EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement, dated on and as of the date set
forth on the signature page hereto (this "Agreement"), is made between Synovis
Life Technologies, Inc., a Minnesota corporation (the "Company"), and the
undersigned purchaser(s) (each a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Regulation D promulgated thereunder, the Company
desires to offer, issue and sell to the Purchasers (the "Offering"), and the
Purchasers, severally and not jointly, desire to purchase from the Company,
shares (the "Shares") of the Company's common stock, par value $0.01 per share,
including certain attached common stock purchase rights pursuant to the
Company's Rights Agreement, referred to in Paragraph (c)(2), below (the "Common
Stock"), as more fully described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration the
receipt and adequacy of which is hereby acknowledged, the Company and each of
the Purchasers agree as follows:
A. SUBSCRIPTION
(1) The Purchaser hereby irrevocably subscribes for and agrees to
purchase Shares in the amount indicated on the signature page hereto (the
"Subscription Amount"). The Purchaser shall deliver the Subscription Amount
within three (3) business days of the date of this Agreement by check payable to
an escrow account to be established and identified or by wire transfer to the
Company's escrow agent in accordance with wire transfer instructions to be
provided separately, and such amount shall be held in the manner described in
Paragraph (A)(2) below. The Purchaser acknowledges that the actual number of
Shares that the Purchaser will be issued at the Closing (as defined below) will
be equal to the quotient of (x) the Subscription Amount, divided by (y) the
Offering Price (as defined below), rounded down to the nearest whole number of
Shares. For purposes of this Agreement, the "Offering Price" shall mean $26.00
per Share.
(2) All payments for Shares made by the Purchasers as contemplated
by Paragraph (1) above will be deposited as soon as practicable for the
undersigned's benefit in a non-interest bearing escrow account. The payment will
be returned promptly, without interest or deduction, if, or to the extent, the
undersigned's subscription is rejected or the Offering is terminated for any
reason. The Company may hold the closing of the Offering (the "Closing") at any
time during the period beginning after one or more subscriptions have been
accepted and ending on or before September 30, 2003 (the "Termination Date");
provided, however, that the Termination Date may be extended another 30 days
upon the mutual agreement of the Company and ▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc., the
placement agent for the Offering (the "Placement Agent"). There is no minimum
subscription amount required for the Closing.
(3) Upon receipt by the Company of the requisite payment for all
Shares to be purchased by the Purchasers whose subscriptions are accepted at
Closing, the Company shall, at Closing: (i) issue to each Purchaser stock
certificates representing the shares of Common Stock purchased under this
Agreement; (ii) deliver to the Placement Agent a certificate stating that the
representations and warranties made by the Company in Section C of this
Agreement were true and correct in all material respects when made and are true
and correct in all material respects on the date of the Closing relating to the
Shares subscribed for pursuant to this Agreement as though made on and as of
such Closing date (provided, however, that representations and warranties that
speak as of a specific date shall continue to be true and correct as of the
Closing with respect to such date) ; and (iii) cause to be delivered to the
Placement Agent an opinion of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP substantially in
the form of Exhibit A hereto.
(4) The Purchaser acknowledges and agrees that this Agreement
shall be binding upon the Purchaser upon the execution and delivery to the
Company, in care of the Placement Agent, of the Purchaser's signed counterpart
signature page to this Agreement unless and until the Company or the Placement
Agent shall reject the subscription being made hereby by the Purchaser.
(5) The Purchaser agrees that each of the Company and the
Placement Agent may reduce the Purchaser's subscription with respect to the
number of Shares to be purchased without any prior notice or further consent by
the Purchaser. If such a reduction occurs, the part of the Subscription Amount
attributable to the reduction shall be promptly returned, without interest or
deduction.
(6) The Purchaser acknowledges and agrees that the purchase of
Shares by the Purchaser pursuant to the Offering is subject to all the terms and
conditions set forth in this Agreement as well as in the Memorandum (as defined
below).
(B) REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each of the Purchasers hereby represents and warrants to the Company
and the Placement Agent, and agrees with the Company as follows:
(1) The Purchaser has been furnished with and has carefully read
the Company's Confidential Private Placement Memorandum dated September 2, 2003,
as supplemented or amended (together with all documents and filings attached
thereto or incorporated therein by reference, the "Memorandum") and this
Agreement (collectively the "Offering Documents"), and is familiar with and
understands the terms of the Offering. Specifically, and without limiting in any
way the foregoing representation, the Purchaser has carefully read and
considered the Company's financial statements included in the Company's annual
report on Form 10-K for the fiscal year ended October 31, 2002 (the "2002 Form
10-K"), the subsection of the 2002 Form 10-K entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the section of
the 2002 Form 10-K entitled "Item 1. Business," the financial results contained
in each of the Company's quarterly reports on Form 10-Q for each of the periods
ending subsequent to October 31, 2002 and the subsection of each such Form 10-Q
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and the section of the Memorandum entitled "Risk
Factors," and fully understands all of the risks
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related to the purchase of the Shares. The Purchaser has carefully considered
and has discussed with the Purchaser's professional legal, tax, accounting and
financial advisors, to the extent the Purchaser has deemed necessary, the
suitability of an investment in the Shares for the Purchaser's particular tax
and financial situation and has determined that the Shares being subscribed for
by the Purchaser are a suitable investment for the Purchaser. The Purchaser
recognizes that an investment in the Shares involves substantial risks,
including the possible loss of the entire amount of such investment.
(2) The Purchaser acknowledges that (i) the Purchaser has had the
opportunity to request copies of any documents, records, and books pertaining to
this investment and (ii) any such documents, records and books that the
Purchaser requested have been made available for inspection by the Purchaser,
the Purchaser's attorney, accountant or advisor(s).
(3) The Purchaser and the Purchaser's advisor(s) have had a
reasonable opportunity to ask questions of and receive answers from
representatives of the Company or persons acting on behalf of the Company
concerning the Offering and all such questions have been answered to the full
satisfaction of the Purchaser.
(4) The Purchaser is not subscribing for Shares as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar, meeting or conference whose
attendees have been invited by any general solicitation or general advertising.
