This Subscription
Agreement (this “ Agreement ”) is entered into
as of December 4, 2008, by and among ReGen Biologics, Inc., a
Delaware corporation (together with its successors and permitted
assigns, the “ Issuer ”), and the undersigned
investors (together with their successors and permitted assigns,
the “ Investors ” and each an “
Investor ”). Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in
Section 11.1 .
Subject to the
terms and conditions of this Agreement the Issuer desires to issue
and sell to the Investors, for an aggregate purchase price of less
than $500,000, an aggregate principal amount of less than $500,000
of the Issuer’s Unsecured Convertible Notes substantially in
the form attached hereto as Exhibit A (the “
Notes ”) and warrants to purchase the Issuer’s
Common Stock, par value $0.01 per share (“ Common
Stock ”) pursuant to the terms of the warrant
substantially in the form attached hereto as Exhibit B
(the “ Warrant ”) and each Investor, severally
and not jointly, desires to subscribe for and purchase the
principal amount of Notes set forth on such Investor’s
signature page hereto.
In consideration
of the mutual representations and warranties, covenants and
agreements contained herein, the parties hereto agree as
follows:
1.
SUBSCRIPTION AND ISSUANCE OF NOTES .
1.1
Subscription and Issuance of the Notes . At Closing, upon
the terms and subject to the conditions set forth herein:
(a) the Issuer agrees that it will issue to the Investors an
aggregate principal amount of less than $500,000 of the Notes for
an aggregate purchase price (the “ Aggregate Purchase
Price ”) of less than $500,000 (the “
Offering ”), and each Investor, severally and not
jointly, agrees that it will acquire from the Issuer Notes in the
amount set forth on its signature page hereto; (b) the Issuer
agrees that it will issue to each Investor, and each Investor
severally and not jointly agrees that it will acquire from the
Issuer, Notes, in each case, up to the aggregate principal amount
set forth on the signature page for each Investor hereof (the
“ Investment Amount ”); and (c) each
Investor agrees to remit payment for its Investment Amount in
accordance with the provisions of Section 1.3
.
1.2
Interest . Interest (“ Interest ”) at the
rate of 8.00% per annum shall be payable on the Maturity Date in
arrears on the sum of the principal amount of each Note then
outstanding. Interest on the principal amount outstanding shall
accrue daily and shall commence accruing from the date of Closing
and shall be computed on the basis of a 360-day year of twelve
(12) 30-day months.
1.3 Payment for
the Notes . At Closing, upon the terms and subject to the
conditions set forth herein, each Investor shall pay its respective
Investment Amount. All payments by
1
Investors shall
be paid in cash, by wire transfer of immediately available funds at
Closing to an account designated in a written notice delivered by
the Issuer to each Investor not later than two (2) days prior
to the Closing.
1.4
Repayment . All outstanding principal and accrued interest
with respect to a Note shall be due and payable (i) in the
form of Common Stock if elected by the Investor or (ii) in the
form of cash on July 24, 2009 (the “ Maturity
Date ”), unless such Note has been converted pursuant to
Section 3.1 hereof.
1.5 Legend
. Any certificate or certificates representing the Notes or any
shares of Common Stock issuable upon conversion of any Note shall
bear the following legend, in addition to any legend that may be
required by any Requirements of Law:
THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE
SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE
WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES
AND EXCHANGE COMMISSION.
2.1 Closing
. The closing of the transactions contemplated herein (the “
Closing ”) shall take place on a date designated by
the Issuer, which date shall be December 4, 2008. The Closing
shall take place at the offices of Pillsbury Winthrop Shaw Pittman
LLP, counsel for the Issuer, 1650 Tysons Boulevard, McLean, VA
22102 or such other location as determined by the Issuer. At the
Closing (i) each Investor shall remit payment in accordance
with and in the manner specified in Section 1.3 ,
(ii) the Issuer shall issue to the Investors the Notes
representing an amount equal to each Investor’s Investment
Amount, (iii) the Issuer shall issue to each Investor a
Warrant or Warrants to purchase a number of shares of Common Stock
equal to 25% of the amount of such Investor’s Investment
Amount divided by $3.00 and (iv) all other actions
referred to in this Agreement which are required to be taken for
the Closing shall be taken and all other agreements and other
documents referred to in this Agreement which are required for the
Closing shall be executed and delivered.
