<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
JUNE 26, 1995
Date of Report
(Date of earliest event reported)
----------------
ADVANCED TISSUE SCIENCES, INC.
(Exact name of registrant as specified in its charter)
-----------------
Delaware 0-016607 14-1701513
- - ------------------------------- ----------- -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
10933 North Torrey Pines Road, La Jolla, California 92037
--------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 450-5730
<PAGE>
Item 5. Other Events
On June 26, 1995, Advanced Tissue Sciences, Inc. (the "Company")
completed the private placement of 1,500,000 shares of its Common Stock
(the "Shares") under Regulation D to the Securities Act of 1933, yielding
the Company gross proceeds of approximately $10.3 million. The Company
intends to use the proceeds from this offering to complete the validation
of its manufacturing facility, the up-scaling and validation of its
manufacturing processes for Dermagraft-TC (trademark) for the treatment of
severe burns and Dermagraft (trademark) for the treatment of diabetic foot
ulcers, and other working capital and general corporate purposes.
The initial purchase price for the Shares was $6.86 per share, representing
an 11.5% discount to the closing bid price of the Company's Common Stock on
June 7, 1995. However, the initial purchase price will be adjusted to
result in a purchase price per share to the investors equal to 88.5% of the
average closing price of the Common Stock during a period 90 to 135
calendar days subsequent to the close of the transaction (the "Average
Price"). To the extent 88.5% of the Average Price exceeds the initial
purchase price of $6.86, the investors will provide additional proceeds
such that the total proceeds to the Company from the investors equals the
product of the 88.5% of the Average Price and the Shares. If 88.5% of the
Average Price is below the initial purchase price of $6.86, additional
shares will be issued to the investors such that the purchase per share to
the investors equals 88.5% of the Average Price.
In addition, if 88.5% of the Average Price is less than $6.86 per share and
the Company issues or sells any shares of its Common Stock or any of its
securities which are convertible into or exchangeable for its Common Stock
or any warrants, options or other rights to subscribe for or purchase
Common Stock within 135 calendar days of the close of the transaction at a
purchase price less than $6.86 per share, then additional shares will be
issued to result in a purchase price per share to the investors equal to
the lower of (i) 88.5% of the Average Price or (ii) the lowest price per
share the Company issues or sells any of the securities referred to above.
This adjustment is exclusive of shares or options issued pursuant to the
Company's option plans or shares issued upon the exercise of options,
warrants or rights outstanding on the closing date of the transaction.
The Shares have not been registered under the Securities Act of 1933 or
applicable state securities laws, and may not be offered or sold in the
United States absent registration under such Act and applicable state
securities laws or in reliance on available exemptions from such
registration requirements. However, the investors have certain
registration rights, including agreement by the Company to register the
Shares within 105 calendar days following the close of the transaction.
The Investment Agreements between the Company and each of S.P. Investors
International S.A., Steinhardt Overseas Fund Ltd. and Gershon Partners
L.P., each dated June 23, 1995, are attached hereto as exhibits and are
incorporated herein by reference. The foregoing summary is qualified in it
entirety by reference to such exhibits.
In connection with the offering, the Company also issued warrants (the
"Warrants") to purchase 90,000 and 45,000 shares, respectively, to
designees of Cappello Capital Corp. ("Cappello") and The Kriegsman Group
("Kriegsman"). Cappello acted as a financial advisor to the Company and
Kriegsman as a finder with respect to the offering. Cappello also received
a cash commission and Kriegsman a finder's fee. The Warrants are subject
to adjustment in the same manner as the Shares. In addition, Cappello and
Kriegsman have certain piggyback registration rights related to the
Warrants.
2
<PAGE>
Item 7. EXHIBITS
Exhibit
Number Description
- - ------- -----------
4.1 Investment Agreement between Advanced Tissue Sciences,
Inc. and S.P. Investors International S.A. dated
June 23, 1995
4.2 Investment Agreement between Advanced Tissue Sciences,
Inc. and Steinhardt Overseas Fund Ltd. dated June 23, 1995
4.3 Investment Agreement between Advanced Tissue Sciences,
Inc. and Gershon Partners L.P. dated June 23, 1995
4.4 Form of Warrant Agreement between the Company and each
of Linda S. Cappello, Gerard K. Cappello, Lawrence K.
Fleischman and The Kriegsman Group
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANCED TISSUE SCIENCES, INC.
Date: July 10 , 1995 By: /s/ Arthur J. Benvenuto
----------------------------------
Arthur J. Benvenuto
Chairman, President and
Chief Executive Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Page
- - ----------- ----
4.1 Investment Agreement between Advanced Tissue Sciences, Inc.
and S.P. Investors International S.A. dated June 23, 1995
4.2 Investment Agreement between Advanced Tissue Sciences, Inc.
and Steinhardt Overseas Fund Ltd. dated June 23, 1995
4.3 Investment Agreement between Advanced Tissue Sciences, Inc.
and Gershon Partners L.P. dated June 23, 1995
4.4 Form of Warrant Agreement between the Company and each of
Linda S. Cappello, Gerard K. Cappello, Lawrence K.
Fleischman and The Kriegsman Group
<PAGE>
Exhibit 4.1
INVESTMENT AGREEMENT
Between
ADVANCED TISSUE SCIENCES, INC.
And
S. P. INVESTORS INTERNATIONAL S.A.
Dated as of June 23, 1995
THE SECURITIES TO BE PURCHASED AND SOLD PURSUANT TO THIS INVESTMENT
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED
OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
<PAGE>
INVESTMENT AGREEMENT dated as of June 23, 1995 between S. P. Investors
International S.A. (the "Investor") and Advanced Tissue Sciences, Inc., a
corporation organized and existing under the laws of the State of Delaware
(the "Company").
WHEREAS, the parties desire that the Investor become an equity
investor in the Company by purchasing an aggregate of 500,000 shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock
---------------------------------
Section 1.1 PURCHASE AND SALE OF COMMON STOCK. Upon the terms
and conditions set forth herein, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, 500,000 shares
of the Company's Common Stock (the "Shares").
Section 1.2 PURCHASE PRICE. The aggregate purchase price for
the Shares (the "Purchase Price") shall equal $3,430,000 payable in cash by
wire transfer or cashier's check in immediately available funds.
Section 1.3 SHARE NUMBER; VALUATION PERIOD.
(a) The number of Shares that the Company shall be
obligated to issue and sell and the Investor shall be obligated to purchase
hereunder, in the aggregate, is referred to herein as the "Share Number."
Subject to adjustment as provided in Sections 1.3(c), 1.3(d) and 1.3(e), the
Share Number shall initially be 500,000.
(b) The "Valuation Period" shall be a 45 calendar day
period commencing on and including the first business day which is 90
calendar days after the Closing Date (as defined herein) as the same may
be modified pursuant to Section 4.2(c) hereof.
(c) Notwithstanding Section 1.3(a) above, and except as
hereinafter provided, if the Average Share Price (hereinafter defined) during
the Valuation Period is less than $7.75, then the Company shall deliver to
the Investor, at no additional cost to the Investor, and in addition to the
initial Share Number, the number of shares of Common Stock that is obtained
by subtracting (x) 500,000 from (y) the quotient obtained by dividing the
Purchase Price by 88.5% of the Average Share Price (rounded to the nearest
whole number) (together with any additional shares issued pursuant to
Section 1.3(e) herein, the "Additional Shares").
(d) Notwithstanding Section 1.3(a) above, and except as
hereinafter provided, if the Average Share Price during the Valuation Period
is greater than $7.75, the Investor shall pay to the Company the dollar
amount by which (x) the product of 88.5% of the Average Share Price and the
Share Number exceeds (y) the product of $6.86 and the Share Number.
(e) Notwithstanding Section 1.3(c) above, in the event that
the Company, on or prior to 135 days from the Closing Date, issues or sells
any shares of its Common Stock or any
-2-
<PAGE>
of its securities which are convertible into or exchangeable for its Common
Stock or any warrants or other rights to subscribe for or to purchase or any
options for the purchase of, its Common Stock (other than shares or options
issued pursuant to the Company's option plans or shares issued upon exercise
of options, warrants or rights outstanding on the Closing Date or as provided
on EXHIBIT A hereto), at a purchase price which is less than $6.86 per share
(the "Subsequent Sale Price"), then the Company shall deliver to the
Investor, at no additional cost to the Investor, and in addition to the Share
Number, the number of shares of Common Stock that is obtained by subtracting
(x) 500,000 from (y) the quotient obtained by dividing the Purchase Price by
the Subsequent Sale Price (rounded to the nearest whole number).
Notwithstanding any of the foregoing, the number of
Additional Shares issuable hereunder shall be the greater of the number of
Additional Shares issuable pursuant to Section 1.3(c) herein and the number
of Additional Shares issuable pursuant to Section 1.3(e) herein, if any.
(f) For purposes hereof, the Average Share Price shall
mean the average of the closing trading prices of the Company's Common
Stock on the Nasdaq National Market, as reported by the Nasdaq National
Market for each trading day during the Valuation Period.
Section 1.4 THE CLOSING.
(a) The closing of the purchase and sale of the Shares (the
"Closing"), shall take place (a) at the offices of the Investor, at
10:00 a.m., local time on the later of the following: (i) June 23, 1995,
and (ii) the date on which the last to be fulfilled or waived of the
conditions set forth in Article IV hereof and applicable to the Closing shall
be fulfilled or waived in accordance herewith, or (b) at such other time and
place and/or on such other date as the Investor and the Company may agree.
The date on which the Closing occurs is referred to herein as the "Closing
Date."
(b) (i) On the Closing Date, the Company shall deliver to
the Investor certificates representing the Share Number to be issued and sold
to the Investor on such date and registered in the name of the Investor or
deposit such Share Number into the accounts designated by the Investor and
(ii) on the Closing Date, the Investor shall deliver to the Company the
Purchase Price by cashier's check or wire transfer in immediately available
funds to such account as shall be designated in writing by the Company.
In addition, each of the Company and the Investor shall deliver all
documents, instruments and writings required to be delivered by either of
them pursuant to this Agreement at or prior to the Closing.
Section 1.5. COVENANT TO REGISTER. For purposes of this
Section 1.5, the following definitions shall apply:
(a) (i) The terms "register," "registered," and
"registration" refer to a registration under the Act effected by preparing
and filing a registration statement or similar document in compliance with
the Act, and the declaration or ordering of effectiveness of such
registration statement, document or amendment thereto.
(ii) The term "Registrable Securities" means the Shares
and any Additional Shares issued pursuant to Section 1.3 hereof and any
securities of the Company or securities of any successor corporation issued
as, or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as a dividend or other distribution with
respect to, or in
-3-
<PAGE>
exchange for, or in replacement of, the Shares and any Additional Shares
issued pursuant to Section 1.3 hereof.
(b) (i) The Company shall, as expeditiously as possible
following the Closing, file a registration statement on Form S-3 or an
equivalent thereof promptly after the Closing Date, covering all the
Registrable Securities, and shall use its best efforts to cause such
registration statement to become effective within 105 days of the Closing
Date (the "Initial Registration"). In the event such registration is not so
declared effective, the holder of the Registrable Securities shall have the
right to require by notice in writing that the Company register all or any
part of the Registrable Securities held by such holder (a "Demand
Registration") and the Company shall thereupon effect such registration in
accordance herewith. The parties agree that if the holder of Registrable
Securities demands registration of less than all of the Registrable
Securities, the Company, at its option, may nevertheless file a registration
statement covering all of the Registrable Securities. If such registration
statement is declared effective with respect to all Registrable Securities
the demand registration rights granted pursuant to this Section 1.5 (b)
(i) shall cease. If such registration statement is not declared effective
with respect to all Registrable Securities the demand registration rights
described herein shall remain in effect until all Registrable Securities
have been registered under the Act.
(ii) The Company shall not be obligated to effect
Demand Registration (i) if all of the Registrable Securities held by the
holder of Registrable Securities which are intended to be covered by the
Demand Registration are, at the time of the request of a Demand Registration,
included in an effective registration statement and the Company is in
compliance with its obligations under Subsection (d) (ii) through (v) hereof.
(iii) The Company may suspend the effectiveness of any
such registration effected pursuant to this Section 1.5(b) in the event, and
for such period of time as, such a suspension is required by the rules and
regulations of the Securities and Exchange Commission ("SEC").
(iv) If the registration statement covering the
Registrable Securities is not effective within 105 days of the Closing, then
the Company shall pay the Investor a one time penalty of 1.0% of the Purchase
Price.
(c) If the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders other
than the Investor) any of its stock or other securities under the Act in
connection with a public offering of such securities (other than a
registration on Form S-4, Form S-8 or other limited purpose form) and the
Registrable Securities have not heretofore been included in a registration
statement under Subsection (b), which remains effective, the Company shall,
at such time, promptly give the holder of Registrable Securities written
notice of such registration. Upon the written request of the holder of
Registrable Securities given within twenty (20) days after receipt of such
notice by the holder of Registrable Securities, the Company shall use its
best efforts to cause to be registered under the Act all Registrable
Securities that the holder of Registrable Securities requests to be
registered. However, the Company shall have no obligation under this
Subsection (c) to the extent that, with respect to a public offering
registration, any underwriter of such public offering reasonably requests
that the Registrable Securities or a portion thereof be excluded therefrom.
(d) Whenever required under this Section 1.5 to effect the
registration of any Registrable Securities, including, without limitation,
the Initial Registration, the Company shall, as expeditiously as reasonably
possible:
-4-
<PAGE>
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective and, upon the request
of the Investor, keep such registration statement effective, pursuant to the
provisions of Regulation Section 230.415 or otherwise, for so long as the
holder of Registrable Securities desires to dispose of the securities covered
by such registration statement (but not after the holder of Registrable
Securities, in the reasonable opinion of its counsel, is free to sell such
securities in any three month period under the provisions of Rule 144 under
the Act).
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to the holder of Registrable Securities
such numbers of copies of a prospectus, including a preliminary prospectus,
in conformity with the requirements of the Act, and such other documents as
the holder of Registrable Securities may reasonably require in order to
facilitate the disposition of Registrable Securities owned by the holder of
Registrable Securities.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or "Blue Sky" laws of such jurisdictions as shall be reasonably requested by
the holder of Registrable Securities, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service and process in any such
states or jurisdictions.
(v) Notify the holder of Registrable Securities of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing.
(vi) Furnish, at the request of the holder of
Registrable Securities, an opinion of counsel of the Company, dated the
effective date of the registration statement, as to the due authorization
and issuance of the securities being registered and compliance with
securities laws by the Company in connection with the authorization and
issuance thereof.
(vii) Use its best efforts to list the Registrable
Securities covered by such registration statement with any securities
exchange on which the Common Stock is then listed;
(viii) Make available for inspection by the holder of
Registrable Securities, upon request, all SEC Documents filed subsequent to
the Closing and require the Company's officers, directors and employees to
supply all information reasonably requested by any holder of Registrable
Securities in connection with such registration statement.
(e) The holder of Registrable Securities will furnish to
the Company in connection with any registration under this Section 1.5 such
information regarding itself, the Registrable Securities and other securities
of the Company held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of the Registrable
Securities held by holder of Registrable Securities.
-5-
<PAGE>
(f) (i) The Company shall indemnify, defend and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of Subsections (b) or
(c) from and against, and shall reimburse such holder with respect to, any
and all claims, suits, demands, causes of action, losses, damages,
liabilities, costs or expenses ("Liabilities") to which such holder may
become subject under the Act or otherwise, arising from or relating to
(A) any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or (B) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company
shall not be liable in any such case to the extent that any such Liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such holders in writing specifically for use in
the preparation thereof.