(5) If the Purchaser is a natural person, the Purchaser has
reached the age of majority in the state in which the Purchaser resides. Each
Purchaser has adequate means of providing for the Purchaser's current financial
needs and contingencies, is able to bear the substantial economic risks of an
investment in the Shares for an indefinite period of time, has no need for
liquidity in such investment and can afford a complete loss of such investment.
(6) The Purchaser has sufficient knowledge and experience in
financial, tax and business matters to enable the Purchaser to utilize the
information made available to the Purchaser in connection with the Offering, to
evaluate the merits and risks of an investment in the Shares and to make an
informed investment decision with respect to an investment in the Shares on the
terms described in the Offering Documents.
(7) The Purchaser will not sell or otherwise transfer the Shares
without registration under the Securities Act of 1933, as amended (the
"Securities Act") and applicable state securities laws or an applicable
exemption therefrom. The Purchaser acknowledges that neither the offer nor sale
of the Shares has been registered under the Securities Act or under the
securities laws of any state. The Purchaser represents and warrants that the
Purchaser is acquiring the Shares for the Purchaser's own account, for
investment and not with a view toward resale or distribution within the meaning
of the Securities Act. The Purchaser has not offered or sold the Shares being
acquired nor does the Purchaser have any present intention of selling,
distributing or otherwise disposing of such Shares either currently or after the
passage of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstances in violation of the
Securities Act. The Purchaser is aware that (i) the Shares are not currently
eligible for sale in reliance upon Rule 144 promulgated under the
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Securities Act and (ii) the Company has no obligation to register the Shares
subscribed for hereunder, except as provided in Section E hereof.
(8) The Purchaser acknowledges that the certificate representing
the Shares shall be stamped or otherwise imprinted with a legend substantially
in the following form: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION, WHICH, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS
AVAILABLE." Certificates evidencing the Shares shall not be required to contain
such legend or any other legend (i) following any sale of such Shares pursuant
to Rule 144, or (ii) if such Shares are eligible for sale under Rule 144(k) or
have been sold pursuant to the Registration Statement and in compliance with the
obligations set forth in Section E(6), below, or (iii) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission), in
each such case (i) through (iii) to the extent determined by the Company's legal
counsel. At such time and to the extent as a legend is no longer required for
the Shares, the Company will no later than three trading days following the
delivery by a Purchaser to the Company or the Company's transfer agent of a
legended certificate representing such Shares (together with such accompanying
documentation or representations as reasonably required by counsel to the
Company), deliver or cause to be delivered to a certificate representing such
Shares that is free from the foregoing legend.
(9) If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust, estate or other entity: (i) such partnership,
corporation, trust, estate or other entity has the full legal right and power
and all authority and approval required (a) to execute and deliver this
Agreement and all other instruments executed and delivered by or on behalf of
such partnership, corporation, trust, estate or other entity in connection with
the purchase of its Shares, and (b) to purchase and hold such Shares; (ii) the
signature of the party signing on behalf of such partnership, corporation,
trust, estate or other entity is binding upon such partnership, corporation,
trust, estate or other entity; and (iii) such partnership, corporation, trust or
other entity has not been formed for the specific purpose of acquiring such
Shares, unless each beneficial owner of such entity is qualified as an
accredited investor within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act and has submitted information to the
Company substantiating such individual qualification.
(10) If the Purchaser is a retirement plan or is investing on
behalf of a retirement plan, the Purchaser acknowledges that an investment in
the Shares poses additional risks including the inability to use losses
generated by an investment in the Shares to offset taxable income.
(11) The information contained in the questionnaire in the form of
Exhibit B attached hereto delivered by the Purchaser in connection with this
Agreement (the "Questionnaire") is complete and accurate in all respects, and
the Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act on the basis indicated therein. The Purchaser shall
indemnify and hold harmless the Company and each officer, director or control
person, who is or may be a party or is or may be threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by
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reason of or arising from any actual or alleged misrepresentation or
misstatement of facts or omission to represent or state facts made or alleged to
have been made by the Purchaser to the Company or omitted or alleged to have
been omitted by the Purchaser, concerning the Purchaser or the Purchaser's
authority to invest or financial position in connection with the Offering,
including, without limitation, any such misrepresentation, misstatement or
omission contained in the Agreement or any other document submitted by the
Purchaser, against losses, liabilities and expenses for which the Company or any
officer, director or control person has not otherwise been reimbursed (including
attorney's fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Company or such officer, director or control person
in connection with such action, suit or proceeding. For the avoidance of doubt,
such indemnification shall be the several, and not joint, obligation of each
Purchaser with respect to its own action or inaction as provided above.
C. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to the
Purchaser, which shall survive the Closing and the purchase and sale of the
Shares. As used herein, "knowledge," as it relates to the Company, shall mean
the actual knowledge of any officer at a level of Vice President or above, as
obtained in the normal conduct of the Company's business.
(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 Minnesota and has full corporate power and authority to
conduct its business as currently conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary except where the failure
to be so qualified would not have a material adverse effect on the business,
properties, prospects, financial condition or results of operations of the
Company (a "Material Adverse Effect").
(2) Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of stock of all classes. The authorized capital
stock is divided into 20,000,000 shares of Common Stock, $0.01 par value per
share and 5,000,000 shares of Preferred Stock, $0.01 par value per share (the
"Preferred Stock"). As of August 26, 2003, there were 9,880,741 shares of Common
Stock issued and outstanding and no shares of Preferred Stock issued and
outstanding. As of August 26, 2003, the Company had reserved 3,007,231 shares of
Common Stock for issuance to employees, directors and consultants pursuant to
the Company's stock option plans and employee stock purchase plan (including
500,000 shares pursuant to the Company's 2004 Non-Employee Director Stock Option
Plan, which remains subject to shareholder approval), of which 1,080,955 shares
of Common Stock are subject to outstanding, unexercised options as of the date
hereof. Other than as set forth above or as contemplated in this Agreement or
that certain Rights Agreement, dated June 12, 1996, by and between the Company
and American Stock Transfer and Trust Company (the "Rights Agreement"), there
are no other options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which either the Company is
bound or obligating the Company to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
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(3) Issuance. The issuance of the Shares has been duly and validly
authorized by all necessary corporate and shareholder action, and the Shares,
when issued and paid for pursuant to this Agreement, will be validly issued,
fully paid and non-assessable shares of Common Stock of the Company.
