PURCHASE AGREEMENT
Exhibit 10.1
THIS PURCHASE AGREEMENT (the “Agreement”) is entered into as of the 17th day of September,
2004, by and among Sutura, Inc., a Delaware corporation (the “Company”), and Pandora Select
Partners L.P., a British Virgin Islands limited partnership (“Pandora”), Whitebox Hedged High Yield
Partners L.P., a British Virgin Islands limited partnership (“WHHY”), Whitebox Convertible
Arbitrage Partners L.P., a British Virgin Islands limited partnership (“WCAP”), Whitebox
Intermarket Partners L.P., a British Virgin Islands limited partnership (“WIP”) and Xxxx X. Xxxxxx
(“Xxxxxx”) and Xxxx X. Xxxxxx (“Xxxxxx”), each residents of the State of Minnesota. Pandora, WHHY,
WCAP, WIP, Kohler and Xxxxxx are individually referred to herein as a “Purchaser” and together as
the “Purchasers.”
R E C I T A L S :
WHEREAS, in consideration of $1,000,000, $2,000,000, $2,500,000, $800,000, $200,000 and
$50,000 (representing $6,550,000 in the aggregate), the Company proposes to issue to Pandora, WHHY,
WCAP, WIP, Kohler and Xxxxxx, respectively, and each such Purchaser desires to severally (and not
jointly) purchase, a corresponding secured convertible promissory note in the form attached as
Exhibit A (each, a “Note” and together, the “Notes”) and a warrant in the form of Exhibit B (each,
a “Warrant” and together, the “Warrants”) to purchase (subject to certain adjustments) shares of
the Company’s common stock, $0.001 par value (the “Common Stock”).
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter
set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE
1.1. Authorization of Transaction. On or prior to the closing of the transactions
contemplated in this Agreement (the “Closing”), the Company shall have authorized the sale and
issuance to each Purchaser of its respective Note, Warrant and the shares of Common Stock issuable
upon conversion of each such Note and upon exercise of each such Warrant (collectively, the
“Shares”).
1.2. Sale and Purchase. Subject to the terms and conditions hereof, at the Closing, the
Company hereby agrees to issue and sell to each Purchaser, and each Purchaser severally (and not
jointly) agrees to purchase from the Company, such Purchaser’s respective Note and the Warrant for
an aggregate purchase price from all Purchasers of $6,550,000 (the “Purchase Price”).
SECTION 2. CLOSING, DELIVERY AND PAYMENT
2.1. Closing. The Closing shall take place at 10:00 a.m. on the date hereof at the offices of
the Purchasers’ legal counsel, Xxxxxxxx & Xxxxxx P.A., in Minneapolis, Minnesota, or
at such other time or place as the Company and the Purchasers may mutually agree (the
“Closing Date”). At the Closing, subject to the terms and conditions hereof, the Company will
issue, sell and deliver to each Purchaser its respective Note and Warrant, against payment by each
Purchaser of its allocable portion of the Purchase Price by certified check or wire transfer of
immediately available funds. At that time, the Company shall also execute and deliver to the
Purchasers the Registration Rights Agreement in the form attached as Exhibit C (the “Registration
Rights Agreement”) and the Security Agreement in the form attached as Exhibit D (the “Security
Agreement”).
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company hereby makes the following representations and warranties to each of the
Purchasers as of the Closing Date and, as to the 510(k) clearance and CE xxxx described in Section
3.16, covenants to so comply with the requirements thereof from and after the Closing Date so long
as any portion of any of the Notes remain outstanding.
3.1. Organization, Good Standing and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware. Except as
set forth on Schedule 3.1, the Company has no subsidiaries. The Company has all requisite corporate
power and authority to own and operate its properties and assets, to execute and deliver this
Agreement, the Notes, the Warrants, the Registration Rights Agreement and the Security Agreement
(together, the “Transaction Documents”), to pledge certain of the Company’s assets as described on
the attached Exhibit E as security for the Notes (the “Collateral”), to issue and sell the Shares
upon conversion of the Notes and upon exercise of the Warrants, to carry out the provisions of the
Transaction Documents, and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in which failure to be
so qualified would not have a material adverse effect on the Company, or its business or
properties, taken as a whole.
3.2. Capitalization. The authorized capital stock of the Company consists of 5,000,000 shares
of Preferred Stock, par value $0.00025 per share, of which 352,160 shares are issued and
outstanding, and 10,000,000 shares of Common Stock, par value $0.00025 per share, of which
6,874,429 shares are issued and outstanding. Except as set forth on Schedule 3.2, the Company has
no outstanding options, warrants or other rights to acquire any capital stock, or securities
convertible or exchangeable for capital stock or for securities themselves convertible or
exchangeable for capital stock (together, “Convertible Securities”). Except as set forth on
Schedule 3.2, the Company has no agreement or commitment to sell or issue any shares of capital
stock or Convertible Securities. All issued and outstanding shares of the Company’s capital stock
(i) have been duly authorized and validly issued, (ii) are fully paid and nonassessable, (iii) are
free from any preemptive and cumulative voting rights and (iv) were issued pursuant to valid
exemptions under federal and state securities laws. Except as set forth
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on Schedule 3.2, there are no outstanding rights of first refusal or proxy or shareholder
agreements of any kind relating to any of the Company’s securities to which the Company or any of
its executive officers and directors is a party or as to which the Company otherwise has knowledge
of. When issued in compliance with the provisions of the Notes and the Warrants (and upon payment
as provided by the Warrants), the Shares will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances; provided, however, that the Shares may be subject to
restrictions on transfer under applicable state and/or federal securities laws.