(ii) Promptly after receipt by the holder of
Registrable Securities of notice of the commencement of any action, the
holder of Registrable Securities shall, if a claim in respect thereof is to
be made against the Company hereunder, notify the Company in writing thereof,
but the omission so to notify the Company shall not relieve the Company from
any Liability which it may have to the holder of Registrable Securities other
than under this section and shall only relieve it from any Lability which it
may have to the holder of Registrable Securities under this section if and
to the extent the Company is prejudiced by such omission. In case any such
action shall be brought against the holder of Registrable Securities and the
holder of Registrable Securities shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to the holder of Registrable Securities, and, after
notice from the Company to the holder of Registrable Securities of its
election so to assume and undertake the defense thereof, the Company shall
not be liable to the holder of Registrable Securities under this section for
any legal expenses subsequently incurred by the holder of Registrable
Securities in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
HOWEVER, that if the defendants in any such action include both the Company
and the holder of Registrable Securities and the holder of Registrable
Securities shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the Company or if the interests of the holder of Registrable
Securities reasonably may be deemed to conflict with the interests of the
Company, the holder of Registrable Securities shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of
such separate counsel and other expenses related to such participation to
be reimbursed by the Company as incurred.
(g) (i) With respect to the inclusion of Registrable
Securities in a registration statement pursuant to subsections (b) or
(c), all fees, costs and expenses of and incidental to such registration,
inclusion and public offering shall be borne by the Company; provided,
however, that any securityholders participating in such registration shall
bear their pro rata share of the underwriting discounts and commissions, if
any, incurred in connection with such registration.
(ii) The fees, costs and expenses of registration to be
borne by the Company as provided in this Subsection (g) shall include,
without limitation, all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
and all legal fees and disbursements and other expenses of complying with
state securities or Blue Sky laws of any jurisdiction or jurisdictions in
which securities to be offered are to be
-6-
<PAGE>
registered and qualified. Fees and disbursements of counsel and accountants
for the selling securityholders shall, however, be borne by the respective
selling securityholder.
(h) (i) The rights to cause the Company to register all or
any portion of Registrable Securities pursuant to this Section 1.5 may be
assigned by Investor to a transferee or assignee of 20% or more, in the
aggregate, of the Shares and the Additional Shares. Within a reasonable
time after such transfer the Investor shall notify the Company of the name
and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned. Such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act. Any transferee shall agree in writing at the time of
transfer to be bound by the provisions of this Section 1.5.
(ii) From and after the date of this Agreement, the
Company shall not agree to allow the holders of any securities of the Company
to include any of their securities in any registration statement filed by the
Company pursuant to Subsection (b) unless the inclusion of such securities
will not reduce the amount of the Registrable Securities included therein.
Section 1.6. ADJUSTMENTS. If the Investor shall be entitled to
the issuance of Additional Shares, the Company shall deliver to the Investor
at the offices of the Investor on the third (3rd) business day after the end
of the Valuation Period one or more certificates representing the Additional
Shares so to be delivered in accordance with this Agreement, registered in
the name of the Investor, or deposit such Additional Shares into accounts
designated by the Investor; provided, however, that if the sum of the shares
then beneficially owned by the Investor , and any Additional Shares then
issuable to the Investor, as determined by the Investor, in its sole
determination, shall equal 1.66% or more of the shares of Company's Common
Stock issued and outstanding (as determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934) just prior to the Closing, then, and
in such event, (x) the number of Additional Shares to be issued to the
Investor pursuant to this paragraph shall be reduced to the number which,
together with the Share Number, shall equal 1.64% of the shares of the
Company's Common Stock issued and outstanding (as so determined) just prior
to the Closing, and (y) in consideration for such reduction in Additional
Shares, the Company shall pay to the Investor a sum equal to the greater of
(a) the product of 88.5% of the Average Share Price and the reduction in the
Additional Shares to be issued as a result of the preceding clause (x), and
(b) the product of the Subsequent Sale Price and the reduction in the
Additional Shares to be issued as a result of the preceding clause (x).
Section 1.7 RESCHEDULING. If after the date hereof and prior to
the expiration of the Valuation Period any person shall (a) publicly announce
a tender offer or exchange offer for the Company's Common Stock, or
(b) publicly announce plans for a merger, consolidation or potential change
in control of the Company, the Investor may in its sole discretion elect by
written notice to the Company to shorten the Valuation Period so as to end
on a date which is either before or after the consummation of the record date
for the consummation of any such transaction, which election must be made
prior to consummation of any such transaction. For purposes of the
foregoing, it is understood and agreed that the Investor may, but shall not
be required to, reduce or entirely eliminate the Valuation Period or to
reschedule the Valuation Period.
-7-
<PAGE>
ARTICLE II
Representations and Warranties
------------------------------
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Investor:
(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated and existing in good standing under the laws of
the State of Delaware, and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company
does not have any active subsidiaries, except for those identified in the
SEC Documents (as hereinafter defined). Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary and
where the failure so to qualify would have a Material Adverse Effect.
"Material Adverse Effect" means any adverse effect on the operations,
properties, prospects, or financial condition of the entity with respect to
which such term is used and which is material to such entity and other
entities controlling or controlled by such entity taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement and to issue the Shares and the Additional Shares in accordance
with the terms hereof, (ii) the execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required, (iii) this Agreement has been duly executed and
delivered by the Company, and (iv) this Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application.
(c) CAPITALIZATION. The authorized capital stock of the
Company and the shares thereof currently issued and outstanding are as most
recently described in the SEC Documents and there have been no changes
(except for changes described on EXHIBIT A) therein since such description.
All of the outstanding shares of the Company's Common Stock have been validly
issued and are fully paid and nonassessable. Except as set forth in
EXHIBIT A hereto and as described in the SEC Documents, no shares of Common
Stock are entitled to preemptive rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound
to issue additional shares of capital stock of the Company or options,
warrants, scrip, rights to subscribe to, or commitments to purchase or
acquire, any shares, or securities or rights convertible into shares, of
capital stock of the Company. The Company has furnished to the Investor
true and correct copies of the Company's Certificate of Incorporation as in
effect on the date hereof (the "Certificate"), and the Company's By-Laws, as
in effect on the date hereof (the "By-Laws").
(d) ISSUANCE OF SHARES. The issuance of the Shares and
Additional Shares has been duly authorized and, when paid for or issued in
accordance with the terms hereof, shall be validly issued, fully paid and
non-assessable.
-8-
<PAGE>
(e) NO CONFLICTS. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) result in a
violation of the Company's Certificate or By-Laws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party and which has previously been
filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1994 and is still in effect, or result in a violation of any
federal, state, local or foreign law, rule, regulation, order, judgment or
decree (including Federal and state securities laws and regulations)
applicable to the Company, or by which any property or asset of the Company
is bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect); provided
that, for purposes of such representation as to Federal, state, local or
foreign law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Investor and not to the
Company. The business of the Company is not being conducted in violation of
any law, ordinance or regulations of any governmental entity, except for
possible violations which either singly or in the aggregate do not have a
Material Adverse Effect. The Company is not required under Federal, state
or local law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under this Agreement or issue and sell the Shares or the
Additional Shares in accordance with the terms hereof (other than the filing
of a Form D with the SEC, any NASD filings or state securities filings which
may be required to be made by the Company subsequent to the Closing, and
any registration statement which may be filed in accordance with Section 1.5
herein); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investor herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock
of the Company is registered pursuant to Section 12(g) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") and the Company has
filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d),
in addition to one or more registration statements and amendments thereto
heretofore filed by the Company with the SEC (all of the foregoing filed
prior to the date hereof being hereinafter referred to herein as the "SEC
Documents"). The Company has delivered to the Investor true and complete
copies of the quarterly and annual (including, without limitation, proxy
information and solicitation materials) SEC Documents filed with the SEC
since December 31, 1994. The Company has not provided to the Investor any
information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and
none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in
-9-
<PAGE>
such financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes
or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) NO MATERIAL ADVERSE CHANGE. Since December 31, 1994,
the date through which the most recent annual report of the Company on
Form 10-K has been prepared and filed with the SEC, a copy of which is
included in the SEC Documents, no Material Adverse Effect has occurred or
exists with respect to the Company except as otherwise disclosed or reflected
in other SEC Documents prepared through or as of a date subsequent to
December 31, 1994.
(h) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations not disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company's business since
March 31, 1995 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstance has occurred or exists with respect to the Company or its
business, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby makes the following representations and warranties
to the Company:
(a) AUTHORIZATION; ENFORCEMENT. (i) The Investor has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Shares being sold hereunder, (ii) the execution and delivery of
this Agreement by the Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Investor or its Board
of Directors, stockholders, or partners, as the case may be, is required,
(iii) this Agreement has been duly authorized, executed and delivered by the
Investor, and (iv) this Agreement constitutes a valid and binding obligation
of the Investor enforceable against the Investor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation by the Investor of the
transactions contemplated hereby or relating hereto do not and will not
(i) result in a violation of the Investor's charter documents or By-Laws or
(ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument to which the Investor is a party, or
result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to the
Investor or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate have a Material
Adverse Effect on the Investor). The businesses of the Investor are not
being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations which either singly or
in the aggregate do not have a Material Adverse Effect. The Investor is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in
-10-
<PAGE>
order for it to execute, deliver or perform any of its obligations under
this Agreement or purchase the Shares or the Additional Shares in accordance
with the terms hereof; provided that for purposes of the representation made
in this sentence, the Investor is assuming and relying upon the accuracy of
the relevant representations and agreements of the Company herein.
(c) OWNERSHIP. The Investor is duly organized and validly
existing under the laws of the place hereinabove provided and is not a U.S.
Person as defined within Regulation S under the Securities Act and is not
purchasing the Shares for the account or benefit of a U.S. Person. On the
date hereof and on the Closing Date, the Investor is and will be, as the
case may be, located outside of the United States. The Investor has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment contemplated
by this Agreement. The Investor has been afforded, to the satisfaction of
the Investor, the opportunity to review the SEC Documents and obtain such
additional publicly available information concerning the Company and its
business, and to ask such questions and receive such answers (based upon
publicly available information), as the Investor deems necessary to make an
informed investment decision.
(d) INVESTMENT REPRESENTATION: The Investor is purchasing
the Shares and, if any, the Additional Shares for investment purposes and
not with a view towards distribution. Investor has no present intention to
sell the Shares or the Additional Shares and the Investor has no present
arrangement (whether or not legally binding) at any time to sell the Shares
or the Additional Shares to or through any person or entity; provided,
however, except as provided in subsection (g) below, that by making the
representations herein, the Investor does not agree to hold the Shares or
the Additional Shares for any minimum or other specific term and reserves
the right to dispose of the Shares or the Additional Shares at any time in
accordance with Federal securities laws applicable to such disposition.
(e) ACCREDITED INVESTOR: The Investor is an accredited
investor as defined in Regulation Section 230.501 promulgated under the Act.
(f) RULE 144. The Investor understands that the Shares
and any Additional Shares must be held indefinitely unless such Shares or
Additional Shares are subsequently registered under the Act or an exemption
from registration is available. The Investor has been advised or is aware
of the provisions of Rule 144 promulgated under the Act.
(g) Notwithstanding the foregoing, the Investor shall not
sell (including a short sale), transfer or otherwise dispose of the shares,
or any Additional Shares issued to such Investor, at any time during the 105
day period following the Closing. Notwithstanding the foregoing, during the
Valuation Period Investor will only transfer or otherwise dispose of its
shares in accordance with the representations contained in EXHIBIT C.
ARTICLE III
Covenants
---------
Section 3.1 REGULATION S
(a) Notwithstanding any of the foregoing, the Company
acknowledges and agrees that in the event that a registration statement
covering all of the Registrable Securities shall not have become effective
within 105 days of the Closing Date, legend described in Article V herein
shall
-11-
<PAGE>
be removed on the 106th day following the Closing, in accordance with
Article V herein, it being acknowledged by the Company that, in such event,
the Investor shall be free to transfer, sell, pledge, or otherwise
hypothecate the Shares and the Additional Shares issued pursuant to this
Agreement in accordance with (a) Regulation S under the Act and (b) the
terms and conditions described in the letter attached hereto as EXHIBIT C.
(b) The Company acknowledges and agrees that, in the
event the Investor sells, transfers, pledges or otherwise hypothecates the
Shares or Additional Shares in accordance with Section 3.1(a) herein, for
purposes of clarifying and specifying the applicable Restricted Period under
Regulation S, the Investor intends to observe as the Restricted Period (as
defined in Regulation S) for the Shares being delivered at the Closing the
period of 40 days commencing upon the Closing Date and ending 40 days
thereafter, and to observe as the Restricted Period applicable to the
Additional Shares, if any, the period of 40 days commencing upon the date
upon which the same are delivered to the Investor hereunder.
Neither the Company nor any of its affiliates has engaged
or will engage in any "directed selling efforts" (as such term is defined
under Regulation S) with respect to the Shares or the Additional Shares, and
the Company and its affiliates have complied and will comply with the
"offering restrictions" requirements of Regulation S.
(c) In the event the Investor sells, transfers or
otherwise disposes of the Shares or the Additional Shares in accordance with
Section 3.1(a) herein, the Investor covenants and agrees that such sale,
transfer or other disposition will be made in compliance with the terms of
Regulation S under the Act, as in effect at that time, including (i) that
the Shares and the Additional Shares will not be offered or sold within the
United States or to, or for the account or benefit of, any "U.S. person" (as
such term is defined in Rule 902 (o) promulgated under the Act) except in
accordance with the provisions of Rule 903 or Rule 904 of Regulation S under
the Securities Act, pursuant to registration under the Act, or pursuant to
an exemption from the registration requirements of the Act and (ii) that
neither it, its affiliates, nor persons acting on their behalf, have engaged
or will engage in "directed selling efforts" (as such term is defined by
Regulation S) with respect to the Shares or the Additional Shares and that
each of them has complied and will comply with the "offering restrictions"
requirements of Regulation S.
Section 3.2 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and Nasdaq, in
accordance with its requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, including,
without limitation, the filing of a Form D with the SEC, for the legal and
valid issuance of the Shares and the Additional Shares to the Investor.
(b) The Investor understands that the Shares and, if any,
the Additional Shares, are being offered and sold to it in reliance on a
transactional exemption from the registration
-12-
<PAGE>
requirements of Federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Investor set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Shares.
Section 3.3 CORPORATE. (a) From the date hereof through the
end of the Valuation Period the Company shall not (i) amend its Certificate
or By-Laws so as to adversely affect any rights of the Investor; (ii) split,
combine or reclassify its outstanding capital stock; (iii) declare or set
aside or pay any dividend or other distribution with respect to the Company's
outstanding Common Stock; (iv) issue or sell, directly or indirectly, Shares
of the Company's Common Stock in a manner or upon terms as could reasonably
be expected to affect the market for the Common Stock materially and
adversely; or (v) enter into any agreement with respect to the foregoing;
and (vi) the Company shall at all times reserve and keep available, solely
for issuance and delivery as Shares or Additional Shares hereunder, such
shares of Common Stock as shall from time to time be issuable or reasonably
be expected to be issuable as Shares or Additional Shares hereunder provided,
however, that the number of shares so reserved shall at all times be at least
300% of the Share Number.
(b) The Company will cause its Common Stock to continue to
be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply
in all respects with its reporting and filing obligations under said act,
will comply with all requirements related to any registration statement filed
pursuant to Section 1.5 herein, and will not take any action or file any
document (whether or not permitted by said Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said act, except as permitted herein.
The Company will take all action necessary to continue the listing or trading
of its Common Stock on the Nasdaq National Market and will comply in all
respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and Nasdaq.
ARTICLE IV
Conditions
----------
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE SHARES. The obligation hereunder of the Company to
issue and/or sell the Shares or the Additional Shares to the Investor is
further subject to the satisfaction, at or before the respective issuance
and deliveries thereof, of each of the following conditions set forth below.
These conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion.
(a) ACCURACY OF THE INVESTOR REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Investor shall be true
and correct in all material respects as of the date when made and as of the
date of such issuance and delivery as though made at that time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior to
such date.
(c) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
-13-
<PAGE>
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO PURCHASE THE SHARES. The obligation of the Investor hereunder
to acquire and pay for the Shares is subject to the satisfaction, at or
before the Closing of each of the following conditions set forth below.
These conditions are for the Investor's sole benefit and may be waived by
the Investor at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing.
(c) NASDAQ. From the date hereof to the Closing Date,
as to the Shares to be issued and delivered on the Closing Date, trading
in the Company's Common Stock shall not have been suspended by the SEC
or the Nasdaq National Market (except for any suspension of trading of
limited duration agreed to between the Company and the Nasdaq National
Market solely to permit dissemination of material information regarding
the Company), and trading in securities generally as reported by Nasdaq
shall not have been suspended or limited or minimum prices shall not
have been established on securities whose trades are reported by Nasdaq.