(4) Authorization; Enforceability. The Company has all corporate
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares contemplated herein and
the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as rights to indemnification and
contribution hereunder may be limited by applicable law, and subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. The issuance and sale
of the Shares contemplated hereby will not give rise to any preemptive rights or
rights of first refusal on behalf of any person.
(5) No Conflict; Governmental and Other Consents.
(a) The execution and delivery by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the violation of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or by
which the Company is bound, or of any provision of the Restated Articles of
Incorporation, as amended, or Bylaws of the Company, and will not conflict with,
or result in a breach or violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of its properties or assets is subject, nor result in the
creation or imposition of any lien upon any of the properties or assets of the
Company except to the extent that any such violation, conflict or breach would
not be reasonably likely to have a Material Adverse Effect.
(b) No consent, approval, authorization or other order of
any governmental authority or other third-party is required to be obtained by
the Company in connection with the authorization, execution and delivery of this
Agreement or with the authorization, issue and sale of the Shares, except such
post-Closing filings as may be required to be made with the Securities and
Exchange Commission (the "SEC"), the Nasdaq National Market ("Nasdaq") and with
any state or foreign blue sky or securities regulatory authority.
(6) Litigation. There are no pending, or to the Company's
knowledge threatened, legal or governmental proceedings against the Company,
which, if adversely determined, would be reasonably likely to have a Material
Adverse Effect on the Company.
(7) Accuracy of Reports. All reports required to be filed by the
Company within the two years prior to the date of this Agreement (the "SEC
Reports") under the Securities Exchange
6
Act of 1934, as amended (the "Exchange Act"), have been duly filed with the SEC,
complied at the time of filing in all material respects with the requirements of
their respective forms and, except to the extent updated or superseded by any
subsequently filed report, were complete and correct in all material respects as
of the dates at which the information was furnished, and contained (as of such
dates) no untrue statements of a material fact nor omitted to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
(8) Financial Information. The Company's financial statements that
appear in the SEC Reports have been prepared in accordance with United States
generally accepted accounting principles ("GAAP"), except in the case of
unaudited statements, as permitted by Form 10-Q of the SEC or as may be
indicated therein or in the notes thereto, applied on a consistent basis
throughout the periods indicated and such financial statements fairly present in
all material respects the financial condition and results of operations of the
Company as of the dates and for the periods indicated therein.
(9) Absence of Certain Changes. Since the date of the Company's
financial statements in the latest of the SEC Reports, there has not occurred
any undisclosed event that has caused a Material Adverse Effect or any
occurrence, circumstance or combination thereof that reasonably would be likely
to result in such Material Adverse Effect.
(10) Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
(11) Subsidiaries. To the extent required under applicable SEC
rules, Exhibit 21.1 to the 2002 Form 10-K sets forth each subsidiary of the
Company, showing the jurisdiction of its incorporation or organization. For the
purposes of this Agreement, "subsidiary" shall mean any company or other entity
of which at least 50% of the securities or other ownership interest having
ordinary voting power for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company or
any of its other subsidiaries.
(12) Indebtedness. The financial statements in the SEC Reports
reflect, to the extent required, as of the date thereof all outstanding secured
and unsecured Indebtedness (as defined below) of the Company or any subsidiary,
or for which the Company or any subsidiary has commitments. For purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
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(13) Certain Fees. Other than fees payable to the Placement Agent
pursuant to the Placement Agent Agreement, no brokers', finders' or financial
advisory fees (not including fees payable to Deloitte & Touche LLP) or
commissions will be payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.
(14) Material Agreements. Except as set forth in the SEC Reports,
neither the Company nor any subsidiary is a party to any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement, a
copy of which would be required to be filed with the SEC as an exhibit to Form
10-K (each, a "Material Agreement"). The Company and each of its subsidiaries
has in all material respects performed all the obligations required to be
performed by them to date under the foregoing agreements, have received no
notice of default by the Company or the subsidiary that is a party thereto, as
the case may be, and, to the Company's knowledge, are not in default under any
Material Agreement now in effect, the result of which would be reasonably likely
to have a Material Adverse Effect.
(15) Transactions with Affiliates. Except as set forth in the SEC
Reports, there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions with
aggregate obligations of any party exceeding $60,000 between (a) the Company,
any subsidiary or any of their respective customers or suppliers on the one
hand, and (b) on the other hand, any person who would be covered by Item 404(a)
of Regulation S-K or any company or other entity controlled by such person.
(16) Taxes. The Company and each of the subsidiaries has accurately
prepared and filed all federal, state, local, foreign and other tax returns for
income, gross receipts, sales, use and other taxes and custom duties ("Taxes")
required by law to be filed by it, has paid or made provisions for the payment
of all Taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of the
Company and the subsidiaries for all current Taxes and other charges to which
the Company or any subsidiary is subject and which are not currently due and
payable, except for Taxes which, if unpaid, individually or in the aggregate, do
not and would not have a Material Adverse Effect on the Company or its
subsidiaries. The Company has no knowledge of any assessments, adjustments or
contingent tax liability (whether federal, state, local or foreign) pending or
threatened against the Company or any subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
(17) Environmental Matters. Except as disclosed in the SEC Reports,
to the Company's knowledge, all real property owned, leased or otherwise
operated by the Company and its subsidiaries is free of material contamination
from any substance, waste or material currently identified to be toxic or
hazardous pursuant to, within the definition of a substance which is toxic or
hazardous under, or which may result in liability under, any Environmental Law
(as defined below), including, without limitation, any asbestos, polychlorinated
biphenyls, radioactive substance, methane, volatile hydrocarbons, industrial
solvents, oil or petroleum or chemical liquids or solids, liquid or gaseous
products, or any other material or substance ("Hazardous Substance") which has
or would reasonably be expected to cause or constitute a health, safety, or
environmental hazard to any Person or property or result in any environmental
liabilities that would be reasonably likely to have a Material Adverse Effect.