2.2
Termination . This Agreement may be terminated at any time
prior to the Closing:
(a) by
mutual written consent of the Issuer and the Investors;
(b) with
respect to any Investor’s obligations hereunder, by such
Investor, upon a materially inaccurate representation or breach of
any material warranty, covenant or
2
agreement on
the part of the Issuer set forth in this Agreement, in either case
such that the conditions in Section 10.1 would be
reasonably incapable of being satisfied on or prior to the date of
the Closing; or
(c) by
the Issuer, upon a materially inaccurate representation or breach
of any material warranty, covenant or agreement on the part of the
Investors set forth in this Agreement, in either case such that the
conditions in Section 10.2 would be reasonably
incapable of being satisfied on or prior to the date of the
Closing.
2.3 Effect of
Termination . In the event of termination of this Agreement
pursuant to Section 2.2 , this Agreement shall
forthwith become void, there shall be no liability on the part of
the Issuer or the Investors to each other and all rights and
obligations of any party hereto shall cease; provided ,
however , that nothing herein shall relieve any party from
liability for the willful breach of any of its representations and
warranties, covenants or agreements set forth in this
Agreement.
3.1 Optional
Conversion . On or after the date of Closing, the Holder of a
Note shall, at its sole election be entitled to convert the
outstanding principal amount together with accrued and unpaid
interest of such Note (the “ Note Amount ”) into
fully paid and nonassessable shares of Common Stock in accordance
with this Section 3 . The Issuer shall not issue any
fractional shares of Common Stock upon any conversion. Instead, the
Issuer shall pay to such Investor cash in lieu of fractional shares
based on the per share price of $3.00.
3.2 Conversion
Rate . The number of shares of Common Stock issuable upon
conversion of the Note Amount (the “ Conversion Rate
”) shall be determined by dividing (a) such Note Amount
by (b) $3.00 (the “ Conversion Price ”),
subject to adjustment as described in Section 3.3
below.
3.3 Adjustment
to Conversion Rate .
(a) In
case the Issuer shall at any time after the Closing declare a
dividend or make a distribution on Common Stock, subdivide or split
the outstanding Common Stock, combine or reclassify the outstanding
Common Stock into a smaller number of shares or consolidate with,
or merge with or into, any other entity, or engage in any
reorganization, reclassification or recapitalization that is
effected in such a manner that the holders of Common Stock are
entitled to receive stock, securities, cash or other assets with
respect to or in exchange for Common Stock, then the kind and
amount of stock, securities, cash or other assets issuable upon
conversion of the Note in effect at the time of the record date for
such dividend or distribution or of the effective date of such
subdivision, split, combination, consolidation, merger,
reorganization, reclassification or recapitalization shall be
adjusted so that the conversion of the Note after such time shall
entitle the holder to receive the aggregate number of shares of
Common Stock or securities, cash and other assets that, if the Note
had been converted immediately prior to such time, such holder
would have owned upon such conversion and been
3
entitled to
receive by virtue of such dividend, distribution, subdivision,
split, combination, consolidation, merger, reorganization,
reclassification or recapitalization. Such adjustment shall be made
successively whenever any event listed above shall
occur.
(i) All
calculations under this subsection (a) shall be made to the
nearest four decimal points.
(ii) In
the event that, at any time as a result of the provisions of this
subsection (a), the holder of the Note upon subsequent conversion
shall become entitled to receive any securities other than Common
Stock, the number and kind of such other securities so receivable
upon conversion of the Note shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained
herein.
(b) In
the event the Issuer shall at any time after the Closing issue
Additional Shares of Common Stock (as defined below) without
consideration or for consideration per share less than $2.40 per
share, as adjusted in accordance with subsection (a) above (a
“ Dilutive Issuance ”), then the Conversion
Price shall be reduced, concurrently with such Dilutive Issuance,
to the consideration per share received or deemed received by the
Issuer for such issued or deemed issue of the Additional Shares of
Common Stock, with such consideration per share to be calculated by
dividing the total amount of consideration received or deemed
received by the Issuer for such Dilutive Issuance by the
total number of Additional Shares of Common Stock issued or deemed
issued as part of such Dilutive Issuance; provided that , if
such Dilutive Issuance was without consideration, then the Issuer
shall be deemed to have received consideration of $0.01 per share
for all such Additional Shares of Common Stock issued or deemed to
be issued. For clarity, any Additional Shares of Common Stock
issued or deemed to be issued pursuant to the same agreement or
transaction shall be considered one Dilutive Issuance.