Notwithstanding the foregoing sentence, in the event that at any point
on or prior to the first day of the Valuation Period trading in the
Common Stock is suspended by the SEC or the Nasdaq National Market,
(i) calculation of the Average Stock Price shall be suspended for such
period of time as trading in the Common Stock is suspended and (ii) the
Valuation Period shall be reset so that such Valuation Period shall
begin on the 90th calendar day following the Closing Date and shall end
on the 45th calendar day thereafter on which quotations for the
Company's Common Stock on the Nasdaq National Market are available. In
the event that the Company's Common Stock is delisted from the Nasdaq
National Market at any time during the Valuation Period or in the event
that trading in the Common Stock is suspended for a period of more than
thirty (30) days subsequent to the commencement of the Valuation Period,
(iii) the Valuation Period will be deemed to have concluded on the date
on which the Common Stock was delisted or such trading was suspended,
(iv) the Average Stock Price shall be calculated based on the number of
days in such shortened Valuation Period, and (v) the Investor shall
receive any Additional Shares owed to it pursuant to Section 1.3(c)
herein within five (5) business days of the conclusion of the shortened
Valuation Period. In no event shall the Investor be required to deliver
any shares for cancellation pursuant to Section 1.3(d) herein if the
Common Stock is delisted from the Nasdaq National Market or if trading
in the Common Stock is suspended for more than thirty (30) days during
the Valuation Period or prior to the effectiveness of the Company's
Initial Registration.
(d) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
-14
<PAGE>
(e) OPINION OF COUNSEL, ETC. At the Closing the
Investor shall have received an opinion of Brobeck Phleger & Harrison,
counsel to the Company, in form and substance satisfactory to the
Investor and its counsel (in substantially the form of EXHIBIT B
hereto), and such other certificates and documents as the Investor or
its counsel shall reasonably require incident to the Closing.
ARTICLE V
Legend on Stock
---------------
Each certificate representing the Shares issued pursuant to
Section 1.3 shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT. THIS
LEGEND SHALL CEASE TO HAVE ANY FORCE OR EFFECT AND
WILL BE REMOVED ON OCTOBER 7, 1995 UNLESS AN OPINION
OF COUNSEL TO THE COMPANY, IN FORM AND SUBSTANCE
SATISFACTORY TO THE INVESTOR AND ITS COUNSEL, IS
DELIVERED TO THE COMPANY'S TRANSFER AGENT ON OR
PRIOR TO SUCH DATE STATING THAT REMOVAL OF THIS
LEGEND IS NOT PERMITTED UNDER LAW DUE TO A CHANGE IN
LAW SUBSEQUENT TO JUNE 23, 1995.
Notwithstanding the foregoing, this legend shall cease to
have any force or effect and will be removed on October 7, 1995, unless
an opinion of counsel to the Company, in form and substance satisfactory
to the Investor and its counsel, is delivered to the Company's transfer
agent, on or prior to such date stating that removal of the legend is
not permitted under law due to a change in law subsequent to the date
hereof.
No certificate representing Additional Shares, if any,
required to be issued pursuant to this Agreement will bear a restrictive
legend unless an opinion of the Company's counsel, in form and substance
satisfactory to the Investor, has been issued to the Company's transfer
agent on or prior to the issuance of such Additional Shares stating that
such a legend is required by law due to a change in law subsequent to
the date hereof.
ARTICLE VI
Termination
-----------
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement
may be terminated at any time prior to the Closing by the mutual consent
of the Company and the Investor, by action of their respective Boards of
Directors or other governing body.
-15-
<PAGE>
Section 6.2 OTHER TERMINATION. This Agreement may be
terminated by action of the Board of Directors or other governing body
of the Investor or the Company at any time after June 23, 1995 if the
Closing shall not have been consummated by June 23, 1995.
Section 6.3 AUTOMATIC TERMINATION. This Agreement shall
automatically terminate without any further action of either party
hereto if the Closing shall not have occurred by June 23, 1995.
ARTICLE VII
Miscellaneous
-------------
Section 7.1 FEES AND EXPENSES. Each party shall pay the
fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the Company shall pay, at the Closing, all
attorneys' fees and expenses incurred by the Investor and Cappello
Capital Corp., up to a maximum of $6,666, in connection with the
preparation, negotiation, execution and delivery of this Agreement and
the transactions contemplated hereunder. Without limiting the
generality of the foregoing, The Kriegsman Group shall be entitled to a
finders fee pursuant to a separate agreement with respect thereto
between such finder and the Company, and the Company shall be solely
responsible for the full payment thereof and shall indemnify and hold
harmless the Investor from and against all loss, cost, damage or expense
arising therefrom. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares or the
Additional Shares pursuant hereto.
Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court and other courts of the United States sitting in New York
for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the
Company and the Investor consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth
herein, neither the Company nor the Investor makes any representation,
-16-
<PAGE>
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 7.4 NOTICES. Any notice or other communication
required or permitted to be given hereunder shall be in writing and
shall be effective (a) upon hand delivery or delivery by telex (with
correct answer back received), telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
to the Company:
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attn: Chief Executive Officer
with copies to:
Brobeck Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attn: Laura M. Brower, Esq.
to the Investor:
S. P. Investors International S.A.
c/o Bank of Bermuda Ltd.
Corp. Trust Services Department
Attn: Stewart Bent
129 Front St.
Hamilton 5-31
Bermuda
with copies to:
The Palladin Group, L.P.
40th West 5th Street
Suite 1500
New York, New York 10019
Attn: Jeffrey Devers
Either party hereto may from time to time change its address for notices
under this Section 7.4 by giving at least 10 days' written notice of
such changed address to the other party hereto.
-17-
<PAGE>
Section 7.5 WAIVERS. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 7.6 HEADINGS. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall
not be deemed to limit or affect any of the provisions hereof.
Section 7.7 SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the parties and their
successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. Neither the
Company nor the Investor shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other
(which consent may be withheld for any reason in the sole discretion of
the party from whom consent is sought); provided, however, that the
Company may assign its rights and obligations hereunder to any acquirer
of substantially all of the assets or a controlling equity interest of
the Company. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this
Agreement.
Section 7.8 NO THIRD PARTY BENEFICIARIES. This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.
Section 7.9 GOVERNING LAW. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of Delaware without regard to the principles of conflict of laws.
Section 7.10 SURVIVAL. The representations and warranties
of the Company and the Investor contained in Article II and the
agreements and covenants set forth in Articles I and III shall survive
the Closing.
Section 7.11 EXECUTION. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause four additional executed
signature pages to be physically delivered to the other party within
five days of the execution and delivery hereof.
Section 7.12 PUBLICITY. The Company and the Investor shall
consult and cooperate with each other in issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby, provided the foregoing shall not interfere with the
legal obligations of either party with respect to public disclosure; and
provided further, that neither the Company nor the Investor shall be
required to consult with the other if any such press release or public
statement does not specifically name the other.
[Remainder of page intentionally left blank.]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as
of the date hereof.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ Arthur J. Benvenuto
------------------------------
Name: Arthur J. Benvenuto
Its: Chairman, President & CEO
S. P. INVESTORS INTERNATIONAL S.A.
By: The Palladin Group, L.P., its
investment manager
By: Palladin Capital Management, LLC
Its General Partner
By: /s/ Jeffrey Devers
----------------------
Title: President
-19-
<PAGE>
EXHIBIT A
CAPITALIZATION SUMMARY
The following table reconciles the Company's outstanding Common Stock and
options and warrants as reported in the Company's Quarterly Report on
Form 10-Q as of March 31, 1995 to June 13, 1995.
Common Options and
Stock Warrants
Outstanding Outstanding
------------- -------------
Outstanding per Form 10-Q 30,570,993 4,186,957
Options and warrants exercised 561,200 (561,200)
Options and warrants granted - 125,000
Options and warrants canceled - (139,209)
---------- ---------
Outstanding as of June 13, 1995 31,132,193 3,611,548
========== =========
As of June 13, 1995, the Company had 1,900,462 remaining available for grant
under its 1992 Stock Option/Stock Issuance Plan.
The Company will issue warrants to purchase 135,000 shares of Common Stock
to the placement agents involved in this transaction on the Closing Date at
an initial exercise price of $6.86 per share.
On January 5, 1995, the Company's Board of Directors (the "Board") adopted a
Shareholder Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan,
the Board declared a dividend of one preferred share purchase right (the
"Right") for each share of Common Stock outstanding on January 20, 1995.
Each Right entitles the registered holder to purchase from the Company
one-hundredth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $55 per one-hundredth share, subject to adjustment.
<PAGE>
EXHIBIT B
June 23, 1995
S.P. Investors International S.A.
Steinhardt Overseas Fund Ltd.
c/o Bank of Bermuda Ltd.
Corporate Trust Services Department
129 Front Street
Hamilton 5-31
Bermuda
Attention: Stewart Bent
Gershon Partners L.P.
Royal Trust Bank Cayman Ltd.
2nd Floor
Royal Bank of Canada Building
Cardinal Avenue
Grand Cayman, Cayman Island
Attention: Frank Boers
Re: Advanced Tissue Sciences, Inc.
Ladies and Gentlemen:
We have acted as counsel for Advanced Tissue Sciences, Inc., a
Delaware corporation (the "Company"), in connection with the issuance and
sale of shares of its Common Stock pursuant to those certain Investment
Agreements dated as of June 23, 1995 (the "Purchase Agreement") by and
between the Company and each of S.P. Investors International S.A.,
Steinhardt Overseas Fund Ltd. and Gershon Partners L.P. (collectively the
"Purchasers"). This opinion is being rendered to you pursuant to Section
4.2(e) of the Purchase Agreement. Capitalized terms used herein and not
otherwise defined herein shall have the meanings given to such terms in the
Purchase Agreement.
In connection with the opinions expressed herein we have made
such examination of matters of law and of fact as we considered appropriate
or advisable for purposes hereof. As to matters of fact material to the
opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by the Company
pursuant to the Purchase Agreement and upon certificates and statements of
government officials and of officers of the Company. We have also examined
originals or copies of such corporate documents or records of the Company as
we have considered appropriate for the opinions expressed herein. We have
assumed for the purposes of this opinion that the signatures on documents
and instruments examined by us are authentic, that each document is what it
purports to be, and that all documents submitted to us as copies conform with
the originals, which facts we have not independently verified.
<PAGE>
S.P. Investors International S.A. Page 2
Steinhardt Overseas Fund Ltd.
Gershon partners L.P.
Agreement dated June 23, 1995
June 23, 1995
In rendering this opinion we have also assumed: (A) that the
Purchase Agreement has been duly and validly executed and delivered by you
or on your behalf and constitute valid, binding and enforceable obligations
upon you; (B) that the representations and warranties made in the Purchase
Agreement by you are true and correct; (C) that any wire transfers, drafts
or checks tendered by you will be honored; (D) if you are a corporation or
other entity, that you have filed any required state franchise, income or
similar taxes; and (E) that there are no extrinsic agreements or
understandings among the parties to the Purchase Agreement that would
modify or interpret the terms of the Purchase Agreement or the respective
rights or obligations of the parties thereunder, other than as set forth on
Exhibit C thereto.
As used in this opinion, the expression "we are not aware" or
the phrase "to our knowledge" means as to matters of fact that, based on
the actual knowledge of individual attorneys within the firm principally
responsible for handling current matters for the Company and after an
examination of documents referred to herein and after inquiries of certain
officers of the Company, we find no reason to believe that the opinions
expressed are factually incorrect; but beyond that we have made no factual
investigation for the purposes of rendering this opinion. Specifically,
but without limitation, we have made no inquiries of securities holders or
employees of the Company.
This opinion relates solely to the general corporate laws of the
State of Delaware and the federal law of the United States (except that our
opinion in paragraphs 5 and 6 below also pertains to the laws of the State
of California), and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering
such laws or opinions of other counsel have not been sought or obtained.
Based upon our examination of and reliance upon the foregoing
and subject to the limitations, exceptions, qualifications and assumptions
set forth below and except as set forth in the Purchase Agreement thereto,
we are of the opinion that as of the date hereof:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
the Company has the requisite corporate power and authority to own its
properties and to conduct its business as presently conducted.
<PAGE>
S.P. Investors International S.A. Page 3
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
2. To our knowledge, the Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to so qualify does not have a Material Adverse Effect.
3. The Company has the requisite corporate power and authority
to execute, deliver and perform the Purchase Agreement. The Purchase
Agreement has been duly and validly authorized by the Company, duly
executed and delivered by an authorized officer of the Company and
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company according to its terms.
4. The capitalization of the Company is as stated in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, as amended and supplemented by Exhibit A to the Purchase Agreement
(collectively, the "Supplemented 10-Q"). No shares of Common Stock are
entitled to preemptive rights, and except as described in the Supplemented
10-Q, there are no preemptive rights or, to our knowledge, options,
warrants, conversion privileges or other rights (or agreements for any such
rights) outstanding to purchase or otherwise obtain from the Company any
of the Company's securities.
5. The execution, delivery, performance and compliance with
the terms of the Purchase Agreement do not violate any provision of any
federal, California state or Delaware corporate law, rule or regulation
applicable to the Company, or by which any property or asset of the Company
is bound or affected, or the Company's Certificate or Bylaws, or conflict
with, or constitute a default under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement or
in the Company is a party and which has been filed as a material agreement
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
6. All consents, approvals, permits, orders or authorizations
of, and all qualifications, registrations, designations, declarations or
filings with, any federal, California state or Delaware general corporate
governmental authority on the part of the Company required in connection
with the execution and delivery of the Purchase Agreement and consummation
at the Closing of the transactions contemplated by the Purchase Agreement
have been obtained, and are effective, except the additional listing
application required to be filed with the National Association of Securities
Dealers, Inc. and the registration statement required to
<PAGE>
S.P. Investors International S.A. Page 4
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
be filed with the Securities and Exchange Commission by Section 1.5 of the
Purchase Agreement, and we are not aware of any proceedings, or threat
thereof, that question the validity thereof.
7. The Shares have been duly authorized and, when issued and
delivered to the Purchasers against payment therefor in accordance with the
terms of the Purchase Agreement, will be validly issued, fully paid and
non-assessable.
8. The Additional Shares have been authorized and reserved for
issuance pursuant to the terms of the Purchase Agreement, and when issued
and delivered to the Purchasers in accordance with the terms of the Purchase
Agreement, will be validly issued, fully paid and non-assessable.
9. We are not aware of any action, proceeding or governmental
investigation pending or threatened against the Company which questions the
validity, or which affects the enforceability, of the Purchase Agreement or
the right of the Company to enter into such Purchase Agreement or which
would, if decided adversely to the Company, have a Material Adverse Effect.
Our opinions expressed above are specifically subject to the
following limitations, exceptions, qualifications and assumptions:
(A) For purposes of our opinions in paragraphs 5 and 6 above,
we are rendering no opinion as to the applicability of, or the Company's
compliance or non-compliance with, any federal, state or foreign securities
laws as they may relate to the transactions described in the Purchase
Agreement, the execution, delivery and performance of the Purchase Agreement
by the Company and the consummation by the Company of the transactions
contemplated thereby.
(B) The effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the relief of
debtors or the rights and remedies of creditors generally, including without
limitation the effect of statutory or other law regarding fraudulent
conveyances and preferential transfers.
(C) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust
statutes, laws, rules and regulations.
(D) Limitations imposed by general equitable principles upon
the specific enforceability of any of the remedies, covenants
<PAGE>
S.P. Investors International S.A. Page 5
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
or other provisions of any applicable agreement and upon the availability
of injunctive relief or other equitable remedies, regardless of whether
enforcement of any such agreement is considered a proceeding in equity or
at law.
(E) The unenforceability under certain circumstances of
provisions, indemnifying a party against, or requiring contributions toward,
that party's liability for its own wrongful or negligent acts, or where
indemnification or contribution is contrary to public policy. In this
regard, we advise you that in the opinion of the Securities and Exchange
Commission indemnification of directors, officers and controlling persons
of an issuer against liabilities arising under the Securities Act of 1933,
as amended, is against public policy and is therefore unenforceable.