To the Company's knowledge, neither the Company nor any of its subsidiaries has
caused or suffered to occur any
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material release, spill, migration, leakage, discharge, disposal, uncontrolled
loss, seepage, or filtration of Hazardous Substances that would reasonably be
expected to result in environmental liabilities that would be reasonably likely
to have a Material Adverse Effect. To the Company's knowledge, the Company and
each subsidiary has generated, treated, stored and disposed of any Hazardous
Substances in material compliance with applicable Environmental Laws, except for
such non-compliances that would not be reasonably likely to have a Material
Adverse Effect. The Company and each subsidiary has obtained, or has applied
for, and is in material compliance with and in good standing under all permits
required under Environmental Laws (except for such failures that would not be
reasonably likely to have a Material Adverse Effect) and neither the Company nor
any of its subsidiaries has any knowledge of any proceedings to substantially
modify or to revoke any such permit. To the Company's or its subsidiaries'
knowledge, there are no investigations, proceedings or litigation pending or
threatened, affecting or against the Company, any of its subsidiaries or any of
the Company's or its subsidiaries' facilities relating to Environmental Laws or
Hazardous Substances. "Environmental Laws" shall mean all federal, state,
regional and local laws, statutes, ordinances and regulations, in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including orders, consent decrees or judgments relating
to the regulation and protection of human health, safety, the environment and
natural resources.
(18) Intellectual Property Rights and Licenses. The Company and its
subsidiaries own or have the right to use any and all information, know-how,
trade secrets, patents, copyrights, trademarks, trade names, software, formulae,
methods, processes and other intangible properties that are of a such nature and
significance to the business that the failure to own or have the right to use
such items would have a Material Adverse Effect ("Intangible Rights"). The
Company (including its subsidiaries) has not received any written notice that it
is in conflict with or infringing upon the asserted intellectual property rights
of others in connection with the Intangible Rights, and, to the Company's
knowledge, neither the use of the Intangible Rights nor the operation of the
Company's businesses is infringing or has infringed upon any intellectual
property rights of others. All payments have been duly made that are necessary
to maintain the Intangible Rights in force. No claims have been made, and to the
Company's knowledge, no claims are threatened, that challenge the validity or
scope of any material Intangible Right of the Company or any of its
subsidiaries. The Company and each of its subsidiaries have taken reasonable
steps to obtain and maintain in force all licenses and other permissions under
Intangible Rights of third parties necessary to conduct their businesses as
heretofore conducted by them, and now being conducted by them, and as expected
to be conducted, and neither the Company nor any of its subsidiaries is or has
been in material breach of any such license or other permission. The Company has
obtained and maintained such agreements providing for assignment of all
patentable inventions made by and copyright interest in works created by
employees and non-employees as it reasonably believes is necessary for the
securing and maintenance by the Company of intellectual property rights with
respect to such inventions and interest and for the conduct of its business.
The Company and each of its subsidiaries have used all commercially
reasonable efforts to maintain the confidentiality of all trade secrets and
other confidential information owned by them or in their possession and have no
knowledge of any misappropriation of any such trade secrets or other
confidential information by any third party.
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(19) Labor, Employment and Benefit Matters.
(a) There are no existing, or to the best of the
Company's knowledge, threatened strikes or other labor disputes against the
Company or any of its subsidiaries that would be reasonably likely to have a
Material Adverse Effect. Except as set forth in the SEC Reports, there is no
organizing activity involving employees of the Company or any of its
subsidiaries pending or, to the Company's or its subsidiaries' knowledge,
threatened by any labor union or group of employees. There are no representation
proceedings pending or, to the Company's or its subsidiaries' knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of the Company or its subsidiaries has made a pending demand
for recognition.
(b) Except as set forth in the SEC Reports, neither the
Company nor any of its subsidiaries is, or during the five years preceding the
date of this Agreement was, a party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which
pertain to employees of the Company or its subsidiaries.
(c) Each employee benefit plan is in compliance with all
applicable law, except for such noncompliance that would not be reasonably
likely to have a Material Adverse Effect.
(d) Neither the Company nor any of its subsidiaries has
any liabilities, contingent or otherwise, including without limitation,
liabilities for retiree health, retiree life, severance or retirement benefits,
which are not fully reflected, to the extent required by GAAP, on the Balance
Sheet or fully funded. The term "liabilities" used in the preceding sentence
shall be calculated in accordance with reasonable actuarial assumptions.
(e) None of the Company nor any of its subsidiaries (i)
has terminated any "employee pension benefit plan" as defined in Section 3(2) of
ERISA (as defined below) under circumstances that present a material risk of the
Company or any of its subsidiaries incurring any liability or obligation that
would be reasonably likely to have a Material Adverse Effect, or (ii) has
incurred or expects to incur any outstanding liability under Title IV of the
Employee Retirement Income Security Act of 1974, as amended and all rules and
regulations promulgated thereunder ("ERISA").
(20) Compliance with Law. The Company is in compliance in all
material respects with all applicable laws, except for such noncompliance that
would not reasonably be likely to have a Material Adverse Effect. The Company
has not received any notice of, nor does the Company have any knowledge of, any
violation (or of any investigation, inspection, audit or other proceeding by any
governmental entity involving allegations of any violation) of any applicable
law involving or related to the Company which has not been dismissed or
otherwise disposed of that would be reasonably likely to have a Material Adverse
Effect. The Company has not received notice or otherwise has any knowledge that
the Company is charged with, threatened with or under investigation with respect
to, any violation of any applicable law that would reasonably be likely to have
a Material Adverse Effect.