3.3. Authorization; Binding Obligations. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization of the Transaction
Documents, the performance of all obligations of the Company hereunder and thereunder at the
Closing, including the pledge of the Collateral as security for the Notes, and the authorization,
sale, issuance and delivery of the Shares upon conversion of the Notes and upon exercise of the
Warrants has been taken or will be taken prior to Closing. The Transaction Documents, when
executed and delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or 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) to the extent that the enforceability of
the indemnification provisions of the Registration Rights Agreement may be limited by applicable
laws. The sale of the Shares upon exercise of the Warrants or upon conversion of the Notes is not
and will not be subject to any preemptive rights or rights of first refusal.
3.4. Financial Statements. The Company’s unaudited balance sheets at, and the unaudited
statements of operations, cash flows and changes in shareholders’ equity of the Company for the
years ended, December 31, 2003 and 2002 and the Company’s unaudited balance sheet at, and the
unaudited statements of operations and cash flows of the Company for the six months ended June 30,
2004 (all of the foregoing together, the “Financial Statements,” with June 30, 2004 being the
“Latest Statement Date” and the financial statements at and for the six months ended June 30, 2004
being the “Latest Financial Statements”) fairly present in all material respects (such that no
material modifications are required to conform the financial statements to generally accepted
accounting principles) the financial condition and operating results of the Company as of the
respective dates and for the respective periods covered thereby.
3.5. Liabilities. The Company (i) has no material liabilities and (ii) to the best of its
knowledge, has no material contingent liabilities, in each case not otherwise disclosed in the
Latest Financial Statements, except (A) current liabilities incurred in the ordinary course of
business subsequent to the Latest Statement Date and (B) obligations under contracts and
commitments incurred in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Latest Financial Statements, which, in both cases have
not had, either in any individual case or in the aggregate, a material adverse effect on the
Company, or its business or properties, taken as a whole.
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3.6. Certain Agreements and Actions. Except as disclosed in the Financial Statements or on
Schedule 3.6, the Company has not (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock during the periods
covered by the Financial Statements or since the Latest Statement Date, (ii) since the Latest
Statement Date, incurred any indebtedness for money borrowed or any other material liabilities out
of the ordinary course of business, (iii) except as set forth in Schedule 3.6, made any loans or
advances to any person, other than ordinary advances for travel or entertainment expenses or (iv)
sold, exchanged or otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
3.7. Obligations of or to Related Parties. Except as disclosed on Schedule 3.7, there are no
obligations of the Company to officers, directors or key employees of the Company or, to the
Company’s knowledge, to any members of their immediate families or other affiliates, other than (i)
for accrued salaries, (ii) reimbursement for expenses reasonably incurred on behalf of the Company
and (iii) for other employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board of Directors of the
Company). Except as disclosed on Schedule 3.7, to the Company’s knowledge, none of the officers,
directors or key employees of the Company or, to the Company’s knowledge, any members of their
immediate families or other affiliates, are indebted to the Company or have any direct or indirect
ownership interest in any firm, corporation or other entity with which the Company is affiliated or
with which the Company has a business relationship, or any firm, corporation or other entity that
competes with the Company, except that such officers, directors, employees and members of their
immediate families may own securities (with beneficial ownership not exceeding 2%) in
publicly-traded companies that compete with the Company . Except as disclosed on Schedule 3.7, no
officer, director or key employee of the Company, or, to the Company’s knowledge, any member of
their immediate families or other affiliates, is, directly or indirectly, interested in or a party
to any material contract with the Company. Except as disclosed on Schedule 3.7 or in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
3.8. Changes. Since the Latest Statement Date, and except as disclosed on Schedule 3.8, there
has not been, to the Company’s knowledge, any event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the business, assets,
liabilities, financial condition, operations or prospects of the Company.
3.9. Title to Properties and Assets; Liens. Except as set forth on Schedule 3.9, the Company
has good and marketable title to its properties and assets, including the properties and assets
reflected in the Latest Financial Statements, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) those resulting
from taxes that have not yet become delinquent, (ii) liens and encumbrances that do not materially
detract from the value of the property subject thereto or materially impair the operations of the
Company and (iii) those that have otherwise arisen in the ordinary course of business. With respect
to the property and
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assets it leases, the Company is in compliance with such leases in all material respects and, to
the Company’s knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances. All facilities, machinery, equipment, fixtures and other properties owned, leased or
used by the Company which are reasonably necessary to the Company’s conduct of its business are in
good operating condition and repair and are reasonably fit and usable for the purposes for which
they are being used, reasonable wear and tear excepted.