This opinion is rendered as of the date first written above
solely for your benefit in connection with the Purchase Agreement and may
not be delivered to, quoted or relied upon by any person other than you, or
for any other purpose, without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to
the Company. We assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and
which may alter, affect or modify the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON
<PAGE>
EXHIBIT C
June 23, 1995
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attention: Arthur Benvenuto
Re: Regulation S Offering
---------------------
Ladies and Gentlemen:
Reference is made to the Investment Agreement of even date and delivery
herewith (the "Agreement") between the undersigned ("Investor") and Advanced
Tissue Sciences, Inc. Capitalized terms contained in this letter shall
have the same meaning ascribed to them in the Agreement.
In addition to the representations and covenants of the Investor contained
in the Agreement, Investor further covenants and agrees as follows:
1. In the event the Investor engages in short sales transactions
or other hedging activities during the period from 105 days
following the Closing through 135 days following the Closing
which involve, among other things, sales of Common Stock of the
Company, Investor will, to the extent within its reasonable
control, conduct such activities so as not to complete or
effect any such sale on any trading day during such period
at a price which is lower than the lowest sale effected on
such day by persons other than the Investor;
2. Investor covenants that it will comply with all applicable
laws, rules and regulations regarding the foregoing activities
and/or the financing of the Shares and Additional Shares
including, if applicable, compliance with Regulation S.
[Signatures on next page.]
-1-
<PAGE>
Very truly yours,
S. P. INVESTORS INTERNATIONAL S.A.
By: The Palladin Group, L.P.,
its investment manager
By: Palladin Capital Management, LLC
Its General Partner
By: /s/ Jeffrey Devers
-------------------------------
Title: President
<PAGE>
Exhibit 4.2
INVESTMENT AGREEMENT
Between
ADVANCED TISSUE SCIENCES, INC.
And
STEINHARDT OVERSEAS FUND LTD.
Dated as of June 23, 1995
THE SECURITIES TO BE PURCHASED AND SOLD PURSUANT TO
THIS INVESTMENT AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
<PAGE>
INVESTMENT AGREEMENT dated as of June 23, 1995 between Steinhardt
Overseas Fund Ltd., ( the "Investor") and Advanced Tissue Sciences,
Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Company").
WHEREAS, the parties desire that the Investor become an
equity investor in the Company by purchasing an aggregate of 500,000
shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock
---------------------------------
Section 1.1 PURCHASE AND SALE OF COMMON STOCK. Upon the
terms and conditions set forth herein, the Company shall issue and sell
to the Investor, and the Investor shall purchase from the Company,
500,000 shares of the Company's Common Stock (the "Shares").
Section 1.2 PURCHASE PRICE. The aggregate purchase price
for the Shares (the "Purchase Price") shall equal $3,430,000 payable in
cash by wire transfer or cashier's check in immediately available funds.
Section 1.3 SHARE NUMBER; VALUATION PERIOD.
(a) The number of Shares that the Company shall be
obligated to issue and sell and the Investor shall be obligated to
purchase hereunder, in the aggregate, is referred to herein as the
"Share Number." Subject to adjustment as provided in Sections 1.3(c),
1.3(d) and 1.3(e), the Share Number shall initially be 500,000.
(b) The "Valuation Period" shall be a 45 calendar day
period commencing on and including the first business day which is 90
calendar days after the Closing Date (as defined herein) as the same may
be modified pursuant to Section 4.2(c) hereof.
(c) Notwithstanding Section 1.3(a) above, and except
as hereinafter provided, if the Average Share Price (hereinafter
defined) during the Valuation Period is less than $7.75, then the
Company shall deliver to the Investor, at no additional cost to the
Investor, and in addition to the initial Share Number, the number of
shares of Common Stock that is obtained by subtracting (x) 500,000 from
(y) the quotient obtained by dividing the Purchase Price by 88.5% of the
Average Share Price (rounded to the nearest whole number) (together with
any additional shares issued pursuant to Section 1.3(e) herein, the
"Additional Shares").
(d) Notwithstanding Section 1.3(a) above, and except
as hereinafter provided, if the Average Share Price during the Valuation
Period is greater than $7.75, the Investor shall pay to the Company the
dollar amount by which (x) the product of 88.5% of the Average Share
Price and the Share Number exceeds (y) the product of $6.86 and the
Share Number.
(e) Notwithstanding Section 1.3(c) above, in the event
that the Company, on or prior to 135 days from the Closing Date, issues
or sells any shares of its Common Stock or any of its securities which
are convertible into or exchangeable for its Common Stock or any
warrants or
<PAGE>
other rights to subscribe for or to purchase or any options for the purchase
of, its Common Stock (other than shares or options issued pursuant to the
Company's option plans or shares issued upon exercise of options, warrants
or rights outstanding on the Closing Date or as provided on EXHIBIT A
hereto), at a purchase price which is less than $6.86 per share (the
"Subsequent Sale Price"), then the Company shall deliver to the Investor,
at no additional cost to the Investor, and in addition to the Share Number,
the number of shares of Common Stock that is obtained by subtracting
(x) 500,000 from (y) the quotient obtained by dividing the Purchase Price
by the Subsequent Sale Price (rounded to the nearest whole number).
Notwithstanding any of the foregoing, the number of
Additional Shares issuable hereunder shall be the greater of the number
of Additional Shares issuable pursuant to Section 1.3(c) herein and the
number of Additional Shares issuable pursuant to Section 1.3(e) herein,
if any.
(f) For purposes hereof, the Average Share Price shall
mean the average of the closing trading prices of the Company's Common
Stock on the Nasdaq National Market, as reported by the Nasdaq National
Market for each trading day during the Valuation Period.
Section 1.4 THE CLOSING.
(a) The closing of the purchase and sale of the Shares
(the "Closing"), shall take place (a) at the offices of the Investor, at
10:00 a.m., local time on the later of the following: (i) June 23,
1995, and (ii) the date on which the last to be fulfilled or waived of
the conditions set forth in Article IV hereof and applicable to the
Closing shall be fulfilled or waived in accordance herewith, or (b) at
such other time and place and/or on such other date as the Investor and
the Company may agree. The date on which the Closing occurs is referred
to herein as the "Closing Date."
(b) (i) On the Closing Date, the Company shall deliver
to the Investor certificates representing the Share Number to be issued
and sold to the Investor on such date and registered in the name of the
Investor or deposit such Share Number into the accounts designated by
the Investor and (ii) on the Closing Date, the Investor shall deliver to
the Company the Purchase Price by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in
writing by the Company. In addition, each of the Company and the
Investor shall deliver all documents, instruments and writings required
to be delivered by either of them pursuant to this Agreement at or prior
to the Closing.
Section 1.5. COVENANT TO REGISTER. For purposes of this
Section 1.5, the following definitions shall apply:
(a) (i) The terms "register," "registered," and
"registration" refer to a registration under the Act effected by
preparing and filing a registration statement or similar document in
compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement, document or amendment
thereto.
(ii) The term "Registrable Securities" means the
Shares and any Additional Shares issued pursuant to Section 1.3 hereof
and any securities of the Company or securities of any successor
corporation issued as, or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as a dividend or
other distribution with respect to, or in
-3-
<PAGE>
exchange for, or in replacement of, the Shares and any Additional Shares
issued pursuant to Section 1.3 hereof.
(b) (i) The Company shall, as expeditiously as
possible following the Closing, file a registration statement on Form S-
3 or an equivalent thereof promptly after the Closing Date, covering all
the Registrable Securities, and shall use its best efforts to cause such
registration statement to become effective within 105 days of the
Closing Date (the "Initial Registration"). In the event such
registration is not so declared effective, the holder of the Registrable
Securities shall have the right to require by notice in writing that the
Company register all or any part of the Registrable Securities held by
such holder (a "Demand Registration") and the Company shall thereupon
effect such registration in accordance herewith. The parties agree that
if the holder of Registrable Securities demands registration of less
than all of the Registrable Securities, the Company, at its option, may
nevertheless file a registration statement covering all of the
Registrable Securities. If such registration statement is declared
effective with respect to all Registrable Securities the demand
registration rights granted pursuant to this Section 1.5 (b) (i) shall
cease. If such registration statement is not declared effective with
respect to all Registrable Securities the demand registration rights
described herein shall remain in effect until all Registrable Securities
have been registered under the Act.
(ii) The Company shall not be obligated to effect
Demand Registration (i) if all of the Registrable Securities held by the
holder of Registrable Securities which are intended to be covered by the
Demand Registration are, at the time of the request of a Demand
Registration, included in an effective registration statement and the
Company is in compliance with its obligations under Subsection (d) (ii)
through (v) hereof.
(iii) The Company may suspend the effectiveness of
any such registration effected pursuant to this Section 1.5(b) in the
event, and for such period of time as, such a suspension is required by
the rules and regulations of the Securities and Exchange Commission
("SEC").
(iv) If the registration statement covering the
Registrable Securities is not effective within 105 days of the Closing,
then the Company shall pay the Investor a one time penalty of 1.0% of
the Purchase Price.
(c) If the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders
other than the Investor) any of its stock or other securities under the
Act in connection with a public offering of such securities (other than
a registration on Form S-4, Form S-8 or other limited purpose form) and
the Registrable Securities have not heretofore been included in a
registration statement under Subsection (b), which remains effective,
the Company shall, at such time, promptly give the holder of Registrable
Securities written notice of such registration. Upon the written
request of the holder of Registrable Securities given within twenty (20)
days after receipt of such notice by the holder of Registrable
Securities, the Company shall use its best efforts to cause to be
registered under the Act all Registrable Securities that the holder of
Registrable Securities requests to be registered. However, the Company
shall have no obligation under this Subsection (c) to the extent that,
with respect to a public offering registration, any underwriter of such
public offering reasonably requests that the Registrable Securities or a
portion thereof be excluded therefrom.
(d) Whenever required under this Section 1.5 to effect
the registration of any Registrable Securities, including, without
limitation, the Initial Registration, the Company shall, as
expeditiously as reasonably possible:
-4-
<PAGE>
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective and, upon the
request of the Investor, keep such registration statement effective,
pursuant to the provisions of Regulation Setion 230.415 or otherwise, for so
long as the holder of Registrable Securities desires to dispose of the
securities covered by such registration statement (but not after the
holder of Registrable Securities, in the reasonable opinion of its
counsel, is free to sell such securities in any three month period under
the provisions of Rule 144 under the Act).
(ii) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of
all securities covered by such registration statement.
(iii) Furnish to the holder of Registrable
Securities such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act,
and such other documents as the holder of Registrable Securities may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by the holder of Registrable Securities.
(iv) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or "Blue Sky" laws of such jurisdictions as shall be
reasonably requested by the holder of Registrable Securities, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service and process in any such states or jurisdictions.
(v) Notify the holder of Registrable Securities of
the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(vi) Furnish, at the request of the holder of
Registrable Securities, an opinion of counsel of the Company, dated the
effective date of the registration statement, as to the due
authorization and issuance of the securities being registered and
compliance with securities laws by the Company in connection with the
authorization and issuance thereof.
(vii) Use its best efforts to list the Registrable
Securities covered by such registration statement with any securities
exchange on which the Common Stock is then listed;
(viii) Make available for inspection by the holder
of Registrable Securities, upon request, all SEC Documents filed
subsequent to the Closing and require the Company's officers, directors
and employees to supply all information reasonably requested by any
holder of Registrable Securities in connection with such registration
statement.
(e) The holder of Registrable Securities will furnish
to the Company in connection with any registration under this Section
1.5 such information regarding itself, the Registrable Securities and
other securities of the Company held by it, and the intended method of
disposition of such securities as shall be required to effect the
registration of the Registrable Securities held by holder of Registrable
Securities.
-5-
<PAGE>
(f) (i) The Company shall indemnify, defend and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of Subsections (b) or
(c) from and against, and shall reimburse such holder with respect to,
any and all claims, suits, demands, causes of action, losses, damages,
liabilities, costs or expenses ("Liabilities") to which such holder may
become subject under the Act or otherwise, arising from or relating to
(A) any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or (B) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holders in writing
specifically for use in the preparation thereof.
(ii) Promptly after receipt by the holder of
Registrable Securities of notice of the commencement of any action, the
holder of Registrable Securities shall, if a claim in respect thereof is
to be made against the Company hereunder, notify the Company in writing
thereof, but the omission so to notify the Company shall not relieve the
Company from any Liability which it may have to the holder of
Registrable Securities other than under this section and shall only
relieve it from any Lability which it may have to the holder of
Registrable Securities under this section if and to the extent the
Company is prejudiced by such omission. In case any such action shall
be brought against the holder of Registrable Securities and the holder
of Registrable Securities shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to the holder of Registrable Securities,
and, after notice from the Company to the holder of Registrable
Securities of its election so to assume and undertake the defense
thereof, the Company shall not be liable to the holder of Registrable
Securities under this section for any legal expenses subsequently
incurred by the holder of Registrable Securities in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that if the
defendants in any such action include both the Company and the holder of
Registrable Securities and the holder of Registrable Securities shall
have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those
available to the Company or if the interests of the holder of
Registrable Securities reasonably may be deemed to conflict with the
interests of the Company, the holder of Registrable Securities shall
have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the Company as
incurred.
(g) (i) With respect to the inclusion of Registrable
Securities in a registration statement pursuant to subsections (b) or
(c), all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the
Company; provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discounts and commissions, if any, incurred in connection with such
registration.
(ii) The fees, costs and expenses of registration
to be borne by the Company as provided in this Subsection (g) shall
include, without limitation, all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for
the Company, and all legal fees and disbursements and other expenses of
complying with state securities or Blue Sky laws of any jurisdiction or
jurisdictions in which securities to be offered are to be
-6-
<PAGE>
registered and qualified. Fees and disbursements of counsel and accountants
for the selling securityholders shall, however, be borne by the respective
selling securityholder.
(h) (i) The rights to cause the Company to register
all or any portion of Registrable Securities pursuant to this Section
1.5 may be assigned by Investor to a transferee or assignee of 20% or
more, in the aggregate, of the Shares and the Additional Shares. Within
a reasonable time after such transfer the Investor shall notify the
Company of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being
assigned. Such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by
the transferee or assignee is restricted under the Act. Any transferee
shall agree in writing at the time of transfer to be bound by the
provisions of this Section 1.5.
(ii) From and after the date of this Agreement,
the Company shall not agree to allow the holders of any securities of
the Company to include any of their securities in any registration
statement filed by the Company pursuant to Subsection (b) unless the
inclusion of such securities will not reduce the amount of the
Registrable Securities included therein.
Section 1.6. ADJUSTMENTS. If the Investor shall be
entitled to the issuance of Additional Shares, the Company shall deliver
to the Investor at the offices of the Investor on the third (3rd)
business day after the end of the Valuation Period one or more
certificates representing the Additional Shares so to be delivered in
accordance with this Agreement, registered in the name of the Investor,
or deposit such Additional Shares into accounts designated by the
Investor; provided, however, that if the sum of the shares then
beneficially owned by the Investor, and any Additional Shares then
issuable to the Investor, as determined by the Investor, in its sole
determination, shall equal 1.66% or more of the shares of Company's
Common Stock issued and outstanding (as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934) just prior to the
Closing, then, and in such event, (x) the number of Additional Shares to
be issued to the Investor pursuant to this paragraph shall be reduced to
the number which, together with the Share Number, shall equal 1.64% of
the shares of the Company's Common Stock issued and outstanding (as so
determined) just prior to the Closing, and (y) in consideration for such
reduction in Additional Shares, the Company shall pay to the Investor a
sum equal to the greater of (a) the product of 88.5% of the Average
Share Price and the reduction in the Additional Shares to be issued as a
result of the preceding clause (x), and (b) the product of the
Subsequent Sale Price and the reduction in the Additional Shares to be
issued as a result of the preceding clause (x).
Section 1.7 RESCHEDULING. If after the date hereof and
prior to the expiration of the Valuation Period any person shall (a)
publicly announce a tender offer or exchange offer for the Company's
Common Stock, or (b) publicly announce plans for a merger, consolidation
or potential change in control of the Company, the Investor may in its
sole discretion elect by written notice to the Company to shorten the
Valuation Period so as to end on a date which is either before or after
the consummation of the record date for the consummation of any such
transaction, which election must be made prior to consummation of any
such transaction. For purposes of the foregoing, it is understood and
agreed that the Investor may, but shall not be required to, reduce or
entirely eliminate the Valuation Period or to reschedule the Valuation
Period.