10
(21) Ownership of Property. Except as set forth in the Company's
financial statements included in the SEC Reports, each of the Company and its
subsidiaries has (i) good and marketable fee simple title to its owned real
property, free and clear of all liens, except for liens which do not
individually or in the aggregate have a Material Adverse Effect; (ii) a valid
leasehold interest in all leased real property, and each of such leases is valid
and enforceable in accordance with its terms (subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy) and is in full force
and effect, and, (iii) good and marketable title to, or valid leasehold
interests in, all of its other properties and assets free and clear of all
liens, except for liens which do not individually or in the aggregate have a
Material Adverse Effect.
(22) Compliance with Nasdaq Listing Requirements. The Company is in
compliance in all material respects with all currently effective continued
listing requirements of the Nasdaq National Market.
(23) S-3 Eligibility. The Company currently meets all eligibility
requirements for the use of Form S-3 registration statements and anticipates
that it will continue to meet such requirements as of the Required Effectiveness
Date.
D. UNDERSTANDINGS
Each of the Purchasers understands, acknowledges and agrees with the
Company as follows:
(1) The Company may terminate this Offering or reject any
subscription at any time in its sole discretion. The execution of this Agreement
by the Purchaser or solicitation of the investment contemplated hereby shall
create no obligation on the part of the Company or the Placement Agent to accept
any subscription or complete the Offering.
(2) The Purchaser hereby acknowledges and agrees that the
subscription hereunder is irrevocable by the Purchaser, and that, except as
required by law, the Purchaser is not entitled to cancel, terminate or revoke
this Agreement or any agreements of the Purchaser hereunder and that if the
Purchaser is an individual this Agreement shall survive the death or disability
of the Purchaser and shall be binding upon and inure to the benefit of the
parties and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
(3) No federal or state agency or authority has made any finding
or determination as to the accuracy or adequacy of the Offering Documents or as
to the fairness of the terms of the Offering nor any recommendation or
endorsement of the Shares. Any representation to the contrary is a criminal
offense. In making an investment decision, Purchasers must rely on their own
examination of the Company and the terms of the Offering, including the merits
and risks involved.
(4) The Offering is intended to be exempt from registration under
the Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D thereunder, which is in part dependent upon the
truth, completeness and accuracy of the statements made by the Purchaser herein
and in the Questionnaire.
11
(5) Notwithstanding the registration obligations provided herein,
there can be no assurance that the Purchaser will be able to sell or dispose of
the Shares. It is understood that in order not to jeopardize the Offering's
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
(6) The Purchaser acknowledges that the information contained in
this Agreement is confidential and non-public and agrees that all such
information shall be kept in confidence by the Purchaser pursuant to the terms
of the Confidentiality Agreement between Purchaser and the Company, the terms of
which are incorporated herein by reference.
(7) The Purchaser acknowledges that the foregoing restrictions on
the Purchaser's use and disclosure of any such confidential, non-public
information contained in the above-described documents restricts the Purchaser
from trading in the Company's securities to the extent such trading is on the
basis of material, non-public information of which the Purchaser is aware.
(8) The Purchaser agrees that beginning on the date hereof until
the earlier to occur of (a) ninety (90) days from the Closing and (b) the
effective date of the Registration Statement, it will not enter into any Short
Sales. In the event that the Purchaser enters into any Short Sales prior to such
effectiveness, the Purchaser agrees that no Short Sale will be covered by any of
the Shares. For purposes of the foregoing sentence, a "Short Sale" by a
Purchaser means a sale of Common Stock that is marked as a short sale and that
is executed at a time when such Purchaser has no equivalent offsetting long
position in the Common Stock, exclusive of the Shares. For purposes of
determining whether a Purchaser has an equivalent offsetting long position in
the Common Stock, all Common Stock that would be issuable upon exercise in full
of all options then held by such Purchaser (assuming that such options were then
fully exercisable, notwithstanding any provisions to the contrary, and giving
effect to any exercise price adjustments scheduled to take effect in the future)
shall be deemed to be held long by such Purchaser.
E. REGISTRATION RIGHTS
(1) Certain Definitions. For purposes of this Section E, the
following terms shall have the meanings ascribed to them below.
(a) "Prospectus" means the prospectus included in the
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
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(b) "Registrable Securities" shall mean any Shares issued
or issuable pursuant to the Offering Documents, together with any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
(c) "Registration Statement" means the registration
statement required to be filed under this Section E, including the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
(2) Shelf Registration.
(a) The Company shall use its best efforts to cause to
prepare and file with the Commission a "Shelf" Registration Statement covering
the resale of all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415 on or prior to the 15th day following the
Closing (such date of actual filing, the "Filing Date"). The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchasers may consent) and shall contain (except if otherwise directed by the
Purchasers) a "Plan of Distribution" substantially in the form attached hereto
as Exhibit C. Each Purchaser will furnish to the Company in writing the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Securities Act for use in connection with the Registration Statement or
prospectus or preliminary prospectus included therein. Each Purchaser agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Company by such Purchaser not
materially misleading.
(b) The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission on or prior to
the 60th day following the Filing Date, and shall use its best efforts to keep
the Registration Statement continuously effective under the Securities Act until
the earliest of (i) the second anniversary of the Closing or (ii) the date when
all Registrable Securities covered by such Registration Statement have been sold
(the "Effectiveness Period").
(c) The Company shall notify each Purchaser in writing
promptly (and in any event within one business day) after receiving notification
from the SEC that the Registration Statement has been declared effective.
(d) Upon the occurrence of any Event (as defined below),
as partial relief for the damages suffered therefrom by the Purchasers (which
remedy shall not be exclusive of any other remedies which are available at law
or in equity; and provided further that the Purchasers shall be entitled to
pursue an action for specific performance of the Company's obligations under
Section E(2)(b) and any such actions at law, in equity, for specific performance
or otherwise shall not require the Purchaser to post a bond), the Company shall
pay to each Purchaser, as liquidated damages and not as a penalty, such amounts
and at such times as shall be determined pursuant to this Section E(2)(d). For
such purposes, each of the following shall constitute an "Event":
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(i) the Filing Date does not occur on or prior to the
15th day following the Closing, in which case the Company shall pay on
the 16th day following the Closing and on the calendar day following
every 30-calendar day period thereafter for a period of six months an
amount in cash equal to one percent (1.0%) of the aggregate purchase
price paid by such Purchaser, provided that no such amounts shall be
required to be paid by the Company after the cure of such Event; or
(ii) the Registration Statement is not declared effective
on or prior to the date that is 120 days after the Closing (the
"Required Effectiveness Date"), in which case the Company shall pay on
the calendar day following the Required Effectiveness Date and on the
calendar day following every 30-calendar day period thereafter for a
period of six months an amount in cash equal to one percent (1.0%) of
the aggregate purchase price paid by such Purchaser, provided that no
such amounts shall be required to be paid by the Company after the cure
of such Event.