(c) For
purposes of this Section 3.3 , “Additional Shares
of Common Stock” shall mean all shares of Common Stock issued
by the Issuer or deemed to be issued pursuant to subsection
(d) of this Section 3.3 , excluding those shares
described in subsection (e) of this Section 3.3
.
(d) In
the case of Common Stock deemed to be issued, which shall include
the issuance of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities, the
following provisions shall apply:
(i) The
aggregate maximum number of shares of Common Stock deliverable upon
exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time,
but without taking into account potential anti-dilution
adjustments) of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration
4
equal to the
consideration, if any, received by the Issuer upon the issuance of
such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential
anti-dilution adjustments) for the Common Stock covered
thereby.
(ii) The
aggregate maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for any such convertible or
exchangeable securities (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account
potential anti-dilution adjustments) or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and
for a consideration equal to the consideration, if any, received by
the Issuer for any such securities and related options or rights
(excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration, if
any, to be received by the Issuer (without taking into account
potential anti-dilution adjustments) upon the conversion or
exchange of such securities or the exercise of any related options
or rights.
(iii) In
the event of any change in the number of shares of Common Stock
deliverable or in the consideration payable to the Issuer upon
exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price of the
Notes, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or
exchange of such securities.
(iv) Upon
the expiration of any such options or rights, the termination of
any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Notes to the extent in any
way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall
be recomputed to reflect the issuance of only the number of shares
of Common Stock (and convertible or exchangeable securities which
remain in effect) actually issued upon the exercise of such options
or rights, upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to such
securities.
(v) The
number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to clauses (i) and
(ii) above shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
clause (iii) or clause (iv) above.
(e) Notwithstanding
the foregoing, no adjustment will be made under this
Section 3.3 in respect to any issuance of Common Stock
(i) upon exercise or conversion of any options or other
securities described in the Issuer’s securities filings with
the SEC on file with
5
the SEC prior
to Closing or otherwise pursuant to any employee benefit plan of
the Issuer or its subsidiaries or hereafter adopted by the Issuer,
(ii) or convertible securities issued in a joint venture,
strategic partnership or licensing arrangement, the primary purpose
of which is not the raising of capital, (iii) issued in
connection with this Agreement or (iv) which results in an
adjustment pursuant to subsection (a).
4.
REPRESENTATIONS AND WARRANTIES OF THE ISSUER .
As a material
inducement to the Investors entering into this Agreement,
subscribing for the Notes, except as set forth in the Disclosure
Schedules delivered to the Investors concurrently herewith, the
Issuer represents and warrants to the Investors as
follows:
4.1 Corporate
Status . The Issuer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Each of the Issuer and its Subsidiaries has full
corporate power and authority to own and hold its properties and to
conduct its business as described in the Issuer’s SEC
Reports. Each of the Issuer and its Subsidiaries is duly qualified
to do business and is in good standing in each jurisdiction in
which the nature of its business requires qualification or good
standing, except for any failure to be so qualified or be in good
standing that would not have a Material Adverse Effect.
4.2 Corporate
Power and Authority . The Issuer has the corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. At or prior to the Closing, the Issuer will
have taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. No further
approval or authorization of any stockholder or the board of
directors of the Issuer is required for the issuance and sale of
the Notes or, except as provided in Section 7.2 , the
filing of the Registration Statement.
4.3
Enforceability . This Agreement has been duly executed and
delivered by the Issuer and (assuming it has been duly authorized,
executed and delivered by the Investors) constitutes a legal, valid
and binding obligation of the Issuer, enforceable against the
Issuer in accordance with its terms, except (a) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally, and (b) the
indemnity provisions of Section 9 of this Agreement, to
the extent such provisions may not be enforceable based upon public
policy considerations, and general equitable principles, regardless
of whether such enforceability is considered in a proceeding at law
or in equity.