-7-
<PAGE>
ARTICLE II
Representations and Warranties
------------------------------
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to
the Investor:
(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated and existing in good standing under the
laws of the State of Delaware, and has the requisite corporate power to
own its properties and to carry on its business as now being conducted.
The Company does not have any active subsidiaries, except for those
identified in the SEC Documents (as hereinafter defined). Each of the
Company and its subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any adverse
effect on the operations, properties, prospects, or financial condition
of the entity with respect to which such term is used and which is
material to such entity and other entities controlling or controlled by
such entity taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has
the requisite corporate power and authority to enter into and perform
this Agreement and to issue the Shares and the Additional Shares in
accordance with the terms hereof, (ii) the execution and delivery of
this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action, and no further consent or authorization of
the Company or its Board of Directors or stockholders is required, (iii)
this Agreement has been duly executed and delivered by the Company, and
(iv) this Agreement constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
(c) CAPITALIZATION. The authorized capital stock of
the Company and the shares thereof currently issued and outstanding are
as most recently described in the SEC Documents and there have been no
changes (except for changes described on EXHIBIT A) therein since such
description. All of the outstanding shares of the Company's Common Stock
have been validly issued and are fully paid and nonassessable. Except
as set forth in EXHIBIT A hereto and as described in the SEC Documents,
no shares of Common Stock are entitled to preemptive rights and there
are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares
of capital stock of the Company or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares, or
securities or rights convertible into shares, of capital stock of the
Company. The Company has furnished to the Investor true and correct
copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Certificate"), and the Company's By-Laws, as in effect
on the date hereof (the "By-Laws").
(d) ISSUANCE OF SHARES. The issuance of the Shares
and Additional Shares has been duly authorized and, when paid for or
issued in accordance with the terms hereof, shall be validly issued,
fully paid and non-assessable.
-8-
<PAGE>
(e) NO CONFLICTS. The execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby do not and will not (i)
result in a violation of the Company's Certificate or By-Laws or (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a party
and which has previously been filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1994 and is still in effect, or
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company, or by which
any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect); provided that, for purposes
of such representation as to Federal, state, local or foreign law, rule
or regulation, no representation is made herein with respect to any of
the same applicable solely to the Investor and not to the Company. The
business of the Company is not being conducted in violation of any law,
ordinance or regulations of any governmental entity, except for possible
violations which either singly or in the aggregate do not have a
Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States to obtain
any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement
or issue and sell the Shares or the Additional Shares in accordance with
the terms hereof (other than the filing of a Form D with the SEC, any
NASD filings or state securities filings which may be required to be
made by the Company subsequent to the Closing, and any registration
statement which may be filed in accordance with Section 1.5 herein);
provided that, for purposes of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common
Stock of the Company is registered pursuant to Section 12(g) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the
Company with the SEC (all of the foregoing filed prior to the date
hereof being hereinafter referred to herein as the "SEC Documents").
The Company has delivered to the Investor true and complete copies of
the quarterly and annual (including, without limitation, proxy
information and solicitation materials) SEC Documents filed with the SEC
since December 31, 1994. The Company has not provided to the Investor
any information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in
-9-
<PAGE>
such financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes
or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) NO MATERIAL ADVERSE CHANGE. Since December 31,
1994, the date through which the most recent annual report of the
Company on Form 10-K has been prepared and filed with the SEC, a copy of
which is included in the SEC Documents, no Material Adverse Effect has
occurred or exists with respect to the Company except as otherwise
disclosed or reflected in other SEC Documents prepared through or as of
a date subsequent to December 31, 1994.
(h) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations not disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company's business
since March 31, 1995 and which, individually or in the aggregate, do not
or would not have a Material Adverse Effect on the Company.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event
or circumstance has occurred or exists with respect to the Company or
its business, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby makes the following representations and warranties
to the Company:
(a) AUTHORIZATION; ENFORCEMENT. (i) The Investor has
the requisite power and authority to enter into and perform this
Agreement and to purchase the Shares being sold hereunder, (ii) the
execution and delivery of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate action, and no further
consent or authorization of the Investor or its Board of Directors,
stockholders, or partners as the case may be, is required, (iii) this
Agreement has been duly authorized, executed and delivered by the
Investor, and (iv) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
(b) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation by the Investor of
the transactions contemplated hereby or relating hereto do not and will
not (i) result in a violation of the Investor's charter documents or By-
Laws or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the
Investor is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or its properties (except
for such conflicts, defaults and violations as would not, individually
or in the aggregate have a Material Adverse Effect on the Investor).
The businesses of the Investor are not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for
possible violations which either singly or in the aggregate do not have
a Material Adverse Effect. The Investor is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in
-10-
<PAGE>
order for it to execute, deliver or perform any of its obligations under
this Agreement or purchase the Shares or the Additional Shares in accordance
with the terms hereof; provided that for purposes of the representation
made in this sentence, the Investor is assuming and relying upon the
accuracy of the relevant representations and agreements of the Company herein.
(c) OWNERSHIP. The Investor is duly organized and
validly existing under the laws of the place hereinabove provided and is
not a U.S. Person as defined within Regulation S under the Securities
Act and is not purchasing the Shares for the account or benefit of a
U.S. Person. On the date hereof and on the Closing Date, the Investor
is and will be, as the case may be, located outside of the United
States. The Investor has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks
of the investment contemplated by this Agreement. The Investor has been
afforded, to the satisfaction of the Investor, the opportunity to review
the SEC Documents and obtain such additional publicly available
information concerning the Company and its business, and to ask such
questions and receive such answers (based upon publicly available
information), as the Investor deems necessary to make an informed
investment decision.
(d) INVESTMENT REPRESENTATION: The Investor is
purchasing the Shares and, if any, the Additional Shares for investment
purposes and not with a view towards distribution. Investor has no
present intention to sell the Shares or the Additional Shares and the
Investor has no present arrangement (whether or not legally binding) at
any time to sell the Shares or the Additional Shares to or through any
person or entity; provided, however, except as provided in subsection
(g) below, that by making the representations herein, the Investor does
not agree to hold the Shares or the Additional Shares for any minimum or
other specific term and reserves the right to dispose of the Shares or
the Additional Shares at any time in accordance with Federal securities
laws applicable to such disposition.
(e) ACCREDITED INVESTOR: The Investor is an
accredited investor as defined in Regulation Section 230.501 promulgated under
the Act.
(f) RULE 144. The Investor understands that the
Shares and any Additional Shares must be held indefinitely unless such
Shares or Additional Shares are subsequently registered under the Act or
an exemption from registration is available. The Investor has been
advised or is aware of the provisions of Rule 144 promulgated under the
Act.
(g) Notwithstanding the foregoing, the Investor shall
not sell (including a short sale), transfer or otherwise dispose of the
shares, or any Additional Shares issued to such Investor, at any time
during the 105 day period following the Closing. Notwithstanding the
foregoing, during the Valuation Period Investor will only transfer or
otherwise dispose of its shares in accordance with the representations
contained in EXHIBIT C.
ARTICLE III
Covenants
---------
Section 3.1 REGULATION S
(a) Notwithstanding any of the foregoing, the Company
acknowledges and agrees that in the event that a registration statement
covering all of the Registrable Securities shall not have become
effective within 105 days of the Closing Date, legend described in
Article V herein shall
-11-
<PAGE>
be removed on the 106th day following the Closing, in accordance with
Article V herein, it being acknowledged by the Company that, in such event,
the Investor shall be free to transfer, sell, pledge, or otherwise
hypothecate the Shares and the Additional Shares issued pursuant to this
Agreement in accordance with (a) Regulation S under the Act and (b) the
terms and conditions described in the letter attached hereto as EXHIBIT C.
(b) The Company acknowledges and agrees that, in the
event the Investor sells, transfers, pledges or otherwise hypothecates
the Shares or Additional Shares in accordance with Section 3.1(a)
herein, for purposes of clarifying and specifying the applicable
Restricted Period under Regulation S, the Investor intends to observe as
the Restricted Period (as defined in Regulation S) for the Shares being
delivered at the Closing the period of 40 days commencing upon the
Closing Date and ending 40 days thereafter, and to observe as the
Restricted Period applicable to the Additional Shares, if any, the
period of 40 days commencing upon the date upon which the same are
delivered to the Investor hereunder.
Neither the Company nor any of its affiliates has
engaged or will engage in any "directed selling efforts" (as such term
is defined under Regulation S) with respect to the Shares or the
Additional Shares, and the Company and its affiliates have complied and
will comply with the "offering restrictions" requirements of Regulation
S.
(c) In the event the Investor sells, transfers or
otherwise disposes of the Shares or the Additional Shares in accordance
with Section 3.1(a) herein, the Investor covenants and agrees that such
sale, transfer or other disposition will be made in compliance with the
terms of Regulation S under the Act, as in effect at that time,
including (i) that the Shares and the Additional Shares will not be
offered or sold within the United States or to, or for the account or
benefit of, any "U.S. person" (as such term is defined in Rule 902 (o)
promulgated under the Act) except in accordance with the provisions of
Rule 903 or Rule 904 of Regulation S under the Securities Act, pursuant
to registration under the Act, or pursuant to an exemption from the
registration requirements of the Act and (ii) that neither it, its
affiliates, nor persons acting on their behalf, have engaged or will
engage in "directed selling efforts" (as such term is defined by
Regulation S) with respect to the Shares or the Additional Shares and
that each of them has complied and will comply with the "offering
restrictions" requirements of Regulation S.
Section 3.2 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and Nasdaq, in
accordance with its requirements, of the transactions contemplated by
this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, including, without limitation, the filing of a Form D with
the SEC, for the legal and valid issuance of the Shares and the
Additional Shares to the Investor.
(b) The Investor understands that the Shares and, if
any, the Additional Shares, are being offered and sold to it in reliance
on a transactional exemption from the registration
-12-
<PAGE>
requirements of Federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Investor set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Shares.
Section 3.3 CORPORATE. (a) From the date hereof through
the end of the Valuation Period the Company shall not (i) amend its
Certificate or By-Laws so as to adversely affect any rights of the
Investor; (ii) split, combine or reclassify its outstanding capital
stock; (iii) declare or set aside or pay any dividend or other
distribution with respect to the Company's outstanding Common Stock;
(iv) issue or sell, directly or indirectly, Shares of the Company's
Common Stock in a manner or upon terms as could reasonably be expected
to affect the market for the Common Stock materially and adversely; or
(v) enter into any agreement with respect to the foregoing; and (vi) the
Company shall at all times reserve and keep available, solely for
issuance and delivery as Shares or Additional Shares hereunder, such
shares of Common Stock as shall from time to time be issuable or
reasonably be expected to be issuable as Shares or Additional Shares
hereunder provided, however, that the number of shares so reserved shall
at all times be at least 300% of the Share Number.
(b) The Company will cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing
obligations under said act, will comply with all requirements related to
any registration statement filed pursuant to Section 1.5 herein, and
will not take any action or file any document (whether or not permitted
by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said act, except as permitted herein. The Company
will take all action necessary to continue the listing or trading of its
Common Stock on the Nasdaq National Market and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the NASD and Nasdaq.
ARTICLE IV
Conditions
----------
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE SHARES. The obligation hereunder of the Company to
issue and/or sell the Shares or the Additional Shares to the Investor is
further subject to the satisfaction, at or before the respective
issuance and deliveries thereof, of each of the following conditions set
forth below. These conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE INVESTOR REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Investor shall be
true and correct in all material respects as of the date when made and
as of the date of such issuance and delivery as though made at that
time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior to
such date.
(c) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
-13-
<PAGE>
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO PURCHASE THE SHARES. The obligation of the Investor
hereunder to acquire and pay for the Shares is subject to the
satisfaction, at or before the Closing of each of the following
conditions set forth below. These conditions are for the Investor's
sole benefit and may be waived by the Investor at any time in its sole
discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing.
(c) NASDAQ. From the date hereof to the Closing Date,
as to the Shares to be issued and delivered on the Closing Date, trading
in the Company's Common Stock shall not have been suspended by the SEC
or the Nasdaq National Market (except for any suspension of trading of
limited duration agreed to between the Company and the Nasdaq National
Market solely to permit dissemination of material information regarding
the Company), and trading in securities generally as reported by Nasdaq
shall not have been suspended or limited or minimum prices shall not
have been established on securities whose trades are reported by Nasdaq.
Notwithstanding the foregoing sentence, in the event that at any point
on or prior to the first day of the Valuation Period trading in the
Common Stock is suspended by the SEC or the Nasdaq National Market,
(i) calculation of the Average Stock Price shall be suspended for such
period of time as trading in the Common Stock is suspended and (ii) the
Valuation Period shall be reset so that such Valuation Period shall
begin on the 90th calendar day following the Closing Date and shall end
on the 45th calendar day thereafter on which quotations for the
Company's Common Stock on the Nasdaq National Market are available. In
the event that the Company's Common Stock is delisted from the Nasdaq
National Market at any time during the Valuation Period or in the event
that trading in the Common Stock is suspended for a period of more than
thirty (30) days subsequent to the commencement of the Valuation Period,
(iii) the Valuation Period will be deemed to have concluded on the date
on which the Common Stock was delisted or such trading was suspended,
(iv) the Average Stock Price shall be calculated based on the number of
days in such shortened Valuation Period, and (v) the Investor shall
receive any Additional Shares owed to it pursuant to Section 1.3(c)
herein within five (5) business days of the conclusion of the shortened
Valuation Period. In no event shall the Investor be required to deliver
any shares for cancellation pursuant to Section 1.3(d) herein if the
Common Stock is delisted from the Nasdaq National Market or if trading
in the Common Stock is suspended for more than thirty (30) days during
the Valuation Period or prior to the effectiveness of the Company's
Initial Registration.
(d) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
-14-
<PAGE>
(e) OPINION OF COUNSEL, ETC. At the Closing the
Investor shall have received an opinion of Brobeck Phleger & Harrison,
counsel to the Company, in form and substance satisfactory to the
Investor and its counsel (in substantially the form of Exhibit B
hereto), and such other certificates and documents as the Investor or
its counsel shall reasonably require incident to the Closing.
ARTICLE V
Legend on Stock
---------------
Each certificate representing the Shares issued pursuant to
Section 1.3 shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT. THIS
LEGEND SHALL CEASE TO HAVE ANY FORCE OR EFFECT AND
WILL BE REMOVED ON OCTOBER 7, 1995 UNLESS AN OPINION
OF COUNSEL TO THE COMPANY, IN FORM AND SUBSTANCE
SATISFACTORY TO THE INVESTOR AND ITS COUNSEL, IS
DELIVERED TO THE COMPANY'S TRANSFER AGENT ON OR
PRIOR TO SUCH DATE STATING THAT REMOVAL OF THIS
LEGEND IS NOT PERMITTED UNDER LAW DUE TO A CHANGE IN
LAW SUBSEQUENT TO JUNE 23, 1995.
Notwithstanding the foregoing, this legend shall cease to
have any force or effect and will be removed on October 7, 1995, unless
an opinion of counsel to the Company, in form and substance satisfactory
to the Investor and its counsel, is delivered to the Company's transfer
agent, on or prior to such date stating that removal of this legend is
not permitted under law due to a change in law subsequent to the date
hereof.
No certificate representing Additional Shares, if any,
required to be issued pursuant to this Agreement will bear a restrictive
legend unless an opinion of the Company's counsel, in form and substance
satisfactory to the Investor, has been issued to the Company's transfer
agent on or prior to the issuance of such Additional Shares stating that
such a legend is required by law due to a change in law subsequent to
the date hereof.
ARTICLE VI
Termination
-----------
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement
may be terminated at any time prior to the Closing by the mutual consent
of the Company and the Investor, by action of their respective Boards of
Directors or other governing body.
-15-
<PAGE>
Section 6.2 OTHER TERMINATION. This Agreement may be
terminated by action of the Board of Directors or other governing body
of the Investor or the Company at any time after June 23 1995 if the
Closing shall not have been consummated by June 23, 1995.