The payment obligations of the Company under this Section E(2)(d) shall be
cumulative.
(3) Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) (i) Prepare and file with the SEC such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
Registrable Securities for the Effectiveness Period; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; and (iii)
respond as promptly as reasonably possible, and in any event within ten trading
days, to any comments received from the SEC with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Placement Agent true and complete copies of all correspondence from
and to the SEC relating to the Registration Statement.
(b) Notify the Placement Agent as promptly as reasonably
possible, and (if requested by the Placement Agent) confirm such notice in
writing no later than one trading day thereafter, of any of the following
events: (i) the SEC notifies the Company whether there will be a "review" of the
Registration Statement; (ii) the SEC comments in writing on the Registration
Statement (in which case the Company shall deliver to the Placement Agent a copy
of such comments and of all written responses thereto); (iii) the SEC or any
other Federal or state governmental authority requests any amendment or
supplement to the Registration Statement or Prospectus or requests additional
information related thereto; (iv) if the SEC issues any stop order suspending
the effectiveness of the Registration Statement or initiates any action, claim,
suit, investigation or proceeding (a "Proceeding") for that purpose; (v) the
Company receives notice of any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any jurisdiction, or the
initiation or threat of any Proceeding for such purpose; or (vi) the financial
statements included in the Registration Statement become ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any
14
material respect or any revision to the Registration Statement, Prospectus or
other document is required so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Use its commercially reasonable efforts to avoid the
issuance of or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(d) Promptly deliver to each Purchaser, without charge,
such reasonable number of copies of the Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
persons may reasonably request. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Purchasers in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
(e) (i) In the time and manner required by Nasdaq,
prepare and file with Nasdaq an additional shares listing application covering
all of the Registrable Securities and a notification form regarding the change
in the number of the Company's outstanding Shares; (ii) take all steps necessary
to cause such Registrable Securities to be approved for listing on Nasdaq as
soon as possible thereafter; (iii) provide to the Purchasers notice of such
listing; and (iv) maintain the listing of such Registrable Securities on Nasdaq.
(f) Prior to any public offering of Registrable
Securities, use its commercially reasonable efforts to register or qualify or
cooperate with the selling Purchasers in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or "blue sky"
laws of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption therefrom
) effective during the Effectiveness Period and to do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be required for any such purpose to (i)
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not be otherwise required to qualify but for the requirements
of this Section E(3)(g), or (ii) subject itself to taxation.
(g) Upon the occurrence of any event described in
Paragraph (b)(vi) above, as promptly as reasonably possible, prepare a
supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company may
suspend sales pursuant to the Registration Statement for a period of up to sixty
(60) days (unless the holders of at least two-thirds of the Registrable
Securities consent in
15
writing to a longer delay of up to an additional thirty (30) days) if the
Company furnishes to the holders of the Registrable Securities a certificate
signed by the Company's Chief Executive Officer stating that in the good faith
judgment of the Company's Board of Directors, (i) the offering would interfere
in any material respect with any acquisition, corporate reorganization or other
material transaction under consideration by the Company or (ii) there is some
other material development relating to the condition (financial or other) of the
Company that has not been disclosed to the general public and as to which it is
in the Company's best interests not to disclose such development; provided
further, however, that the Company may not so suspend sales more than once in
any calendar year without the written consent of the holders of at least
two-thirds of the Registrable Securities.
(h) Comply with all applicable rules and regulations of
the SEC in all material respects.
(4) Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the SEC, Nasdaq and in connection with applicable
state securities or "Blue Sky" laws, (b) printing expenses (including without
limitation expenses of printing certificates for Registrable Securities and of
printing copies of Prospectuses reasonably requested by the Purchasers), (c)
messenger, telephone and delivery expenses, (d) fees and disbursements of
counsel for the Company and fees and disbursements, up to an aggregate of
$10,000, of a single counsel for all the Purchasers, and (e) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. Notwithstanding the
foregoing, each Purchaser shall pay any and all costs, fees, discounts or
commissions attributable to the sale of their respective Registrable Securities.