4.4 No
Violation . The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated
hereby, and the compliance by the Issuer with the terms and
provisions hereof (including, without limitation, the
Issuer’s issuance to the Investors of the Notes as
contemplated by and in accordance with this Agreement), will not
result in a default under (or give any other party the right, with
the giving of notice or the passage of time (or both),
6
to declare a
default or accelerate any obligation under) or violate the
Certificate of Incorporation or Bylaws of the Issuer or any
material Contract to which the Issuer is a party (except to the
extent such a default, acceleration, or violation would not, in the
case of a Contract, have a Material Adverse Effect on the Issuer),
or materially violate any Requirement of Law applicable to the
Issuer, or result in the creation or imposition of any material
Lien upon any of the capital stock, properties or assets of the
Issuer or any of its Subsidiaries (except where such violations of
any Requirement of Law or creations or impositions of any Liens
would not have a Material Adverse Effect on the Issuer). Neither
the Issuer nor any of its Subsidiaries is (a) in default under
or in violation of any material Contract to which it is a party or
by which it or any of its properties is bound or (b) to its
knowledge, in violation of any order of any Governmental Authority,
which, in the case of clauses (a) and (b) , could
reasonably be expected to have a Material Adverse
Effect.
4.5
Consents/Approvals . Except for the filing of a registration
statement in accordance with Article 7 hereof and
filings with the SEC and the securities commissions of the states
in which the Notes are to be issued, no consents, filings,
authorizations or other actions of any Governmental Authority are
required to be obtained or made by the Issuer for the
Issuer’s execution, delivery and performance of this
Agreement which have not already been obtained or made. No consent,
approval, waiver or other action by any Person under any Contract
to which the Issuer is a party or by which the Issuer or any of its
properties or assets are bound is required or necessary for the
execution, delivery or performance by the Issuer of this Agreement
and the consummation of the transactions contemplated hereby,
except where the failure to obtain such consents would not have a
Material Adverse Effect on the Issuer.
4.6 Valid
Issuance . Upon payment of the Aggregate Purchase Price by the
Investors and delivery to the Investors of the Notes, the Notes
will be validly issued, fully paid and nonassessable and will be
free and clear of all Liens imposed by the Issuer. The shares of
Common Stock issuable upon conversion of the Notes (the “
Conversion Shares ”) when issued will be validly
issued, fully paid and nonassessable and will be free and clear of
all Liens imposed by the Issuer and will not be subject to any
preemptive rights or other similar rights of stockholders of the
Issuer imposed by law.
4.7 SEC Filings
and Other Filings . Except as set forth on
Schedule 4.7 , the Issuer has timely made all filings
required to be made by it under the Exchange Act since December 31,
2006. The Issuer has delivered or made accessible to the Investors
true, accurate and complete copies of (a) the Issuer’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2007; (b) the Issuer’s definitive
proxy statement dated April 21, 2008 relating to its 2008
Annual Meeting of Stockholders; and (c) the Issuer’s
Period Reports on Form 10-Q filed May 8, 2008 for the quarter
ended March 31, 2008, August 8, 2008 for the quarter
ended June 30, 2008 and November 10, 2008 for the quarter
ended September 30, 2008 (as such documents have, since the
time of their filing, been amended or supplemented, and together
with all reports, documents and information filed or after the date
first written above through the date of Closing with the SEC,
collectively the “ SEC Reports ”). The SEC
Reports, when filed (unless amended and superseded by a later
Issuer filing prior to the date hereof, then on the date of such
later filing), complied in all material respects with all
applicable requirements of the Exchange Act and the Securities Act,
if
7
and to the
extent applicable, and the rules and regulations of the SEC
thereunder applicable to the SEC Reports. None of the SEC Reports
when filed (unless amended and superseded by a later Issuer filing
prior to the date hereof, then on the date of such later filing)
contained any misstatement of a material fact or omitted to state a
material fact necessary to prevent the statements made therein from
being misleading.
4.8
Commissions . Except for those fees set forth on
Schedule 4.8 , the Issuer has not incurred any other
obligation for any finder’s or broker’s or
agent’s fees or commissions in connection with the
transactions contemplated hereby.