3.10. Patents and Trademarks. Schedule 3.10 contains a listing of all U.S. and foreign
patents and patent applications, and U.S. and foreign trademarks and service marks and applications
therefor, owned by, assigned to or licensed to the Company. Except as set forth on Schedule 3.10,
the Company owns or has a valid right to use all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information and other proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted, without any known infringement of the
rights of others. The Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the Company’s business as
now conducted or proposed to be conducted. None of the execution or delivery of, or the performance
of the transactions contemplated by, the Transaction Documents, the pledge of the Collateral by the
Company to secure the Notes, the carrying on of the Company’s business by the employees of the
Company nor the conduct of the Company’s business as currently conducted or proposed to be
conducted will conflict with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any employee is now
obligated. The Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to their employment by
the Company, except for inventions, trade secrets or proprietary information that have been
exclusively assigned to the Company.
Without limiting the generality of the above, neither of Cardio Medical Solutions, Inc. nor
Xxxxxx XXX Engineering Inc., nor any other entity owned or controlled by officers, directors or key
employees of the Company, own or control any inventions, trade secrets or proprietary information
necessary for or desirable to the Company in connection with and directly related to its business
as now conducted or proposed to be conducted.
Except as set forth in Schedule 3.10, (i) each of the Company’s employees have executed
agreements of confidentiality and non-disclosure as to the Company’s
confidential information, including its intellectual property and trade secrets, and (ii) each of
the Company’s employees has agreed to assign to the Company any and all significant conceptions and
ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are
conceived or made by such employees, solely or jointly with another, during the period of
employment, and which are directly related to the business or activities of the Company and which
the employee conceives as a result of the employee’s employment by the Company (other than
inventions for which no equipment, supplies, facility or trade secret information of the Company
was used and
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which was developed entirely on the employee’s own time and (1) which does not relate (a) directly
to the business of the Company or (b) to the Company’s actual or demonstrably anticipated research
or development or (2) which does not result from any work performed by the employee for the
Company).
3.11. Compliance with Other Instruments. Except as disclosed on Schedule 3.11, the Company is
not in violation or default of any term of its Certificate of Incorporation or Bylaws, or in any
material respect of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge,
any statute, rule or regulation applicable to the Company that would materially and adversely
affect the business, assets, liabilities, financial condition, operations or prospects of the
Company. The execution and delivery of, and the performance of and compliance with the
transactions contemplated by, the Transaction Documents, and the issuance and sale of the Shares
upon conversion of the Notes or upon exercise of the Warrants, will not, with or without the
passage of time or giving of notice, result in any such material violation, or be in conflict with
or constitute a default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company, its business or operations or any of its assets or properties, except
for such results that would not materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company.
3.12. Litigation. There is no action, suit, proceeding or investigation pending or, to the
Company’s knowledge, currently threatened against the Company that questions the validity of this
Agreement or the other Transaction Documents or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby. Except as disclosed
on Schedule 3.12, there is no action, suit, proceeding or investigation or, to the Company’s
knowledge, currently threatened against the Company that might result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs or prospects of the
Company, financial or otherwise, or any change in the current equity ownership of the Company. The
foregoing includes, without limitation, actions pending or threatened involving the prior
employment of any of the employees of the Company, their use in connection with the Company’s
business of any information or techniques allegedly proprietary to any of
their former employers or their obligations under any agreements with prior employers. The Company
is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
3.13. Tax Returns and Payments. The Company has filed all tax returns (federal, state and
local) required to be filed by it. All taxes shown to be due and payable on such returns, any
assessments imposed, and, to the Company’s knowledge, all other taxes due and payable by the
Company on or before the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns, federal, state or other,
have been or are being audited as of the date hereof or (ii) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. The Company has no
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knowledge of any liability of any tax to be imposed upon the properties or assets of the Company as
of the date of this Agreement that is not adequately provided for.
3.14. Employees. The Company has no collective bargaining agreements with any of its
employees. The Company is not aware of any labor union organizing activity relating to its
employees. Except as set forth on Schedule 3.14, no employee has any agreement or contract, written
or verbal, regarding his employment. Except as disclosed on Schedule 3.14, the Company is not a
party to or bound by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing or defined benefit plan, retirement
agreement or other employee compensation plan or agreement. To the Company’s actual knowledge, no
employee of the Company, nor any consultant with whom the Company has contracted, is in violation
of any material term of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company; and, to the Company’s
knowledge, the continued employment by the Company of its present employees, and the performance of
the Company’s contracts with its independent contractors, will not result in any such violation.
The Company has not received any written or oral notice alleging that any such violation has
occurred. Except as disclosed on Schedule 3.14, no employee of the Company has been granted the
right to continued employment by the Company or to any material compensation following termination
of employment with the Company. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer, key employee or group
of key employees.
3.15. Registration Rights. Except as disclosed on Schedule 3.15 or required pursuant to the
Registration Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in the Registration Rights Agreement) any of the
Company’s presently outstanding securities or any of its securities that may hereafter be issued.