(5) Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, its officers and directors, partners, members, agents, brokers
and employees of each of them, each Person who controls any such Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and
employees of each such controlling Person, and each underwriter of Registrable
Securities, to the fullest extent permitted by applicable law, from and against
any and all losses, claims, damages, liabilities, settlement costs and expenses,
including without limitation costs of preparation and reasonable attorneys' fees
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or form of prospectus or in any amendment or
supplement thereto, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based upon information regarding such
Purchaser furnished in writing to the Company by such Purchaser expressly for
use therein, or to the extent that such information related to such
16
Purchaser or such Purchaser's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Purchaser
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (which shall, however, be
deemed to include disclosure substantially in accordance with the "Plan of
Distribution" attached hereto), or (ii) in the case of an occurrence of an event
of the type specified in Paragraph (3)(b) above, the use by such Purchaser of an
outdated or defective Prospectus after the Company has notified such Purchaser
in writing that the Prospectus is outdated or defective and prior to the receipt
by such Purchaser of the Advice contemplated in Paragraph (6) below. The Company
shall notify the Purchasers promptly of the institution, threat or assertion of
any Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, and each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus or in any
amendment or supplement thereto, or arising out of or based upon any omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information furnished in
writing by such Purchaser to the Company specifically for inclusion in such
Registration Statement or Prospectus or to the extent that (i) such untrue
statements or omissions are based upon information regarding such Purchaser
furnished in writing to the Company by such Purchaser expressly for use therein,
or to the extent that such information related to such Purchaser or such
Purchaser's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Purchaser expressly for use
in the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto (which shall, however, be deemed to include
disclosure substantially in accordance with the "Plan of Distribution" attached
hereto), or (ii) in the case of an occurrence of an event of the type specified
in Paragraph (3)(b) above, the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of the Advice contemplated in Paragraph (6) below. In no event shall the
liability of any selling Purchaser hereunder be greater in amount than the
dollar amount of the net proceeds received by such Purchaser upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof,
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of
17
its obligations or liabilities pursuant to this Agreement, except (and only) to
the extent that such failure shall have prejudiced the Indemnifying Party. An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party;
provided, however, that in the event that the Indemnifying Party shall be
required to pay the fees and expenses of separate counsel, the Indemnifying
Party shall only be required to pay the fees and expenses of one separate
counsel for such Indemnified Party or Parties. The Indemnifying Party shall not
be liable for any settlement of any such Proceeding affected without its written
consent, which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding. All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten trading days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Paragraph
(5)(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or related to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Paragraph (5)(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the
18
extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Paragraph was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Paragraph (5)(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Paragraph (5)(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
(6) Dispositions. Each Purchaser agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Paragraphs
(3)(b), such Purchaser will discontinue disposition of such Registrable
Securities under the Registration Statement until such Purchaser's receipt of
the copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Paragraph (3)(h), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
(7) No Piggy-Back on Registrations. Neither the Company nor any of
its security holders (other than the Purchasers in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities, and the Company shall not after the date
hereof enter into any agreement providing any such right with respect to the
Registration Statement to any of its security holders.
(8) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
19
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
F. COVENANTS OF THE COMPANY
(1) The Company hereby agrees that, for a period of sixty (60)
days after effectiveness of the Registration Statement, it shall not issue or
sell any Common Stock of the Company, any warrants or other rights to acquire
Common Stock or any other securities that are convertible into Common Stock,
with the exception of issuances or sales related to a strategic transaction or
to an employee, director, consultant, supplier, lender or lessor, or any option
grant or issuance.
(2) Until the later of ninety (90) days following the Closing and
fifteen (15) days following effectiveness of the Registration Statement, the
Company shall not cause any registration statement to become effective, other
than the Registration Statement contemplated hereby, or any Registration
Statement related to securities issued or to be issued pursuant to any option or
other plan for the benefit of the Company's employees, officers or directors.
(3) As soon as practicable following the Closing, the Company
shall, by filing a Current Report on Form 8-K and/or by issuance of a press
release, disclose the Closing of the Offering and any material, non-public
information disclosed to the Purchaser in connection therewith.
G. MISCELLANEOUS
(1) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, singular or plural, as identity of
the person or persons may require.
(2) Any notice or other document required or permitted to be given
or delivered to the Purchaser shall be in writing and sent (i) by fax if the
sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), (b) by registered or certified
mail with return receipt requested (postage prepaid), or (c) by a recognized
overnight delivery service (with charges prepaid):
(a) if to the Company, at
Synovis Life Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
or such other address as it shall have specified to the
Purchaser in writing, with a copy (which shall not constitute
notice) to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) if to the Purchaser, at its address set forth on the
signature page to this Agreement, or such other address as it shall have
specified to the Company in writing.
(3) Failure of the Company to exercise any right or remedy under
this Agreement or any other agreement between the Company and the Purchaser, or
otherwise, or delay by the Company in exercising such right or remedy, will not
operate as a waiver thereof. No waiver by the Company will be effective unless
and until it is in writing and signed by the Company.
(4) This Agreement shall be enforced, governed and construed in
all respects in accordance with the laws of the State of New York, as such laws
are applied by the New York courts to agreements entered into and to be
performed in New York by and between residents of New York, and shall be binding
upon the Purchaser, the Purchaser's heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Company, its
successors and assigns.
(5) If any provision of this Agreement is held to be invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provisions hereof.
(6) The parties understand and agree that money damages would not
be a sufficient remedy for any breach of the Agreement by the Company or the
Purchaser and that the party against which such breach is committed shall be
entitled to equitable relief, including injunction and specific performance, as
a remedy for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach by either party of the Agreement but shall be in
addition to all other remedies available at law or equity to the party against
which such breach is committed.
(7) This Agreement, together with the agreements and documents
executed and delivered in connection with this Agreement (including, without
limitation, the separate Confidentiality Agreement), constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
H. SIGNATURE
The signature page of this Agreement is contained as part of the
applicable subscription package, entitled "Signature Page".
21
SIGNATURE PAGE
The Purchaser hereby subscribes for such number of Shares as shall
equal the Subscription Amount as set forth below divided by the Offering Price
and agrees to be bound by the terms and conditions of this Agreement.
PURCHASER
1. Dated:_________________, 2003
2. Subscription Amount: $__________
_______________________________ ________________________________
Signature of Subscriber Signature of Joint Purchaser
(and title, if applicable) (if any)
_________________________________ __________________________________
Taxpayer Identification or Social Taxpayer Identification or Social
Security Number Security Number of Joint Purchaser
(if any)
______________________________________
Name (please print as name will appear
on stock certificate)
_______________________________
Number and Street
_______________________________
City, State Zip Code
ACCEPTED BY:
SYNOVIS LIFE TECHNOLOGIES, INC.
By:
Name: _______________________________
Title:_______________________________
Dated:_______________________________
EXHIBIT A
LEGAL MATTERS
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP shall deliver an opinion covering the
following matters. The opinion shall be subject to and include customary
assumptions, limitations and qualifications.
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota and has all
requisite corporate power and authority to conduct its business as it is
described in the Memorandum and the [specific SEC filings delivered with the
Memorandum], to enter into and perform its obligations under the Agreement, and
to carry out the transactions contemplated by the Agreement.