4.9
Capitalization . As of the date hereof, the authorized
capital stock of the Issuer consists of 165,000,000 shares of
Common Stock and 60,000,000 shares of Preferred Stock. Except as
set forth on Schedule 4.9 , all issued and outstanding
shares of capital stock of the Issuer have been, and as of Closing
will be, duly authorized and validly issued and are fully paid and
non-assessable, have been issued in compliance with all applicable
state and federal securities laws in all material respects and were
not issued in violation of, or subject to, any preemptive,
subscription or other similar rights of any stockholder of the
Issuer imposed by law. As of November 30, 2008, the Issuer has
issued and outstanding 5,965,729 shares of Common Stock, not
accounting for any fractional shares, and 9,066,464 shares of
Preferred Stock, of which 2,483,116 shares have been designated as
Series A Convertible Preferred Stock and of which 6,583,348
shares have been designated as Series C Convertible Preferred
Stock, which in the aggregate are convertible into 453,323 shares
of Common Stock, not accounting for any fractional shares. Except
for outstanding options to purchase 5,644,540 shares of Common
Stock and outstanding warrants to purchase 1,004,487 shares of
Common Stock, as of November 30, 2008 there were no
outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal and similar rights)
or agreements, orally or in writing, for the purchase or
acquisition from the Issuer of any shares of capital stock, and,
except as set forth on Schedule 4.9 , the Issuer is not
a party to or subject to any agreement or understanding and, to the
Issuer’s knowledge, there is no agreement or understanding
between any Persons, which affects or relates to the voting or
giving of written consents with respect to any security or by a
director of the Issuer. The Issuer owns, directly or indirectly,
all of the capital stock of its Subsidiaries, free and clear of any
Liens or equitable interests other than as reflected in the SEC
Reports. Except as set forth in the SEC Reports, the Issuer has no
obligation, contingent or otherwise, to redeem or repurchase any
equity security or any security that is a combination of debt and
equity.
4.10 Material
Changes . Except as set forth in the SEC Reports (excluding any
“risk factors” or “forward-looking
statements” sections thereof) or as otherwise contemplated
herein, since December 31, 2007, there has been no Material
Adverse Effect in respect of the Issuer and its Subsidiaries taken
as a whole. Except as set forth in the SEC Reports (excluding any
“risk factors” or “forward-looking
statements” sections thereof), since December 31, 2007,
there has not been: (i) any direct or indirect redemption,
purchase or other acquisition by the Issuer of any shares of the
Common Stock; (ii) any declaration, setting aside or payment
of any dividend or other distribution by the Issuer with respect to
the Common Stock; (iii) any borrowings incurred or any
material liabilities (absolute, accrued or contingent) assumed,
other than current liabilities
8
incurred in the
ordinary course of business, liabilities under Contracts entered
into in the ordinary course of business, or liabilities not
required to be reflected on the Issuer’s financial statements
pursuant to GAAP or required to disclosed in the SEC Reports;
(iv) any Lien or adverse claim on any of the Issuer’s
material properties or assets, except for Liens for taxes not yet
due and payable or otherwise in the ordinary course of business;
(v) any sale, assignment or transfer of any of the
Issuer’s material assets, tangible or intangible, except in
the ordinary course of business; (vi) any extraordinary losses
or waiver of any rights of material value; (vii) any material
capital expenditures or commitments therefor other than in the
ordinary course of business; (viii) any other material
transaction other than in the ordinary course of business; (ix) any
material change in the nature or operations of the business of the
Issuer and its Subsidiaries; (x) any default in the payment of
principal or interest in any material amount, or violation of any
material covenant, with respect to any outstanding debt obligations
that are material to the Issuer and its Subsidiaries as a whole;
(xi) any material changes to the Issuer’s critical
accounting policies or material deviations from historical
accounting and other practices in connection with the maintenance
of the Issuer’s books and records; or (xii) any
agreement or commitment to do any of the foregoing.
4.11
Litigation . Except as set forth in the SEC Reports, there
is no action, suit, proceeding or investigation pending or, to the
Issuer’s knowledge, currently threatened against the Issuer
or any of its Subsidiaries that questions the validity of this
Agreement or the right of the Issuer to enter into it, or to
consummate the transactions contemplated hereby, or that could
reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect on the Issuer or any
material change in the current equity ownership of the Issuer. The
foregoing includes, without limitation, actions pending or, to the
Issuer’s knowledge, threatened involving the prior employment
of any of the Issuer’s employees or their use in connection
with the Issuer’s business of any information or techniques
allegedly proprietary to any of their former employers. Neither the
Issuer nor any of its Subsidiaries is a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of
any court or Governmental Authority. There is no action, suit,
proceeding or investigation by the Issuer or any of its
Subsidiaries currently pending or which the Issuer or any of its
Subsidiaries currently intends to initiate, which could reasonably
be expected to have a Material Adverse Effect.