3.16. Compliance with Laws; Permits; Company Medical Devices. Except as disclosed on
Schedule 3.16, the Company is not in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties that would materially and
adversely affect the business, assets, liabilities, financial condition, operations or prospects of
the Company. No governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be filed in connection
with the execution and delivery of, and the performance of the transactions contemplated by, the
Transaction Documents, the pledge of the Collateral to secure the Notes or the issuance of the
Shares upon conversion of the Notes or upon exercise of the Warrants, except such as has been duly
and validly obtained or filed, or with respect to any filings that must be made after the Closing,
as will be filed in a timely manner. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its
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business as now being conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company and the Company believes it
can obtain any similar authority for the conduct of its business as now conducted or planned to be
conducted.
With respect to the Company’s marketing and sale of minimally invasive vessel closure devices
for surgical applications (which the Company represents are the only products that the Company
manufactures, markets or sells):
(i) The Company has received 510(k) clearance from the U.S. Food & Drug Administration (the
“FDA”) to sell its F8 & F6 SuperStitch® devices (the “Company Medical Devices”) in the United
States;
(ii) The Company has obtained permission from its notified body to place the CE xxxx on the
Company Medical Devices so as to permit their sale in European Union countries;
(iii) The Company’s 510(k) clearance and CE xxxx for the Company Medical Devices are in full
force and effect and the Company has not received and anticipates no warning letter or other notice
of, and is unaware of any basis for, revocation, limitation or modification of such 510(k)
clearance or CE marking; and
(iv) The Company manufactures the Company Medical Devices in compliance with FDA quality
system regulations and the EU Medical Device Directive and is otherwise in compliance with all
applicable FDA rules and regulations and EU directives (including the Medical Device Directive)
relating to the manufacture, marketing and sale of the Company Medical Devices, including with
respect to reporting of any device failures or adverse reactions, except where such failure to
comply would not materially and adversely affect the ability of the Company to sell the Company’s
Medical Devices in each EU country.
With respect to any human clinical investigation of new or proposed medical devices by the
Company, or modifications to the Company Medical Devices, the Company is conducting each such
investigation in material compliance with applicable rules and regulations, including by obtaining
any required Investigational Device Exemption or Institutional Review Board approvals.
3.17. Environmental and Safety Laws. The Company is not in violation of any applicable
statute, law or regulation relating to the environment or occupational health and safety, where
such violation would have a material adverse effect on the Company, and to the Company’s knowledge,
no material expenditures are or will be required in order to comply with any such existing statute,
law or regulation. Without limiting the foregoing:
(a) with respect to any real property owned, leased or otherwise
utilized by the Company (“Real Property”), the Company is not or has not
in the past been in violation of any
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Hazardous Substance Law which violation could reasonably be expected to
result in a material liability to the Company or its properties and
assets;
(b) neither the Company nor, to the knowledge of the Company, any
third party has used, released, generated, manufactured, produced or
stored, in, on, under, or about any Real Property, or transported thereto
or therefrom, any Hazardous Substances that could reasonably be expected
to result in a material liability to the Company under any Hazardous
Substance Law;
(c) to the knowledge of the Company, there are no underground tanks,
whether operative or temporarily or permanently closed, located on any
Real Property that could reasonably be expected to result in a material
liability to the Company under any Hazardous Substance Law;
(d) there are no Hazardous Substances used, stored or present at, or
on, or to the knowledge of the Company that could reasonably be expected
to migrate onto any Real Property, except in compliance with Hazardous
Substance Laws; and
(e) to the knowledge of the Company, there neither is nor has been
any condition, circumstance, action, activity or event that could
reasonably be expected to be a material violation by the Company of any
Hazardous Substance Law, or to result in liability to the Company under
any Hazardous Substance Law.
For purposes hereof, “Hazardous Substances” means (statutory acronyms and
abbreviations having the meaning given them in the definition below of “Hazardous Substances Laws”)
substances defined as “hazardous substances,” “pollutants” or “contaminants” in Section 101 of the
CERCLA; those substances defined as “hazardous waste,” “hazardous materials” or “regulated
substances” by the RCRA; those substances designated as a “hazardous substance” pursuant to Section
311 of the CWA; those substances defined as “hazardous materials” in Section 103 of the HMTA;
those substances regulated as a hazardous chemical substance or mixture or as an imminently
hazardous chemical substance or mixture pursuant to Sections 6 or 7 of the TSCA; those substances
defined as “contaminants” by Section 1401 of the SDWA, if present in excess of permissible levels;
those substances regulated by the Oil Pollution Act; those substances defined as a pesticide
pursuant to Section 2(u) of the FIFRA; those substances defined as a source, special nuclear or
by-product material by Section 11 of the AEA; those substances defined as “residual radioactive
material” by Section 101 of the UMTRCA; those substances defined as “toxic materials” or “harmful
physical agents” pursuant to Section 6 of the OSHA; those substances defined as hazardous wastes
in 40 C.F.R. Part 261.3; those substances defined as hazardous waste constituents in 40 C.F.R. Part
260.10,
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specifically including Appendix VII and VIII of Subpart D of 40 C.F.R. Part 261; those substances
designated as hazardous substances in 40 C.F.R. Parts 116.4 and 302.4; those substances defined as
hazardous substances or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as
hazardous materials, hazardous substances, or toxic substances in 40 C.F.R. Part 1910; any
chemical, material, toxin, pollutant, or waste regulated by or in any other Hazardous Substances
Laws; and in the regulations adopted and publications promulgated pursuant to said laws, whether or
not such regulations or publications are specifically referenced herein.
