION AND LISTING OF SECURITIES.
(a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors of the
Company shall use commercially reasonable efforts to amend the
Company's certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least
the Required Minimum at such time, as soon as possible and in any event
not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and
manner required by the Trading Market, prepare and file with such
Trading Market an additional shares listing application covering a
number of shares of Common Stock at least equal to the Required Minimum
on the date of such application, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on the Trading
Market as soon as possible thereafter, (iii) provide to the Purchaser
evidence of such listing, and (iv) maintain the listing of such Common
Stock on any date at least equal to the Required Minimum on such date
on such Trading Market or another Trading Market.
4.10 VARIABLE RATE TRANSACTIONS. From the date hereof until such time
as the Debenture is no longer outstanding, the Company shall be prohibited from
effecting or entering into an agreement to effect any financing of Common Stock
or Common Stock Equivalents involving a "Variable Rate Transaction". The term
"VARIABLE RATE TRANSACTION" shall mean a transaction in which the Company issues
or sells (i) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial
22
issuance of such debt or equity securities, or (B) with a conversion, exercise
or exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock, other than customary
anti-dilution adjustments or (ii) enters into any agreement, including, but not
limited to, an equity line of credit, whereby the Company may sell securities at
a future determined price.
4.11 SHORT SALES AND CONFIDENTIALITY.
(a) The Purchaser covenants that neither it nor any Person
acting under its direction or pursuant to any understanding with it has
executed or will execute any Short Sales during the period commencing
from the time that the Purchaser first received a term sheet from the
Company or any other Person setting forth the material terms of the
transactions contemplated hereunder and ending at the time that the
transactions contemplated by this Agreement are first publicly
announced as described in Section 4.5. The Purchaser covenants that
until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company as described in Section 4.5, the
Purchaser will maintain the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and
terms of this transaction).
(b) The Purchaser agrees to restrict the volume of sales or
other dispositions, including Short Sales and other hedging activities,
of Securities by the Purchaser, its Affiliates and any Person managed
by or under the direction of the Purchaser (i) on each Trading Day, to
no more than 20% of the total trading volume of the Common Stock, as
reported on Bloomberg Financial LP using HP function, for such Trading
Day (the "VOLUME LIMITATION"), and (ii) in the aggregate, to no more
than the Purchaser's position in the Securities; PROVIDED, HOWEVER,
that the Volume Limitation shall not be applicable in any one or more
of the following circumstances: (x) with respect to any Trading Day
during which the VWAP equals or exceeds $7.00 per share of Common
Stock, or (y) if an Event of Default (as such term is defined in the
Debenture) has occurred and is continuing.
ARTICLE V
MISCELLANEOUS
5.1 TERMINATION. This Agreement may be terminated by the Purchaser, as
to the Purchaser's obligations hereunder, by written notice to the other
parties, if the Closing has not been consummated on or before June 30, 2006;
PROVIDED, HOWEVER, that no such termination will affect the right of any party
to xxx for any breach by the other party (or parties).
5.2 FEES AND EXPENSES. At the Closing, the Company has agreed to
reimburse the Purchaser $50,000 for its legal fees and expenses by payment of
such amount by wire transfer of immediately available funds to an account
designated by Purchaser's counsel. The Company shall deliver, prior to the
Closing, a completed and executed copy of the Closing Statement, attached hereto
as Annex A. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation,
23
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities.
5.3 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. Eastern Time
on a Trading Day, (b) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading
Day or later than 5:30 p.m. Eastern Time on any Trading Day, (c) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
5.5 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and the Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver 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 subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. The Purchaser may assign any
or all of its rights under this Agreement to any Person to whom the Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof and the other Transaction Documents that apply to the Purchaser.
5.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of,
24
nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.7 (Indemnification).
5.9 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) 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 contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
5.10 SURVIVAL. The representations and warranties contained herein
shall survive the Closings and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations or until the
Securities are no longer held by the Purchaser, whichever is earlier.
5.11 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
25
5.13 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.15 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to the Purchaser pursuant to any Transaction Document or the
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.16 USURY. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by the
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "MAXIMUM RATE"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to the
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by the Purchaser to the unpaid principal
26
balance of any such indebtedness or be refunded to the Company, the manner of
handling such excess to be at the Purchaser's election.
5.17 LIQUIDATED DAMAGES. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.18 CONSTRUCTION. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(SIGNATURE PAGES FOLLOW)
27
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
TUTOGEN MEDICAL, INC. ADDRESS FOR NOTICE:
------------------
By: /S/ XXX X. XXXXX
--------------------------------
Name: Xxx X. Xxxxx Tutogen Medical, Inc.
Title: Chief Executive Officer 00000 Xxxxxxxx Xxxx., Xxx 00
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to (which shall not constitute notice):
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Stanford X. Xxxxxxx, Xx., Esq.
Facsimile (000) 000-0000
AZIMUTH OPPORTUNITY, LTD. ADDRESS FOR NOTICE:
------------------
Fortis Prime Fund Solutions (BVI) Limited
XX Xxx 000, 0xx Xxxxx, Xxxxx Xxxxx Xxxxxxxx
By: /S/ XXXXXX X. XXXXX Road Town, Tortola, British Virgin Islands
----------------------------
Name: Xxxxxxx X. XxXxx Phone: 0 000 000 0000 xt 239
Title: Corporate Secretary Fax: 0 000 000 0000
Attn: Xxxxx X'Xxxxxxx, Fund Accountant