Section 6.3 AUTOMATIC TERMINATION. This Agreement shall
automatically terminate without any further action of either party
hereto if the Closing shall not have occurred by June 23, 1995.
ARTICLE VII
Miscellaneous
-------------
Section 7.1 FEES AND EXPENSES. Each party shall pay the
fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the Company shall pay, at the Closing, all
attorneys' fees and expenses incurred by the Investor and Cappello
Capital Corp., up to a maximum of $6,666, in connection with the
preparation, negotiation, execution and delivery of this Agreement and
the transactions contemplated hereunder. Without limiting the
generality of the foregoing, The Kriegsman Group shall be entitled to a
finders fee pursuant to a separate agreement with respect thereto
between such finder and the Company, and the Company shall be solely
responsible for the full payment thereof and shall indemnify and hold
harmless the Investor from and against all loss, cost, damage or expense
arising therefrom. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares or the
Additional Shares pursuant hereto.
Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court and other courts of the United States sitting in New York
for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the
Company and the Investor consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as
-16-
<PAGE>
specifically set forth herein, neither the Company nor the Investor makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 7.4 NOTICES. Any notice or other communication
required or permitted to be given hereunder shall be in writing and
shall be effective (a) upon hand delivery or delivery by telex (with
correct answer back received), telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
to the Company:
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attn: Chief Executive Officer
with copies to:
Brobeck Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attn: Laura M. Brower, Esq.
to the Investor:
Steinhardt Overseas Fund Ltd.
c/o Bank of Bermuda Ltd.
Corp. Trust Services Department
Attn: Stewart Bent
129 Front St.
Hamilton 5-31
Bermuda
with copies to:
The Palladin Group, L.P.
40th West 57th Street
Suite 1500
New York, New York 10019
Attn: Jeffrey Devers
-17-
<PAGE>
Either party hereto may from time to time change its address for notices
under this Section 7.4 by giving at least 10 days' written notice of
such changed address to the other party hereto.
Section 7.5 WAIVERS. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 7.6 HEADINGS. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall
not be deemed to limit or affect any of the provisions hereof.
Section 7.7 SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the parties and their
successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. Neither the
Company nor the Investor shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other
(which consent may be withheld for any reason in the sole discretion of
the party from whom consent is sought); provided, however, that the
Company may assign its rights and obligations hereunder to any acquirer
of substantially all of the assets or a controlling equity interest of
the Company. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this
Agreement.
Section 7.8 NO THIRD PARTY BENEFICIARIES. This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.
Section 7.9 GOVERNING LAW. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of Delaware without regard to the principles of conflict of laws.
Section 7.10 SURVIVAL. The representations and warranties
of the Company and the Investor contained in Article II and the
agreements and covenants set forth in Articles I and III shall survive
the Closing.
Section 7.11 EXECUTION. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause four additional executed
signature pages to be physically delivered to the other party within
five days of the execution and delivery hereof.
Section 7.12 PUBLICITY. The Company and the Investor shall
consult and cooperate with each other in issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby, provided the foregoing shall not interfere with the
legal obligations of either party with respect to public disclosure; and
provided further, that neither the Company nor the Investor shall be
required to consult with the other if any such press release or public
statement does not specifically name the other.
[Remainder of page intentionally left blank.]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as
of the date hereof.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ Arthur J. Benvenuto
----------------------------
Name: Arthur J. Benvenuto
Its: Chairman, President & CEO
STEINHARDT OVERSEAS FUND LTD.
By: The Palladin Group, L.P., its
investment manager
By: Palladin Capital Management, LLC
Its General Partner
By: /s/ Jeffrey Devers
---------------------
Title: President
-19-
EXHIBIT A
CAPITALIZATION SUMMARY
The following table reconciles the Company's outstanding Common Stock and
options and warrants as reported in the Company's Quarterly Report on
Form 10-Q as of March 31, 1995 to June 13, 1995.
Common Options and
Stock Warrants
Outstanding Outstanding
------------- -------------
Outstanding per Form 10-Q 30,570,993 4,186,957
Options and warrants exercised 561,200 (561,200)
Options and warrants granted - 125,000
Options and warrants canceled - (139,209)
---------- ---------
Outstanding as of June 13, 1995 31,132,193 3,611,548
========== =========
As of June 13, 1995, the Company had 1,900,462 remaining available for
grant under its 1992 Stock Option/Stock Issuance Plan.
The Company will issue warrants to purchase 135,000 shares of Common Stock
to the placement agents involved in this transaction on the Closing Date at
an initial exercise price of $6.86 per share.
On January 5, 1995, the Company's Board of Directors (the "Board") adopted
a Shareholder Rights Plan (the "Rights Plan"). Pursuant to the Rights
Plan, the Board declared a dividend of one preferred share purchase right
(the "Right") for each share of Common Stock outstanding on January 20, 1995.
Each Right entitles the registered holder to purchase from the Company
one-hundredth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $55 per one-hundredth share, subject to adjustment.
<PAGE>
EXHIBIT B
June 23, 1995
S.P. Investors International S.A.
Steinhardt Overseas Fund Ltd.
c/o Bank of Bermuda Ltd.
Corporate Trust Services Department
129 Front Street
Hamilton 5-31
Bermuda
Attention: Stewart Bent
Gershon Partners L.P.
Royal Trust Bank Cayman Ltd.
2nd Floor
Royal Bank of Canada Building
Cardinal Avenue
Grand Cayman, Cayman Island
Attention: Frank Boers
Re: Advanced Tissue Sciences, Inc.
Ladies and Gentlemen:
We have acted as counsel for Advanced Tissue Sciences, Inc., a
Delaware corporation (the "Company"), in connection with the issuance and
sale of shares of its Common Stock pursuant to those certain Investment
Agreements dated as of June 23, 1995 (the "Purchase Agreement") by and
between the Company and each of S.P. Investors International S.A.,
Steinhardt Overseas Fund Ltd. and Gershon Partners L.P. (collectively the
"Purchasers"). This opinion is being rendered to you pursuant to Section
4.2(e) of the Purchase Agreement. Capitalized terms used herein and not
othewise defined herein shall have the meanings given to such terms in the
Purchase Agreement.
In connection with the opinions expressed herein we have made
such examination of matters of law and of fact as we considered appropriate
or advisable for purposes hereof. As to matters of fact material to the
opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by the Company
pursuant to the Purchase Agreement and upon certificates and statements of
government officials and of officers of the Company. We have also examined
originals or copies of such corporate documents or records of the Company
as we have considered appropriate for the opinions expressed herein. We
have assumed for the purposes of this opinion that the signatures on
documents and instruments examined by us are authentic, that each document
is what it purports to be, and that all documents submitted to us as copies
conform with the originals, which facts we have not independently verified.
<PAGE>
S.P. Investors International S.A. Page 2
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
In rendering this opinion we have also assumed: (A) that the
Purchase Agreement has been duly and validly executed and delivered by you
or on your behalf and constitute valid, binding and enforceable obligations
upon you; (B) that the representations and warranties made in the Purchase
Agreement by you are true and correct; (C) that any wire transfers, drafts
or checks tendered by you will be honored; (D) if you are a corporation or
other entity, that you have filed any required state franchise, income
or similar taxes; and (E) that there are no extrinsic agreements or
understandings among the parties to the Purchase Agreement that would
modify or interpret the terms of the Purchase Agreement or the respective
rights or obligations of the parties thereunder, other than as set forth on
Exhibit C thereto.
As used in this opinion, the expression "we are not aware" or
the phrase "to our knowledge" means as to matters of fact that, based on
the actual knowledge of individual attorneys within the firm principally
responsible for handling current matters for the Company and after an
examination of documents referred to herein and after inquiries of certain
officers of the Company, we find no reason to believe that the opinions
expressed are factually incorrect; but beyond that we have made no factual
investigation for the purposes of rendering this opinion. Specifically, but
without limitation, we have made no inquiries of securities holders or
employees of the Company.
This opinion relates solely to the general corporate laws of
the State of Delaware and the federal law of the United States (except that
our opinion in paragraphs 5 and 6 below also pertains to the laws of the
State of California), and we express no opinion with respect to the effect
or application of any other laws. Special rulings of authorities
administering such laws or opinions of other counsel have not been sought
or obtained.
Based upon our examination of and reliance upon the foregoing
and subject to the limitations, exceptions, qualifications and assumptions
set forth below and except as set forth in the Purchase Agreement thereto,
we are of the opinion that as of the date hereof:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
the Company has the requisite corporate power and authority to own its
properties and to conduct its business as presently conducted.
<PAGE>
S.P. Investors International S.A. Page 3
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
2. To our knowledge, the Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to so qualify does not have a Material Adverse Effect.
3. The Company has the requisite corporate power and authority
to execute, deliver and perform the Purchase Agreement. The Purchase
Agreement has been duly and validly authorized by the Company, duly executed
and delivered by an authorized officer of the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company according to its terms.
4. The capitalization of the Company is as stated in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, as amended and supplemented by Exhibit A to the Purchase Agreement
(collectively, the "Supplemented 10-Q"). No shares of Common Stock are
entitled to preemptive rights, and except as described in the Supplemented
10-Q, there are no preemptive rights or, to our knowledge, options,
warrants, conversion privileges or other rights (or agreements for any such
rights) outstanding to purchase or otherwise obtain from the Company any
of the Company's securities.
5. The execution, delivery, performance and compliance with
the terms of the Purchase Agreement do not violate any provision of any
federal, California state or Delaware corporate law, rule or regulation
applicable to the Company, or by which any property or asset of the Company
is bound or affected, or the Company's Certificate or Bylaws, or conflict
with, or constitute a default under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement or
in the Company is a party and which has been filed as a material agreement
in the Company's Annual Report on Form 10-K for the year ended December 31,
1994.
6. All consents, approvals, permits, orders or authorizations
of, and all qualifications, registrations, designations, declarations or
filings with, any federal, California state or Delaware general corporate
governmental authority on the part of the Company required in connection
with the execution and delivery of the Purchase Agreement and consummation
at the Closing of the transactions contemplated by the Purchase Agreement
have been obtained, and are effective, except the additional listing
application required to be filed with the National Association of Securities
Dealers, Inc. and the registration statement required to
<PAGE>
S.P. Investors International S.A. Page 4
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
be filed with the Securities and Exchange Commission by Section 1.5 of the
Purchase Agreement, and we are not aware of any proceedings, or threat
thereof, that question the validity thereof.
7. The Shares have been duly authorized and, when issued and
delivered to the Purchasers against payment therefor in accordance with the
terms of the Purchase Agreement, will be validly issued, fully paid and
non-assessable.
8. The Additional Shares have been authorized and reserved for
issuance pursuant to the terms of the Purchase Agreement, and when issued
and delivered to the Purchasers in accordance with the terms of the
Purchase Agreement, will be validly issued, fully paid and non-assessable.
9. We are not aware of any action, proceeding or governmental
investigation pending or threatened against the Company which questions the
validity, or which affects the enforceability, of the Purchase Agreement or
the right of the Company to enter into such Purchase Agreement or which
would, if decided adversely to the Company, have a Material Adverse Effect.
Our opinions expressed above are specifically subject to the
following limitations, exceptions, qualifications and assumptions:
(A) For purposes of our opinions in paragraphs 5 and 6 above,
we are rendering no opinion as to the applicability of, or the Company's
compliance or non-compliance with, any federal, state or foreign securities
laws as they may relate to the transactions described in the Purchase
Agreement, the execution, delivery and performance of the Purchase Agreement
by the Company and the consummation by the Company of the transactions
contemplated thereby.
(B) The effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the relief of
debtors or the rights and remedies of creditors generally, including without
limitation the effect of statutory or other law regarding fraudulent
conveyances and preferential transfers.
(C) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust
statutes, laws, rules and regulations.
(D) Limitations imposed by general equitable principles upon
the specific enforceability of any of the remedies, covenants
<PAGE>
S.P. Investors International S.A. Page 5
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
or other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether
enforcement of any such agreement is considered a proceeding in equity or
at law.
(E) The unenforceability under certain circumstances of
provisions, indemnifying a party against, or requiring contributions toward,
that party's liability for its own wrongful or negligent acts, or where
indemnification or contribution is contrary to public policy. In this
regard, we advise you that in the opinion of the Securities and Exchange
Commission indemnification of directors, officers and controlling persons
of an issuer against liabilities arising under the Securities Act of 1933,
as amended, is against public policy and is therefore unenforceable.
This opinion is rendered as of the date first written above
solely for your benefit in connection with the Purchase Agreement and may
not be delivered to, quoted or relied upon by any person other than you, or
for any other purpose, without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to
the Company. We assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and
or developments which hereafter may be brough to our attention and which
may alter, affect or modify the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON
<PAGE>
EXHIBIT C
June 23, 1995
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attention: Arthur Benvenuto
Re: Regulation S Offering
Ladies and Gentlemen:
Reference is made to the Investment Agreement of even date and delivery
herewith (the "Agreement") between the undersigned ("Investor") and
Advanced Tissue Sciences, Inc. Capitalized terms contained in this letter
shall have the same meaning ascribed to them in the Agreement.
In addition to the representations and covenants of the Investor contained
in the Agreement, Investor further covenants and agrees as follows:
1. In the event the Investor engages in short sales transactions
or other hedging activities during the period from 105 days
following the Closing through 135 days following the Closing
which involve, among other things, sales of Common Stock of
the Company, Investor will, to the extent within its reasonable
control, conduct such activities so as not to complete or
effect any such sale on any trading day during such period at a
price which is lower than the lowest sale effected on such day
by persons other than the Investor;
2. Investor covenants that it will comply with all applicable laws,
rules and regulations regarding the foregoing activities and/or
the financing of the Shares and Additional Shares including, if
applicable, compliance with Regulation S.
[Signatures on next page.]
-1-
<PAGE>
Very truly yours,
STEINHARDT OVERSEAS FUND LTD.
By: The Palladin Group, L.P.,
its investment manager
By: Palladin Capital Management, LLC
Its General Partner
By: /s/ Jeffrey Devers
------------------------
Title: President
-2-
Exhibit 4.3
INVESTMENT AGREEMENT
Between
ADVANCED TISSUE SCIENCES, INC.
And
GERSHON PARTNERS L.P.
Dated as of June 23, 1995
THE SECURITIES TO BE PURCHASED AND SOLD PURSUANT TO THIS INVESTMENT
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED
OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
<PAGE>
INVESTMENT AGREEMENT dated as of June 23, 1995 between Gershon
Partners L.P. (the "Investor") and Advanced Tissue Sciences, Inc., a
corporation organized and existing under the laws of the State of
Delaware (the "Company").
WHEREAS, the parties desire that the Investor become an
equity investor in the Company by purchasing an aggregate of 500,000
shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock
---------------------------------
Section 1.1 PURCHASE AND SALE OF COMMON STOCK. Upon the
terms and conditions set forth herein, the Company shall issue and sell
to the Investor, and the Investor shall purchase from the Company,
500,000 shares of the Company's Common Stock (the "Shares").
Section 1.2 PURCHASE PRICE. The aggregate purchase price
for the Shares (the "Purchase Price") shall equal $3,430,000 payable in
cash by wire transfer or cashier's check in immediately available funds.
Section 1.3 SHARE NUMBER; VALUATION PERIOD.
(a) The number of Shares that the Company shall be
obligated to issue and sell and the Investor shall be obligated to
purchase hereunder, in the aggregate, is referred to herein as the
"Share Number." Subject to adjustment as provided in Sections 1.3(c),
1.3(d) and 1.3(e), the Share Number shall initially be 500,000.
(b) The "Valuation Period" shall be a 45 calendar day
period commencing on and including the first business day which is 90
calendar days after the Closing Date (as defined herein) as the same may
be modified pursuant to Section 4.2(c) hereof.
(c) Notwithstanding Section 1.3(a) above, and except
as hereinafter provided, if the Average Share Price (hereinafter
defined) during the Valuation Period is less than $7.75, then the
Company shall deliver to the Investor, at no additional cost to the
Investor, and in addition to the initial Share Number, the number of
shares of Common Stock that is obtained by subtracting (x) 500,000 from
(y) the quotient obtained by dividing the Purchase Price by 88.5% of the
Average Share Price (rounded to the nearest whole number) (together with
any additional shares issued pursuant to Section 1.3(e) herein, the
"Additional Shares").