“Hazardous Substances Law” means any of:
(i) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as
amended (42 U.S.C. Section 9601 et seq.) (“CERCLA”);
(ii) the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.) (“Clean Water
Act” or “CWA”);
(iii) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) (“RCRA”);
(iv) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.) (“AEA”);
(v) the Clean Air Act (42 U.S.C. Section 7401 et seq.) (“CAA”);
(vi) the Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001 et seq.) (“EPCRA”);
(vii) the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.)
(“FIFRA”);
(viii) the Oil Pollution Act of 1990 (33 U.S.C.A. Section 2701 et seq.);
(ix) the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.) (“SDWA”);
(x) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
Sections 1201 et seq.) (“SMCRA”);
(xi) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) (“TSCA”);
(xii) the Hazardous Materials Transportation Act (49 U.S.C. Section 5101 et seq.) (“HMTA”);
(xiii) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901 et seq.) (“UMTRCA”);
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(xiv) the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) (“OSHA”); and
(xv) all other federal, state and local governmental rules which govern Hazardous Substances,
and the regulations adopted and publications promulgated pursuant to all such foregoing laws.
3.18. Offering Valid. Assuming the accuracy of the representations and warranties of the
Purchasers contained in Section 4, the offer, sale and issuance of the Notes and the Warrants (and
the Shares issuable upon conversion of the Notes or upon exercise of the Warrants) will be exempt
from the registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”), and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of the State of
Minnesota.
3.19. Full Disclosure. None of this Agreement, the Notes, the Warrants, the Registration
Rights Agreement or the Security Agreement contains any untrue statement of a material fact nor, to
the Company’s knowledge and belief, omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
3.20. Insurance. The Company has fire and casualty insurance policies with coverage customary
for companies similarly situated to the Company. The Company’s coverage for product liability is
described on Schedule 3.20.
3.21. Investment Company Act. The Company is not, and will not use the proceeds from the Notes
in a manner so as to become, an “investment company,” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.
3.22. Security Interest in Collateral. The Company owns the Collateral free and clear of all
claims, liens or encumbrances of any kind and, upon consummation of the transactions as
contemplated hereby, the Purchasers will, together, have a first priority security interest in the
Collateral.
3.23. Foreign Corrupt Practices; Xxxxxxxx-Xxxxx.
(a) 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 corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful 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
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(iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(b) The Company is in compliance in all material respects with all provisions of the
Xxxxxxxx-Xxxxx Act of 2002 that are applicable to it as of the Closing Date.
3.24. Brokers or Finders. Except as set forth in Schedule 3.24, the Company has not incurred
nor will incur, directly or indirectly, any liability for any brokerage or finders’ fees or agent’s
commissions or any similar charges (whether payable in cash, in equity securities or by a
combination thereof) in connection with this Agreement or any transaction contemplated hereby.
3.25. Proposed Merger with Millenium Holding Group, Inc. The Company has entered into an
Agreement and Plan of Merger dated July 9, 2004 (the “Merger Agreement”) with Millenium Holding
Group, Inc., a Nevada corporation (“Millenium”), pursuant to which the Company is to merge into
Millenium (the “Merger”). The Merger Agreement, in the form filed by Millenium as an exhibit to a
Current Report on Form 8-K dated July 12, 2004, is a true and correct copy of the agreement between
the Company and Millenium and is in full force and effect. From and after the date hereof, the
Company will not amend, modify, replace, terminate or abandon the Merger Agreement and the proposed
Merger without first obtaining the written consent of Whitebox Advisors, LLC, as agent for the
Purchasers (“Whitebox Advisors”), unless with respect to such abandonment or termination, a
majority of the members of the Board of Directors of the Company determine that such abandonment or
termination is in the best interests of the Company and its stockholders.
3.26. Use of Proceeds. The Company will use the proceeds from the purchase of the Notes and
Warrants to retire in full the convertible notes and certain securities issued by the Company to Xx
Xxxxx and Xxxxx Xxxxxxx, and will otherwise use the transaction
proceeds for general corporate purposes.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Purchaser hereby severally, but not jointly, represents and warrants to the Company as of
the Closing Date, and agrees, as follows:
4.1. Authorization. Such Purchaser has full power and authority to enter into this Agreement
and each of the Transaction Documents, and each such agreement, when executed and delivered by such
Purchaser, will be valid and binding obligations of the Purchaser enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or 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) to the extent that the enforceability of the indemnification
provisions of the Registration Rights Agreement may be limited by applicable laws.
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4.2. Investment Representations. The Purchaser understands that neither the offer nor the sale
of the Purchaser’s Note, the Warrant or the Shares has been registered under the Securities Act.