2. The authorized capital stock of the Company on the date hereof
consists of (i) 20,000,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par value
per share, of which no shares have been designated (the "Preferred Stock"). As
of the date hereof, without giving effect to the transactions contemplated by
the Agreement, to our knowledge there are (i) [_____________] shares of Common
Stock of record issued and outstanding, (ii) [_________________] shares of
Common Stock reserved for issuance pursuant to the Company's stock option plans
(including 500,000 shares reserved under the Company's 2004 Non-Employee
Director Stock Option Plan, which remains subject to shareholder approval), and
(iii) no shares of Preferred Stock of record issued and outstanding. The
currently outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
3. The Shares have been duly authorized or reserved for issuance
by all necessary corporate and shareholder action on the part of the Company;
and the Shares, when issued, sold and delivered against payment therefor in
accordance with the provisions of the Agreement, will be duly and validly
issued, fully paid and non-assessable.
4. The execution and delivery by the Company of the Agreement,
and the consummation by the Company of the transactions contemplated thereby,
have been duly authorized by all necessary corporate action on the part of the
Company, and the Agreement have been duly executed and delivered by the Company.
Each of the Agreement constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnification and contribution thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles.
5. Subject to the assumptions set forth in paragraph 6, below,
the execution and delivery by the Company of the Agreement, and the consummation
by the Company of the transactions contemplated thereby, do not (a) violate the
provisions of any U.S. federal or Minnesota state law, rule or regulation
applicable to the Company; (b) violate the provisions of the Company's Articles
of Incorporation or By-laws, each as amended to date; or (c) violate any
judgment, decree, order or award of any court, governmental body or arbitrator
specifically naming the Company of which we are aware; or (d) with or without
notice and/or the passage of time, conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Company pursuant to any contract or
instrument listed as [an Exhibit to the Company's 2002 10-K and subsequent SEC
filings] pursuant to Item 601 (b)(10) of Regulation S-K.
6. Assuming (a) the accuracy of the representations made by the
Purchasers in Section B of the Agreement; (b) that neither the Company, the
Placement Agent nor any person acting on behalf of either the Company or the
Placement Agent has offered or sold the Shares by any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act; (c) that any person or entity that
purchases securities after the date hereof in a transaction that can be
"integrated" with the sales of the Shares will be an accredited investor as of
the date of such purchase; and (d) that each person or entity that purchased
securities of the Company directly from the Company or its agents and without
registration between the date six months prior to the Closing of the Offering
and the date of the Agreement was, as of the date of such purchase, an
"accredited investor" as defined in Rule 501 of Regulation D, the sale, issuance
and delivery of the Shares to the Purchasers under the circumstances
contemplated by this Agreement are exempt from the registration and prospectus
delivery requirements of the Securities Act and all applicable state securities
laws.
7. To our knowledge, there is no action, proceeding or litigation
pending or threatened against the Company before any court, governmental or
administrative agency or body required to be described in the Company's
[specific SEC filings delivered with the Memorandum] which is not otherwise
disclosed therein.
2
EXHIBIT B
CONFIDENTIAL
PURCHASER QUESTIONNAIRE
Before any sale of securities in the above-captioned Company can be
made to you, this Questionnaire must be completed and returned to ▇▇▇▇▇▇▇▇▇▇▇ &
CO. INC., Attn: Investment Banking Dept., ▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
The purpose of this Questionnaire is to substantiate that you meet the
standards imposed by Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act").
(1) Name: _________________________________________
(2) Address:
(a) Home: _________________________________
_________________________________
Telephone: ( ) ________________________
(b) Business: _____________________________
_____________________________
Telephone: ( ) _______________________
(3) Social Security Number or
Tax ID Number: _____-______-___________________
(4) Occupation: ____________________________________
(5) Age: ___________________________________________
(6) The following information is required to substantiate that you qualify
as an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act. Please check which of the following you are:
(a) A bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended; any insurance company as
defined in Section 2(13) of the Securities Act; any investment
company registered under the Investment Company Act of 1940 or
a business development company as defined in Section 2(a)(48)
of that
act; any Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefits of its employees
if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000, or, if a self-directed plan, with
investment decisions made solely by persons that are
accredited investors;
Yes ______ No ______
(b) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
Yes ______ No ______
(c) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess
of $5,000,000;
Yes ______ No ______
(d) A director or executive officer of the Company;
Yes ______ No ______
(e) A natural person whose individual net worth, or joint net
worth with your spouse, at the time of your purchase exceeds
$1,000,000;
Yes ______ No ______
(f) A natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with your spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income
level in the current year;
Yes ______ No ______
(g) A trust, with total assets in excess of $5,000,000 not formed
for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii); or
Yes ______ No ______
2
(h) Any entity in which all of the equity owners are accredited
investors.
Yes____ No____
(7) Investment, business, and educational experience:
(a) Educational background:
_________________________________________________
_________________________________________________
(b) Principal employment positions held during last five years:
_________________________________________________
_________________________________________________
_________________________________________________
(c) Frequency of prior investment (check one in each column):
Venture Capital
Stocks & Bonds Investments
-------------- ---------------
Frequently ______________ _______________
Occasionally ______________ _______________
Never ______________ _______________
(8) Please list the name and address of your:
(a) Bank____________________________________
________________________________________
(b) Accountant______________________________
________________________________________
3
I represent that the foregoing information is true and correct.
Dated:____________, 2003
__________________________________________
(Name of Investor - Please Print)
__________________________________________
(Signature)
__________________________________________
(Print Name) (Title)
4
EXHIBIT C
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledges, assignees, donees selling
shares received from such Selling Stockholders as a gift, and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
_ ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including certain fees and disbursements of counsel
to the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
To the extent required, the Company will amend or supplement this
prospectus to disclose material arrangements regarding the plan of distribution.
To comply with the securities laws of certain jurisdictions, registered
or licensed brokers or dealers may need to offer or sell the shares offered by
this prospectus. The applicable rules and regulations under the Securities
Exchange Act of 1934, may limit any person engaged in a distribution of the
shares of common stock covered by this prospectus in its ability to engage in
market activities with respect to such shares. A selling stockholder, for
example, will be subject to applicable provisions of the Securities Exchange Act
of 1934 and the rules and regulations under it, which provisions may limit the
timing of purchases and sales of any shares of common stock by that selling
stockholder.
2