(d) Notwithstanding Section 1.3(a) above, and except
as hereinafter provided, if the Average Share Price during the Valuation
Period is greater than $7.75, the Investor shall pay to the Company the
dollar amount by which (x) the product of 88.5% of the Average Share
Price and the Share Number exceeds (y) the product of $6.86 and the
Share Number.
(e) Notwithstanding Section 1.3(c) above, in the event
that the Company, on or prior to 135 days from the Closing Date, issues
or sells any shares of its Common Stock or any
-2-
<PAGE>
of its securities which are convertible into or exchangeable for its Common
Stock or any warrants or other rights to subscribe for or to purchase or
any options for the purchase of, its Common Stock (other than shares or
options issued pursuant to the Company's option plans or shares issued upon
exercise of options, warrants or rights outstanding on the Closing Date
or as provided on EXHIBIT A hereto), at a purchase price which is less
than $6.86 per share (the "Subsequent Sale Price"), then the Company
shall deliver to the Investor, at no additional cost to the Investor,
and in addition to the Share Number, the number of shares of Common
Stock that is obtained by subtracting (x) 500,000 from (y) the quotient
obtained by dividing the Purchase Price by the Subsequent Sale Price
(rounded to the nearest whole number).
Notwithstanding any of the foregoing, the number of
Additional Shares issuable hereunder shall be the greater of the number
of Additional Shares issuable pursuant to Section 1.3(c) herein and the
number of Additional Shares issuable pursuant to Section 1.3(e) herein,
if any.
(f) For purposes hereof, the Average Share Price shall
mean the average of the closing trading prices of the Company's Common
Stock on the Nasdaq National Market, as reported by the Nasdaq National
Market for each trading day during the Valuation Period.
Section 1.4 THE CLOSING.
(a) The closing of the purchase and sale of the Shares
(the "Closing"), shall take place (a) at the offices of the Investor, at
10:00 a.m., local time on the later of the following: (i) June 23,
1995, and (ii) the date on which the last to be fulfilled or waived of
the conditions set forth in Article IV hereof and applicable to the
Closing shall be fulfilled or waived in accordance herewith, or (b) at
such other time and place and/or on such other date as the Investor and
the Company may agree. The date on which the Closing occurs is referred
to herein as the "Closing Date."
(b) (i) On the Closing Date, the Company shall deliver
to the Investor certificates representing the Share Number to be issued
and sold to the Investor on such date and registered in the name of the
Investor or deposit such Share Number into the accounts designated by
the Investor and (ii) on the Closing Date, the Investor shall deliver to
the Company the Purchase Price by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in
writing by the Company. In addition, each of the Company and the
Investor shall deliver all documents, instruments and writings required
to be delivered by either of them pursuant to this Agreement at or prior
to the Closing.
Section 1.5. COVENANT TO REGISTER. For purposes of this
Section 1.5, the following definitions shall apply:
(a) (i) The terms "register," "registered," and
"registration" refer to a registration under the Act effected by
preparing and filing a registration statement or similar document in
compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement, document or amendment
thereto.
(ii) The term "Registrable Securities" means the
Shares and any Additional Shares issued pursuant to Section 1.3 hereof
and any securities of the Company or securities of any successor
corporation issued as, or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as a dividend or
other distribution with respect to, or in
-3-
<PAGE>
exchange for, or in replacement of, the Shares and any Additional Shares
issued pursuant to Section 1.3 hereof.
(b) (i) The Company shall, as expeditiously as
possible following the Closing, file a registration statement on Form S-
3 or an equivalent thereof promptly after the Closing Date, covering all
the Registrable Securities, and shall use its best efforts to cause such
registration statement to become effective within 105 days of the
Closing Date (the "Initial Registration"). In the event such
registration is not so declared effective, the holder of the Registrable
Securities shall have the right to require by notice in writing that the
Company register all or any part of the Registrable Securities held by
such holder (a "Demand Registration") and the Company shall thereupon
effect such registration in accordance herewith. The parties agree that
if the holder of Registrable Securities demands registration of less
than all of the Registrable Securities, the Company, at its option, may
nevertheless file a registration statement covering all of the
Registrable Securities. If such registration statement is declared
effective with respect to all Registrable Securities the demand
registration rights granted pursuant to this Section 1.5 (b) (i) shall
cease. If such registration statement is not declared effective with
respect to all Registrable Securities the demand registration rights
described herein shall remain in effect until all Registrable Securities
have been registered under the Act.
(ii) The Company shall not be obligated to effect
Demand Registration (i) if all of the Registrable Securities held by the
holder of Registrable Securities which are intended to be covered by the
Demand Registration are, at the time of the request of a Demand
Registration, included in an effective registration statement and the
Company is in compliance with its obligations under Subsection (d) (ii)
through (v) hereof.
(iii) The Company may suspend the effectiveness of
any such registration effected pursuant to this Section 1.5(b) in the
event, and for such period of time as, such a suspension is required by
the rules and regulations of the Securities and Exchange Commission
("SEC").
(iv) If the registration statement covering the
Registrable Securities is not effective within 105 days of the Closing,
then the Company shall pay the Investor a one time penalty of 1.0% of
the Purchase Price.
(c) If the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders
other than the Investor) any of its stock or other securities under the
Act in connection with a public offering of such securities (other than
a registration on Form S-4, Form S-8 or other limited purpose form) and
the Registrable Securities have not heretofore been included in a
registration statement under Subsection (b), which remains effective,
the Company shall, at such time, promptly give the holder of Registrable
Securities written notice of such registration. Upon the written
request of the holder of Registrable Securities given within twenty (20)
days after receipt of such notice by the holder of Registrable
Securities, the Company shall use its best efforts to cause to be
registered under the Act all Registrable Securities that the holder of
Registrable Securities requests to be registered. However, the Company
shall have no obligation under this Subsection (c) to the extent that,
with respect to a public offering registration, any underwriter of such
public offering reasonably requests that the Registrable Securities or a
portion thereof be excluded therefrom.
(d) Whenever required under this Section 1.5 to effect
the registration of any Registrable Securities, including, without
limitation, the Initial Registration, the Company shall, as
expeditiously as reasonably possible:
-4-
<PAGE>
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective and, upon the
request of the Investor, keep such registration statement effective,
pursuant to the provisions of Regulation Section 230.415 or otherwise, for so
long as the holder of Registrable Securities desires to dispose of the
securities covered by such registration statement (but not after the
holder of Registrable Securities, in the reasonable opinion of its
counsel, is free to sell such securities in any three month period under
the provisions of Rule 144 under the Act).
(ii) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of
all securities covered by such registration statement.
(iii) Furnish to the holder of Registrable
Securities such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act,
and such other documents as the holder of Registrable Securities may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by the holder of Registrable Securities.
(iv) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or "Blue Sky" laws of such jurisdictions as shall be
reasonably requested by the holder of Registrable Securities, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service and process in any such states or jurisdictions.
(v) Notify the holder of Registrable Securities of
the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(vi) Furnish, at the request of the holder of
Registrable Securities, an opinion of counsel of the Company, dated the
effective date of the registration statement, as to the due
authorization and issuance of the securities being registered and
compliance with securities laws by the Company in connection with the
authorization and issuance thereof.
(vii) Use its best efforts to list the Registrable
Securities covered by such registration statement with any securities
exchange on which the Common Stock is then listed;
(viii) Make available for inspection by the holder
of Registrable Securities, upon request, all SEC Documents filed
subsequent to the Closing and require the Company's officers, directors
and employees to supply all information reasonably requested by any
holder of Registrable Securities in connection with such registration
statement.
(e) The holder of Registrable Securities will furnish
to the Company in connection with any registration under this Section
1.5 such information regarding itself, the Registrable Securities and
other securities of the Company held by it, and the intended method of
disposition of such securities as shall be required to effect the
registration of the Registrable Securities held by holder of Registrable
Securities.
-5-
<PAGE>
(f) (i) The Company shall indemnify, defend and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of Subsections (b) or
(c) from and against, and shall reimburse such holder with respect to,
any and all claims, suits, demands, causes of action, losses, damages,
liabilities, costs or expenses ("Liabilities") to which such holder may
become subject under the Act or otherwise, arising from or relating to
(A) any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or (B) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holders in writing
specifically for use in the preparation thereof.
(ii) Promptly after receipt by the holder of
Registrable Securities of notice of the commencement of any action, the
holder of Registrable Securities shall, if a claim in respect thereof is
to be made against the Company hereunder, notify the Company in writing
thereof, but the omission so to notify the Company shall not relieve the
Company from any Liability which it may have to the holder of
Registrable Securities other than under this section and shall only
relieve it from any Lability which it may have to the holder of
Registrable Securities under this section if and to the extent the
Company is prejudiced by such omission. In case any such action shall
be brought against the holder of Registrable Securities and the holder
of Registrable Securities shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to the holder of Registrable Securities,
and, after notice from the Company to the holder of Registrable
Securities of its election so to assume and undertake the defense
thereof, the Company shall not be liable to the holder of Registrable
Securities under this section for any legal expenses subsequently
incurred by the holder of Registrable Securities in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that if the
defendants in any such action include both the Company and the holder of
Registrable Securities and the holder of Registrable Securities shall
have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those
available to the Company or if the interests of the holder of
Registrable Securities reasonably may be deemed to conflict with the
interests of the Company, the holder of Registrable Securities shall
have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the Company as
incurred.
(g) (i) With respect to the inclusion of Registrable
Securities in a registration statement pursuant to subsections (b) or
(c), all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the
Company; provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discounts and commissions, if any, incurred in connection with such
registration.
(ii) The fees, costs and expenses of registration
to be borne by the Company as provided in this Subsection (g) shall
include, without limitation, all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for
the Company, and all legal fees and disbursements and other expenses of
complying with state securities or Blue Sky laws of any jurisdiction or
jurisdictions in which securities to be offered are to be
-6-
<PAGE>
registered and qualified. Fees and disbursements of counsel and accountants
for the selling securityholders shall, however, be borne by the respective
selling securityholder.
(h) (i) The rights to cause the Company to register
all or any portion of Registrable Securities pursuant to this Section
1.5 may be assigned by Investor to a transferee or assignee of 20% or
more, in the aggregate, of the Shares and the Additional Shares. Within
a reasonable time after such transfer the Investor shall notify the
Company of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being
assigned. Such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by
the transferee or assignee is restricted under the Act. Any transferee
shall agree in writing at the time of transfer to be bound by the
provisions of this Section 1.5.
(ii) From and after the date of this Agreement,
the Company shall not agree to allow the holders of any securities of
the Company to include any of their securities in any registration
statement filed by the Company pursuant to Subsection (b) unless the
inclusion of such securities will not reduce the amount of the
Registrable Securities included therein.
Section 1.6. ADJUSTMENTS. If the Investor shall be
entitled to the issuance of Additional Shares, the Company shall deliver
to the Investor at the offices of the Investor on the third (3rd)
business day after the end of the Valuation Period one or more
certificates representing the Additional Shares so to be delivered in
accordance with this Agreement, registered in the name of the Investor,
or deposit such Additional Shares into accounts designated by the
Investor; provided, however, that if the sum of the shares then
beneficially owned by the Investor, and any Additional Shares then
issuable to the Investor, as determined by the Investor, in its sole
determination, shall equal 1.66% or more of the shares of Company's
Common Stock issued and outstanding (as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934) just prior to the
Closing, then, and in such event, (x) the number of Additional Shares to
be issued to the Investor pursuant to this paragraph shall be reduced to
the number which, together with the Share Number, shall equal 1.64% of
the shares of the Company's Common Stock issued and outstanding (as so
determined) just prior to the Closing, and (y) in consideration for such
reduction in Additional Shares, the Company shall pay to the Investor a
sum equal to the greater of (a) the product of 88.5% of the Average
Share Price and the reduction in the Additional Shares to be issued as a
result of the preceding clause (x), and (b) the product of the
Subsequent Sale Price and the reduction in the Additional Shares to be
issued as a result of the preceding clause (x).
Section 1.7 RESCHEDULING. If after the date hereof and
prior to the expiration of the Valuation Period any person shall (a)
publicly announce a tender offer or exchange offer for the Company's
Common Stock, or (b) publicly announce plans for a merger, consolidation
or potential change in control of the Company, the Investor may in its
sole discretion elect by written notice to the Company to shorten the
Valuation Period so as to end on a date which is either before or after
the consummation of the record date for the consummation of any such
transaction, which election must be made prior to consummation of any
such transaction. For purposes of the foregoing, it is understood and
agreed that the Investor may, but shall not be required to, reduce or
entirely eliminate the Valuation Period or to reschedule the Valuation
Period.
-7-
<PAGE>
ARTICLE II
Representations and Warranties
------------------------------
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to
the Investor:
(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated and existing in good standing under the
laws of the State of Delaware, and has the requisite corporate power to
own its properties and to carry on its business as now being conducted.
The Company does not have any active subsidiaries, except for those
identified in the SEC Documents (as hereinafter defined). Each of the
Company and its subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any adverse
effect on the operations, properties, prospects, or financial condition
of the entity with respect to which such term is used and which is
material to such entity and other entities controlling or controlled by
such entity taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has
the requisite corporate power and authority to enter into and perform
this Agreement and to issue the Shares and the Additional Shares in
accordance with the terms hereof, (ii) the execution and delivery of
this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action, and no further consent or authorization of
the Company or its Board of Directors or stockholders is required, (iii)
this Agreement has been duly executed and delivered by the Company, and
(iv) this Agreement constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
(c) CAPITALIZATION. The authorized capital stock of
the Company and the shares thereof currently issued and outstanding are
as most recently described in the SEC Documents and there have been no
changes (except for changes described on EXHIBIT A) therein since such
description. All of the outstanding shares of the Company's Common Stock
have been validly issued and are fully paid and nonassessable. Except
as set forth in EXHIBIT A hereto and as described in the SEC Documents,
no shares of Common Stock are entitled to preemptive rights and there
are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares
of capital stock of the Company or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares, or
securities or rights convertible into shares, of capital stock of the
Company. The Company has furnished to the Investor true and correct
copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Certificate"), and the Company's By-Laws, as in effect
on the date hereof (the "By-Laws").
(d) ISSUANCE OF SHARES. The issuance of the Shares
and Additional Shares has been duly authorized and, when paid for or
issued in accordance with the terms hereof, shall be validly issued,
fully paid and non-assessable.
-8-
<PAGE>
(e) NO CONFLICTS. The execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby do not and will not (i)
result in a violation of the Company's Certificate or By-Laws or (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a party
and which has previously been filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1994 and is still in effect, or
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company, or by which
any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect); provided that, for purposes
of such representation as to Federal, state, local or foreign law, rule
or regulation, no representation is made herein with respect to any of
the same applicable solely to the Investor and not to the Company. The
business of the Company is not being conducted in violation of any law,
ordinance or regulations of any governmental entity, except for possible
violations which either singly or in the aggregate do not have a
Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States to obtain
any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement
or issue and sell the Shares or the Additional Shares in accordance with
the terms hereof (other than the filing of a Form D with the SEC, any
NASD filings or state securities filings which may be required to be
made by the Company subsequent to the Closing, and any registration
statement which may be filed in accordance with Section 1.5 herein);
provided that, for purposes of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common
Stock of the Company is registered pursuant to Section 12(g) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the
Company with the SEC (all of the foregoing filed prior to the date
hereof being hereinafter referred to herein as the "SEC Documents").
The Company has delivered to the Investor true and complete copies of
the quarterly and annual (including, without limitation, proxy
information and solicitation materials) SEC Documents filed with the SEC
since December 31, 1994. The Company has not provided to the Investor
any information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in
-9-
<PAGE>
such financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes
or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) NO MATERIAL ADVERSE CHANGE. Since December 31,
1994, the date through which the most recent annual report of the
Company on Form 10-K has been prepared and filed with the SEC, a copy of
which is included in the SEC Documents, no Material Adverse Effect has
occurred or exists with respect to the Company except as otherwise
disclosed or reflected in other SEC Documents prepared through or as of
a date subsequent to December 31, 1994.