The Purchaser also understands that the Purchaser’s Note and Warrant are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based in part upon the
Purchaser’s representations contained in the Agreement. The Purchaser hereby represents and
warrants as follows:
(a) Purchaser Bears Economic Risk. The Purchaser has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar to the Company so
that it is capable of evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk of this
investment indefinitely unless the Purchaser’s respective Note or Warrant (or the Shares) are
registered pursuant to the Securities Act, or an exemption from registration is available. Except
as contemplated by the Registration Rights Agreement, the Purchaser has no present intention of
selling or otherwise transferring its respective Note, the Warrant or the Shares, or any interest
therein. The Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if available, such exemption
may not allow the Purchaser to transfer all or any portion of the Purchaser’s respective Note, the
Warrant or the Shares under the circumstances, in the amounts or at the times the Purchaser might
propose.
(b) Acquisition for Own Account. Except as contemplated by the Registration Rights Agreement,
the Purchaser is acquiring its respective Note, the Warrant and the Shares for the Purchaser’s own
account for investment only, and not with a view towards their public distribution.
(c) Purchaser Can Protect Its Interest. The Purchaser represents that by reason of its, or of
its management’s, business or financial experience, the Purchaser has
the capacity to protect its own interests in connection with the transactions contemplated in this
Agreement, the Note, the Warrant and the Registration Rights Agreement. Further, the Purchaser is
aware of no publication of any advertisement in connection with the transactions contemplated in
the Agreement.
(d) Accredited Investor. The Purchaser represents that it is an accredited investor within the
meaning of Rule 501 of Regulation D of the Securities Act
(e) Residence. The Purchaser represents that, if it is an entity, it is organized under the
laws of the British Virgin Islands and that its principal office is located in the State of
Minnesota and that, if the Purchaser is an individual, he is a resident of the State of Minnesota.
(f) Rule 144. The Purchaser acknowledges and agrees that its respective Note and Warrant, and,
if issued, its Shares, must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. The
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Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring not less than one year after a
party has purchased and paid for the security to be sold, the sale being through an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as such term is defined
under the Securities Exchange Act of 1934, as amended) and the number of shares being sold during
any three-month period not exceeding specified limitations.
(g) Disclosure of Information. Such Purchaser believes it has received all the information it
considers necessary or appropriate for deciding whether to purchase the securities of the Company
contemplated by this Agreement and the Transaction Documents. Such Purchaser further represents
that it or he has had an opportunity to ask questions and receive answers from the Company
regarding the securities being issued by the Company pursuant to this Agreement and the Transaction
Documents and Company’s business, properties, prospects and financial condition.
4.3. Transfer Restrictions. The Purchaser acknowledges and agrees that its respective Note
and Warrant and, if issued, its Shares, are subject to restrictions on transfer and will bear
restrictive legends.
4.4. Limitation on Short Selling of Millenium Common Stock. The Purchaser has not and agrees
not to engage in any “short sale” (as such term is defined in Rule 3b-3 of the Securities Exchange
Act of 1934, as amended) of Millenium’s Common Stock or any hedging transaction, which establishes
a net short position of Millenium’s Common Stock (i) from and after the Closing Date and until the
effective date of the Merger (or, if sooner, until the termination or abandonment of the Merger
Agreement or the Merger)
and (ii) if the Company effects the Merger into Millenium, during the period consisting of the
sixty (60) consecutive trading days ending on the date that is one year following the effective
date of the Merger. The foregoing covenant shall lapse if the Company defaults in the timely
payment of any amount due under the Purchaser’s Note.
SECTION 5. CONDITIONS FOR CLOSING
5.1. Conditions for the Company to Satisfy. The several obligations of each Purchaser to
purchase its respective Note and Warrant as contemplated by this Agreement is subject to
satisfaction of the following contingencies at or prior to Closing:
(a) The Company shall have obtained all third party consents required in connection herewith,
including consents to pledge the Collateral to the Purchasers as security for the Notes.
(b) The Company shall have executed and delivered to the Purchasers at Closing the Transaction
Documents.
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(c) The Company shall have satisfied all judgment liens against it filed of record with the
U.S. Patent and Trademark Office or otherwise.
(d) The Company shall have obtained the written consent of Fusion Capital Fund II, LLC, an
Illinois limited liability company and prospective funding source for Millenium upon consummation
of the Merger, to the transactions contemplated hereby in such form as the Purchasers shall
require.
(e) The Company shall have paid Whitebox Advisors a $180,000 cash origination fee related to
the transactions contemplated hereby.
(f) Sheppard, Mullin, Xxxxxxx & Hampton LLP, legal counsel to the Company (“SMRH”), shall have
delivered an opinion to the Purchasers with respect to the following matters (which opinion may
contain customary exclusions and limitations that are reasonably acceptable to counsel for the
Purchasers):
(i) The Company is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware. The Company has all corporate power and authority
necessary to own its properties and to conduct its business as, to SMRH’s knowledge, it is
presently conducted. The Company is qualified to do business and is in good standing in each state
where it owns or leases any material property or conducts any material business, except where a
failure to so qualify would not have a material adverse effect on the Company.