4.12 Rights of
Registration, Voting Rights, and Anti-Dilution . Except as
contemplated in this Agreement and as set forth on
Schedule 4.12 , the Issuer has not granted or agreed to
grant any registration rights, including piggyback rights, to any
Person and, to the Issuer’s knowledge, no stockholder of the
Issuer has entered into any agreements with respect to the voting
of capital shares of the Issuer. Except as set forth in
Schedule 4.12 , the issuance of the Notes does not
constitute an anti-dilution event for any existing security holders
of the Issuer, pursuant to which such security holders would be
entitled to additional securities or a reduction in the applicable
conversion price or exercise price of any securities.
4.13
Offerings . Subject in part to the truth and accuracy of the
Investors’ representations and warranties set forth in this
Agreement, the offer, sale and issuance of the Notes, Warrants and
Conversion Shares (together, the “ Securities ”)
as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act and any applicable
9
state
securities laws, and neither the Issuer nor any authorized agent
acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
4.14 Licenses
and Permits . Except as disclosed in the SEC Reports or on
Schedule 4.14 , each of the Issuer and its Subsidiaries has
all Permits under applicable Requirements of Law from all
applicable Governmental Authorities that are necessary to operate
its businesses as presently conducted and all such Permits are in
full force and effect, except where the failure to have any such
Permits in full force and effect would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Neither the Issuer nor any of its Subsidiaries is in
default under, or in violation of or noncompliance with, any of
such Permits, except for any such default, violation, or
noncompliance which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. To the
Issuer’s knowledge, other than as disclosed in the SEC
Reports, there is no proposed change in any Requirements of Law
which would require the Issuer and its Subsidiaries to obtain any
Permits in order to conduct its business as presently conducted
that the Issuer and its Subsidiaries do not currently possess and
the lack of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect.
4.15 Patents
and Trademarks. The Issuer and each of its Subsidiaries has, or
has rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and know-how (including trade secrets or other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures) (collectively, the “ Intellectual
Property Rights ”) that are necessary for use in
connection with its business as presently conducted, except where
the failure to have such Intellectual Property Rights would not
reasonably be expected to have a Material Adverse Effect. To the
Issuer’s knowledge, there is no existing infringement by
another person or entity of any of the Intellectual Property Rights
that are necessary for use in connection with the Issuer’s
business as presently conducted. The Issuer is not infringing on
any intellectual property rights of any other person, nor is there
any claim of infringement made or, to the Issuer’s knowledge,
threatened by a third party against or involving the
Issuer.
4.16
Insurance. The Issuer maintains and will continue to
maintain insurance with such insurers, and insuring against such
losses, in such amounts, and subject to such deductibles and
exclusions as are customary in the Issuer’s industry and
otherwise reasonably prudent, all of which insurance is in full
force and effect.
4.17 Material
Contracts . All material Contracts to which the Issuer or any
Subsidiary is a party and which are required to have been filed by
the Issuer on Exhibit 10 to the SEC Reports have been filed by
the Issuer with the SEC pursuant to the requirements of the
Exchange Act. Except as disclosed in the SEC Reports, each such
material Contract is in full force and effect, except as otherwise
required pursuant to its respective terms, and is binding on the
Issuer or its Subsidiaries, as the case may be, in each case, in
accordance with its respective terms, and neither the Issuer or any
of its Subsidiaries nor, to the Issuer’s knowledge, any other
party thereto is in breach of, or in default under, any such
material Contract, which breach or default would
10
reasonably be
expected to have a Material Adverse Effect. Except as set forth in
the SEC Reports, there exists no actual or, to the knowledge of the
Issuer, threatened termination, cancellation or limitation of, or
any material adverse modification or change in, the business
relationship of the Issuer or any of its Subsidiaries, or the
business of the Issuer or any of its Subsidiaries, with any
customer or supplier or any group of customers or suppliers whose
purchases or inventories provided to the business of the Issuer or
any of its Subsidiaries would, individually or in the aggregate,
have a Material Adverse Effect.
4.18 Taxes
. The Issuer has filed all material federal, state and foreign
income and franchise tax returns which are due and has paid or
accrued all taxes shown as due thereon, and the Issuer has no
knowledge of a tax deficiency which has been or might be asserted
or threatened against it which is reasonably likely to have a
Material Adverse Effect.