(ii) The Company has the requisite corporate power and authority to execute, deliver and
perform its obligations under the Transaction Documents.
(iii) The Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Company.
(iv) The authorized capital stock of the Company consists of 10,000,000 shares of Common
Stock, par value $0.00025 per share, 6,874,429 shares of which to SMRH’s knowledge are issued and
outstanding prior to the Closing, and 5,000,000 shares of Preferred Stock, par value $0.00025 per
share, 352,160 shares of which to SMRH’s knowledge are issued and outstanding prior to the Closing.
To SMRH’s knowledge, except as described in the Purchase Agreement (including the schedules and
exhibits thereto), there are no other presently outstanding preemptive rights to purchase from the
Company any of the authorized but unissued stock of the Company.
(v) Each of the Transaction Documents, when executed and delivered by the Company, will
constitute valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
(vi) When issued in compliance with the provisions of the Notes and Warrants (and upon payment
as provided by the Warrants), the Shares will be validly issued, fully paid and nonassessable.
- 15 -
(vii) The execution and delivery of the Transaction Documents by the Company will not result
in (i) a violation of the Company’s Certificate of Incorporation or Bylaws, as amended or (ii) a
violation of any judgment or order specifically identified on the Schedules to the Purchase
Agreement, if any.
(g) The Company shall have procured, at its expense, UCC-type insurance in form and amount
satisfactory to the Purchasers as to the perfection and priority of the Purchasers’ security
interest in the Collateral.
SECTION 6. MISCELLANEOUS
6.1. Governing Law. This Agreement shall be governed by the laws of the State of Minnesota as
such laws are applied to agreements between Minnesota residents entered into and performed entirely
in Minnesota.
6.2. Survival. The representations, warranties, covenants and agreements made herein shall
survive any investigation made by the parties and the closing of the transactions contemplated
hereby. All statements as to factual matters contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the Company hereunder
solely as of the date of such certificate or instrument.
6.3. Successors and Assigns. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Notes, the
Warrants or the Shares from time to time.
6.4. Entire Agreement. The Transaction Documents and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set forth herein and
therein.
6.5. Severability. In case any provision of the Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
6.6. Amendment and Waiver. This Agreement may be amended or modified, and any provision
hereunder may be waived, only upon the written consent of the Company and Whitebox Advisors, as
agent for the Purchasers.
6.7. Notices. All notices, requests, consents, and other communications hereunder shall be in
writing and shall be deemed effectively given and received when delivered in person
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or by national overnight courier service or by certified or registered mail, return receipt
requested, or by telecopier, addressed as follows:
| (a) | if to the Company, at | |||
| Sutura, Inc. 00000 Xxxxxxx Xxxxxx Xxxxxxxx Xxxxxx, Xxxxxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxx, President and Chief Executive Officer Facsimile: (000) 000-0000 |
||||
| with a copy to: | ||||
| Sheppard, Mullin, Xxxxxxx & Hampton LLP 000 Xxxx Xxxxxx Xxxxx, Xxxxxx Xxxxx Xxxxx Xxxx, Xxxxxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxxx, Esq. Facsimile: (000) 000-0000 |
||||
| (b) | if to the Purchasers, in care of: | |||
| Whitebox Advisors, LLC 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 Xxxxxxxxxxx, Xxxxxxxxx 00000 Attention: Xxxxxxxx Xxxx, Chief Financial Officer Facsimile: (000) 000-0000 |
||||
| with a copy to: | ||||
| Xxxxxxxx & Xxxxxx P.A. 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Xxxxxxxxxxx, Xxxxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxxx, Esq. Facsimile: (000) 000-0000. |
6.8. Indemnification by the Company. The Company agrees to indemnify and hold the Purchasers
harmless against any loss, liability, damage or expense (including reasonable legal fees and costs)
that the Purchasers may suffer, sustain or become subject to as a result of or in connection with
the breach by the Company of any representation, warranty, covenant or agreement of the Company
contained in this Agreement, the Notes, the Warrants, the Security Agreement or the Patent and
Trademark Security Agreement, dated as of this date, among the Company and the Purchasers.
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6.9. Expenses. At Closing, the Company shall pay the Purchaser’s counsel, Xxxxxxxx
& Xxxxxx P.A., $17,000 for its legal fees and expenses in representing the Purchasers in connection
with the transactions contemplated hereby. In addition, the Purchaser agrees to pay or reimburse
the Purchasers for their reasonable legal fees and expenses that they may incur after the date
hereof in connection with the review and approval of any matter relating to the Merger or the
granting of any waiver with respect to, the modification of any of the terms or provisions of or
the enforcement of any of the Transaction Documents.
6.10. Titles and Subtitles. The titles of the sections and subsections of the Agreement are
for convenience of reference only and are not to be considered in construing this Agreement.
6.11. Counterparts. This Agreement may be delivered via facsimile or other means of electronic
communication, and may be executed in counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have hereunto affixed their signatures.
| Sutura, Inc. | Pandora Select Partners L.P., |
|||||||
| Whitebox Hedged High Yield Partners L.P., |
||||||||
| Whitebox Intermarket Partners L.P. and |
||||||||
| Whitebox Convertible Arbitrage |
||||||||
By
|
Partners L.P. | |||||||
| Xxxxxxx X. Xxxxxx, President and Chief Executive Officer |
||||||||
| By | ||||||||
| Their | ||||||||
| Xxxx X. Xxxxxx | ||||||||
| Xxxx X. Xxxxxx | ||||||||
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Exhibit A
Form of Notes
Form of Notes
- 19 -
Exhibit B
Form of Warrants
Form of Warrants
- 20 -
Exhibit C
Form of Registration Rights Agreement
Form of Registration Rights Agreement
- 21 -
Exhibit D
Form of Security Agreement
Form of Security Agreement
- 22 -
Exhibit E
Description of Collateral
Description of Collateral
All assets of Sutura, Inc., a Delaware corporation (the “Company”), including without
limitation, the following:
Inventory: All inventory of the Company as that term is defined in the Uniform Commercial
Code, whether now owned or hereafter acquired or in which the Company obtains rights, whether
consisting of whole goods, spare parts or components, supplies or materials whether acquired, held
or furnished for sale, for lease or for any other arrangements, or under contracts or for
manufacture or processing, and wherever located worldwide;
Equipment: All equipment of the Company, whether now owned or hereafter acquired, including
all present and future machinery, vehicles, furniture, fixtures, office and recordkeeping
equipment, parts, tools, jigs, supplies and all other goods (except inventory) used or bought for
use by the Company for any business or enterprise and including specifically (without limitation)
all accessions thereto, all substitutions and replacements thereof, and all like or similar
property now owned or hereafter acquired by the Company, and all of which is owned by the Company,
and all deposits made on any such equipment;
Deposit Accounts and Other Cash: All deposits and deposit accounts with any bank, savings and
loan association, credit union or like organization, and all funds and amounts therein, and whether
or not held in trust, or in custody or safekeeping, or otherwise restricted or designated for a
particular purpose, and all other cash or
marketable securities on hand, whether held in-vault or otherwise;
Receivables: Each and every right of the Company to the payment of money, whether such right
to payment now exists or hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a rendering of services, or of a
loan, out of the overpayment of taxes or other liabilities, or any other transaction or event,
whether such right to payment is created, generated or earned by the Company or by some other
person who subsequently transfers his, her or its interest to the Company, whether such right to
payment is or is not already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and other security
interests) which the Company may at any time have by law or agreement against any account debtor or
other person obligated to make such payment or against any property of such account debtor or other
persons including, but not limited to, all present and future accounts, contract rights, chattel
paper, bonds, notes and other debt instruments, and rights to payment in the nature of general
intangibles; and to include, without limitation, each and every right of the Company to the payment
of money, whether such right to payment now exists or hereafter arises, out of a sale, lease or
other disposition of Inventory or Equipment;
General Intangibles: All general intangibles of the Company whether now owned or hereafter
acquired, including (without limitation) all present and future U.S. and foreign patents,
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patent applications, copyrights, trademarks, trade names, trade secrets, customer or supplier lists
and contracts, manuals, operating instructions, permits, franchises, the right to use the Company’s
name, the Company’s internet domain names and address and the goodwill of the Company’s business.
Securities: All securities and other equity interests now owned or hereafter acquired by the
Company, including shares of capital stock of any now owned or hereafter acquired wholly owned or
partially owned subsidiary of the Company.
The Collateral shall include (i) all substitutes and replacements for and proceeds of any and
all of the foregoing property, and in the case of all tangible Collateral, all accessions,
accessories, attachments, parts, equipment and repairs now or hereafter attached or affixed to or
use in connection with any such goods and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
- 24 -
Schedule 3.1
Subsidiaries
Subsidiaries
- 25 -
Schedule 3.2
Stock Matters
Stock Matters
- 26 -
Schedule 3.6
Certain Agreements and Actions
Certain Agreements and Actions
- 27 -
Schedule 3.7
Related Party Matters
Related Party Matters
- 28 -
Schedule 3.8
Changes
Changes
- 29 -
Schedule 3.9
Properties Matters
Properties Matters
- 30 -
Schedule 3.10
Intellectual Property Matters
Intellectual Property Matters
- 31 -
Schedule 3.11
Compliance Matters
Compliance Matters
- 32 -
Schedule 3.12
Litigation
Litigation
- 33 -
Schedule 3.14
Employment Matters
Employment Matters
- 34 -
Schedule 3.15
Registration Rights
Registration Rights
- 35 -
Schedule 3.16
Violations
Violations
- 36 -
Schedule 3.20
Product Liability Insurance
Product Liability Insurance
- 37 -
Schedule 3.22
Encumbrances on Collateral
Encumbrances on Collateral
- 38 -
Schedule 3.24
Brokers or Finders
Brokers or Finders
The Company owes a cash payment of $360,000 to Catalina Capital Advisors or its assigns in
connection with the closing on the transactions contemplated by this Agreement.
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