4.19 Private
Placement . Neither the Issuer nor any of its Subsidiaries or
Affiliates, nor any Person acting on its or their behalf,
(i) has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of the
Securities, (ii) has, directly or indirectly, made any offers
or sales of any security or solicited any offers to buy any
security, under any circumstances that would require registration
of the Securities under the Securities Act or (iii) has issued
any shares of Common Stock or shares of any series of preferred
stock or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to
acquire shares of Common Stock which would be integrated with the
sale of the Securities hereunder for purposes of the Securities Act
or of any applicable stockholder approval provisions, nor will the
Issuer or any of its Subsidiaries or Affiliates take any action or
steps that would require registration of any of the Securities
under the Securities Act or cause the offering of the Securities to
be integrated with other offerings. Assuming the accuracy of the
representations and warranties of the Investors, the offer and sale
of the Securities by the Issuer to the Investors pursuant to this
Agreement will be exempt from the registration requirements of the
Securities Act.
4.20
Application of Takeover Protections . There is no control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar
anti-takeover provision under the Issuer’s charter documents
or the laws of its state of incorporation that is or could become
applicable to the Investors as a result of the Investors and the
Issuer fulfilling their obligations or exercising their rights
hereunder, including, without limitation, as a result of the
Issuer’s issuance of the Securities or the Investors’
ownership of the Securities.
5.
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR .
As a material
inducement to the Issuer entering into this Agreement and issuing
the Notes, and in reliance upon the representations and warranties
of the Issuer in Section 4 hereof, each of the Investors
severally and not jointly represents, warrants, and covenants to
the Issuer as follows:
11
5.1 Power and
Authority . The Investor, if other than a natural person, is an
entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation. The
Investor has the corporate, partnership or other power (or
capacity) and authority under applicable law to execute and deliver
this Agreement and consummate the transactions contemplated hereby,
and has all necessary authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. The Investor has taken all necessary action to
authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
5.2 No
Violation . The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated
hereby, and the compliance by the Investor with the terms and
provisions hereof, will not result in a default under (or give any
other party the right, with the giving of notice or the passage of
time (or both), to declare a default or accelerate any obligation
under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the
Investor is a party or by which it or its properties or assets are
bound, or violate any Requirement of Law applicable to the
Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a
Material Adverse Effect on the Investor. The Investor will comply
with any Requirement of Law applicable to it in connection with the
Offering and any resale by the Investor of any of the
Securities.
5.3
Consents/Approvals . No consents, filings, authorizations or
actions of any Governmental Authority are required for the
Investor’s execution, delivery and performance of this
Agreement. No consent, approval, waiver or other actions by any
Person under any Contract to which the Investor is a party or by
which the Investor or any of its properties or assets are bound is
required or necessary for the execution, delivery and performance
by the Investor of this Agreement and the consummation of the
transactions contemplated hereby.
5.4
Enforceability . This Agreement has been duly executed and
delivered by the Investor and (assuming it has been duly
authorized, executed and delivered by the Issuer) constitutes a
legal, valid and binding obligation of the Investor, enforceable
against the Investor in accordance with its terms, except
(a) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditor’s rights generally, and
(b) the indemnity provisions of Section 9 of this
Agreement, to the extent they may not be enforceable based upon
public policy considerations, and general equitable principles,
regardless of whether enforceability is considered in a proceeding
at law or in equity.
5.5 Investment
Intent . The Investor is acquiring the Notes hereunder for its
own account and with no present intention of distributing or
selling any of the Securities and further agrees not to transfer
such Securities in violation of the Securities Act or any
applicable state securities law, and no one other than the Investor
has any beneficial interest in the Notes (except to the extent that
the Investor may have delegated voting authority to its investment
advisor) or the Conversion Shares. The Investor agrees that it will
not sell or otherwise dispose of any of the Securities unless such
sale or other disposition has been registered under the Securities
Act or, in
12
the opinion of
counsel acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the
opinion of such counsel acceptable to the Issuer, is exempt from
registration or qualification under applicable state securities
laws. The Investor understands that the offer and sale by the
Issuer of the Notes being acquired by the Investor hereunder has
not been registered under the Securities Act by reason of their
contemplated issuance in transactions exempt from the registration
and prospectus delivery requirements of the Securities Act pursuant
to Section 4(2) thereof, and that the reliance of the Issuer
on such exemption from registration is predicated in part on these
representations and warranties of the Inv
|