(h) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations not disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company's business
since March 31, 1995 and which, individually or in the aggregate, do not
or would not have a Material Adverse Effect on the Company.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event
or circumstance has occurred or exists with respect to the Company or
its business, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby makes the following representations and warranties
to the Company:
(a) AUTHORIZATION; ENFORCEMENT. (i) The Investor has
the requisite power and authority to enter into and perform this
Agreement and to purchase the Shares being sold hereunder, (ii) the
execution and delivery of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate action, and no further
consent or authorization of the Investor or its Board of Directors,
stockholders, or partners, as the case may be, is required, (iii) this
Agreement has been duly authorized, executed and delivered by the
Investor, and (iv) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
(b) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation by the Investor of
the transactions contemplated hereby or relating hereto do not and will
not (i) result in a violation of the Investor's charter documents or By-
Laws or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the
Investor is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or its properties (except
for such conflicts, defaults and violations as would not, individually
or in the aggregate have a Material Adverse Effect on the Investor).
The businesses of the Investor are not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for
possible violations which either singly or in the aggregate do not have
a Material Adverse Effect. The Investor is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in
-10-
<PAGE>
order for it to execute, deliver or perform any of its obligations under
this Agreement or purchase the Shares or the Additional Shares in accordance
with the terms hereof; provided that for purposes of the representation made
in this sentence, the Investor is assuming and relying upon the accuracy of
the relevant representations and agreements of the Company herein.
(c) OWNERSHIP. The Investor is duly organized and
validly existing under the laws of the place hereinabove provided and is
not a U.S. Person as defined within Regulation S under the Securities
Act and is not purchasing the Shares for the account or benefit of a
U.S. Person. On the date hereof and on the Closing Date, the Investor
is and will be, as the case may be, located outside of the United
States. The Investor has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks
of the investment contemplated by this Agreement. The Investor has been
afforded, to the satisfaction of the Investor, the opportunity to review
the SEC Documents and obtain such additional publicly available
information concerning the Company and its business, and to ask such
questions and receive such answers (based upon publicly available
information), as the Investor deems necessary to make an informed
investment decision.
(d) INVESTMENT REPRESENTATION: The Investor is
purchasing the Shares and, if any, the Additional Shares for investment
purposes and not with a view towards distribution. Investor has no
present intention to sell the Shares or the Additional Shares and the
Investor has no present arrangement (whether or not legally binding) at
any time to sell the Shares or the Additional Shares to or through any
person or entity; provided, however, except as provided in subsection
(g) below, that by making the representations herein, the Investor does
not agree to hold the Shares or the Additional Shares for any minimum or
other specific term and reserves the right to dispose of the Shares or
the Additional Shares at any time in accordance with Federal securities
laws applicable to such disposition.
(e) ACCREDITED INVESTOR: The Investor is an
accredited investor as defined in Regulation Section 230.501 promulgated under
the Act.
(f) RULE 144. The Investor understands that the
Shares and any Additional Shares must be held indefinitely unless such
Shares or Additional Shares are subsequently registered under the Act or
an exemption from registration is available. The Investor has been
advised or is aware of the provisions of Rule 144 promulgated under the
Act.
(g) Notwithstanding the foregoing, the Investor shall
not sell (including a short sale), transfer or otherwise dispose of the
shares, or any Additional Shares issued to such Investor, at any time
during the 105 day period following the Closing. Notwithstanding the
foregoing, during the Valuation Period Investor will only transfer or
otherwise dispose of its shares in accordance with the representations
contained in EXHIBIT C.
ARTICLE III
Covenants
---------
Section 3.1 REGULATION S
(a) Notwithstanding any of the foregoing, the Company
acknowledges and agrees that in the event that a registration statement
covering all of the Registrable Securities shall not have become
effective within 105 days of the Closing Date, the legend described in
Article V herein
-11-
<PAGE>
shall be removed on the 106th day following the Closing, in accordance with
Article V herein, it being acknowledged by the Company that, in such event,
the Investor shall be free to transfer, sell, pledge, or otherwise
hypothecate the Shares and the Additional Shares issued pursuant to this
Agreement in accordance with (a) Regulation S under the Act and (b) the
terms and conditions described in the letter attached hereto as EXHIBIT C.
(b) The Company acknowledges and agrees that, in the
event the Investor sells, transfers, pledges or otherwise hypothecates
the Shares or Additional Shares in accordance with Section 3.1(a)
herein, for purposes of clarifying and specifying the applicable
Restricted Period under Regulation S, the Investor intends to observe as
the Restricted Period (as defined in Regulation S) for the Shares being
delivered at the Closing the period of 40 days commencing upon the
Closing Date and ending 40 days thereafter, and to observe as the
Restricted Period applicable to the Additional Shares, if any, the
period of 40 days commencing upon the date upon which the same are
delivered to the Investor hereunder.
Neither the Company nor any of its affiliates has
engaged or will engage in any "directed selling efforts" (as such term
is defined under Regulation S) with respect to the Shares or the
Additional Shares, and the Company and its affiliates have complied and
will comply with the "offering restrictions" requirements of Regulation
S.
(c) In the event the Investor sells, transfers or
otherwise disposes of the Shares or the Additional Shares in accordance
with Section 3.1(a) herein, the Investor covenants and agrees that such
sale, transfer or other disposition will be made in compliance with the
terms of Regulation S under the Act, as in effect at that time,
including (i) that the Shares and the Additional Shares will not be
offered or sold within the United States or to, or for the account or
benefit of, any "U.S. person" (as such term is defined in Rule 902 (o)
promulgated under the Act) except in accordance with the provisions of
Rule 903 or Rule 904 of Regulation S under the Securities Act, pursuant
to registration under the Act, or pursuant to an exemption from the
registration requirements of the Act and (ii) that neither it, its
affiliates, nor persons acting on their behalf, have engaged or will
engage in "directed selling efforts" (as such term is defined by
Regulation S) with respect to the Shares or the Additional Shares and
that each of them has complied and will comply with the "offering
restrictions" requirements of Regulation S.
Section 3.2 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and Nasdaq, in
accordance with its requirements, of the transactions contemplated by
this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, including, without limitation, the filing of a Form D with
the SEC, for the legal and valid issuance of the Shares and the
Additional Shares to the Investor.
(b) The Investor understands that the Shares and, if
any, the Additional Shares, are being offered and sold to it in reliance
on a transactional exemption from the registration
-12-
<PAGE>
requirements of Federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Investor set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Shares.
Section 3.3 CORPORATE. (a) From the date hereof through
the end of the Valuation Period the Company shall not (i) amend its
Certificate or By-Laws so as to adversely affect any rights of the
Investor; (ii) split, combine or reclassify its outstanding capital
stock; (iii) declare or set aside or pay any dividend or other
distribution with respect to the Company's outstanding Common Stock;
(iv) issue or sell, directly or indirectly, Shares of the Company's
Common Stock in a manner or upon terms as could reasonably be expected
to affect the market for the Common Stock materially and adversely; or
(v) enter into any agreement with respect to the foregoing; and (vi) the
Company shall at all times reserve and keep available, solely for
issuance and delivery as Shares or Additional Shares hereunder, such
shares of Common Stock as shall from time to time be issuable or
reasonably be expected to be issuable as Shares or Additional Shares
hereunder provided, however, that the number of shares so reserved shall
at all times be at least 300% of the Share Number.
(b) The Company will cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing
obligations under said act, will comply with all requirements related to
any registration statement filed pursuant to Section 1.5 herein, and
will not take any action or file any document (whether or not permitted
by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said act, except as permitted herein. The Company
will take all action necessary to continue the listing or trading of its
Common Stock on the Nasdaq National Market and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the NASD and Nasdaq.
ARTICLE IV
Conditions
----------
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE SHARES. The obligation hereunder of the Company to
issue and/or sell the Shares or the Additional Shares to the Investor is
further subject to the satisfaction, at or before the respective
issuance and deliveries thereof, of each of the following conditions set
forth below. These conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE INVESTOR REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Investor shall be
true and correct in all material respects as of the date when made and
as of the date of such issuance and delivery as though made at that
time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior to
such date.
(c) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
-13-
<PAGE>
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO PURCHASE THE SHARES. The obligation of the Investor
hereunder to acquire and pay for the Shares is subject to the
satisfaction, at or before the Closing of each of the following
conditions set forth below. These conditions are for the Investor's
sole benefit and may be waived by the Investor at any time in its sole
discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing.
(c) NASDAQ. From the date hereof to the Closing Date,
as to the Shares to be issued and delivered on the Closing Date, trading
in the Company's Common Stock shall not have been suspended by the SEC
or the Nasdaq National Market (except for any suspension of trading of
limited duration agreed to between the Company and the Nasdaq National
Market solely to permit dissemination of material information regarding
the Company), and trading in securities generally as reported by Nasdaq
shall not have been suspended or limited or minimum prices shall not
have been established on securities whose trades are reported by Nasdaq.
Notwithstanding the foregoing sentence, in the event that at any point
on or prior to the first day of the Valuation Period trading in the
Common Stock is suspended by the SEC or the Nasdaq National Market,
(i) calculation of the Average Stock Price shall be suspended for such
period of time as trading in the Common Stock is suspended and (ii) the
Valuation Period shall be reset so that such Valuation Period shall
begin on the 90th calendar day following the Closing Date and shall end
on the 45th calendar day thereafter on which quotations for the
Company's Common Stock on the Nasdaq National Market are available. In
the event that the Company's Common Stock is delisted from the Nasdaq
National Market at any time during the Valuation Period or in the event
that trading in the Common Stock is suspended for a period of more than
thirty (30) days subsequent to the commencement of the Valuation Period,
(iii) the Valuation Period will be deemed to have concluded on the date
on which the Common Stock was delisted or such trading was suspended,
(iv) the Average Stock Price shall be calculated based on the number of
days in such shortened Valuation Period, and (v) the Investor shall
receive any Additional Shares owed to it pursuant to Section 1.3(c)
herein within five (5) business days of the conclusion of the shortened
Valuation Period. In no event shall the Investor be required to deliver
any shares for cancellation pursuant to Section 1.3(d) herein if the
Common Stock is delisted from the Nasdaq National Market or if trading
in the Common Stock is suspended for more than thirty (30) days during
the Valuation Period or prior to the effectiveness of the Company's
Initial Registration.
(d) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
-14-
<PAGE>
(e) OPINION OF COUNSEL, ETC. At the Closing the
Investor shall have received an opinion of Brobeck Phleger & Harrison,
counsel to the Company, in form and substance satisfactory to the
Investor and its counsel (in substantially the form of EXHIBIT B
hereto), and such other certificates and documents as the Investor or
its counsel shall reasonably require incident to the Closing.
ARTICLE V
Legend on Stock
---------------
Each certificate representing the Shares issued pursuant to
Section 1.3 shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT. THIS
LEGEND SHALL CEASE TO HAVE ANY FORCE OR EFFECT AND
WILL BE REMOVED ON OCTOBER 7, 1995 UNLESS AN OPINION
OF COUNSEL TO THE COMPANY, IN FORM AND SUBSTANCE
SATISFACTORY TO THE INVESTOR AND ITS COUNSEL, IS
DELIVERED TO THE COMPANY'S TRANSFER AGENT, ON OR
PRIOR TO SUCH DATE STATING THAT REMOVAL OF THIS
LEGEND IS NOT PERMITTED UNDER LAW DUE TO A CHANGE IN
LAW SUBSEQUENT TO JUNE 23, 1995.
Notwithstanding the foregoing, this legend shall cease to
have any force or effect and will be removed on October 7, 1995, unless
an opinion of counsel to the Company, in form and substance satisfactory
to the Investor and its counsel, is delivered to the Company's transfer
agent, on or prior to such date stating that removal of this legend is
not permitted under law due to a change in law subsequent to the date
hereof.
No certificate representing Additional Shares, if any,
required to be issued pursuant to this Agreement will bear a restrictive
legend unless an opinion of the Company's counsel, in form and substance
satisfactory to the Investor, has been issued to the Company's' transfer
agent on or prior to the issuance of such Additional Shares stating that
such a legend is required by law due to a change in law subsequent to
the date hereof.
ARTICLE VI
Termination
-----------
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement
may be terminated at any time prior to the Closing by the mutual consent
of the Company and the Investor, by action of their respective Boards of
Directors or other governing body.
-15-
<PAGE>
Section 6.2 OTHER TERMINATION. This Agreement may be
terminated by action of the Board of Directors or other governing body
of the Investor or the Company at any time after June 23, 1995 if the
Closing shall not have been consummated by June 23, 1995.
Section 6.3 AUTOMATIC TERMINATION. This Agreement shall
automatically terminate without any further action of either party
hereto if the Closing shall not have occurred by June 23, 1995.
ARTICLE VII
Miscellaneous
-------------
Section 7.1 FEES AND EXPENSES. Each party shall pay the
fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the Company shall pay, at the Closing, all
attorneys' fees and expenses incurred by the Investor and Cappello
Capital Corp., up to a maximum of $6,666, in connection with the
preparation, negotiation, execution and delivery of this Agreement and
the transactions contemplated hereunder. Without limiting the
generality of the foregoing, The Kriegsman Group shall be entitled to a
finders fee pursuant to a separate agreement with respect thereto
between such finder and the Company, and the Company shall be solely
responsible for the full payment thereof and shall indemnify and hold
harmless the Investor from and against all loss, cost, damage or expense
arising therefrom. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares or the
Additional Shares pursuant hereto.
Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court and other courts of the United States sitting in New York
for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the
Company and the Investor consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as
-16-
<PAGE>
specifically set forth herein, neither the Company nor the Investor makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 7.4 NOTICES. Any notice or other communication
required or permitted to be given hereunder shall be in writing and
shall be effective (a) upon hand delivery or delivery by telex (with
correct answer back received), telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
to the Company:
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attn: Chief Executive Officer
with copies to:
Brobeck Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attn: Laura M. Brower, Esq.
to the Investor:
Gershon Partners L.P.
c/o Royal Trust (Cayman Ltd.)
First Home Tower, 2nd Floor
P.O. Box 1586, Grand Cayman
Grand Cayman Islands, B.W.I.
with copies to:
The Palladin Group, L.P.
40th West 57th Street
Suite 1500
New York, New York 10019
Attn: Jeffrey Devers
Either party hereto may from time to time change its address for notices
under this Section 7.4 by giving at least 10 days' written notice of
such changed address to the other party hereto.
-17-
<PAGE>
Section 7.5 WAIVERS. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 7.6 HEADINGS. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall
not be deemed to limit or affect any of the provisions hereof.
Section 7.7 SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the parties and their
successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. Neither the
Company nor the Investor shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other
(which consent may be withheld for any reason in the sole discretion of
the party from whom consent is sought); provided, however, that the
Company may assign its rights and obligations hereunder to any acquirer
of substantially all of the assets or a controlling equity interest of
the Company. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this
Agreement.
Section 7.8 NO THIRD PARTY BENEFICIARIES. This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.
Section 7.9 GOVERNING LAW. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of Delaware without regard to the principles of conflict of laws.
Section 7.10 SURVIVAL. The representations and warranties
of the Company and the Investor contained in Article II and the
agreements and covenants set forth in Articles I and III shall survive
the Closing.
Section 7.11 EXECUTION. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause four additional executed
signature pages to be physically delivered to the other party within
five days of the execution and delivery hereof.
Section 7.12 PUBLICITY. The Company and the Investor shall
consult and cooperate with each other in issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby, provided the foregoing shall not interfere with the
legal obligations of either party with respect to public disclosure; and
provided further, that neither the Company nor the Investor shall be
required to consult with the other if any such press release or public
statement does not specifically name the other.
[Remainder of page intentionally left blank.]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as
of the date hereof.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ Arthur J. Benvenuto
-----------------------------
Name: Arthur J. Benvenuto
Its: Chairman, President & CEO
GERSHON PARTNERS L.P.
By: The Palladin Group, L.P., its
investment manager
By: Palladin Capital
Management, LLC
Its General Partner
By: /s/ Jeffrey Devers
----------------------
Title: President
-19-
<PAGE>
EXHIBIT A
CAPITALIZATION SUMMARY
The following table reconciles the Company's outstanding Common Stock and
options and warrants as reported in the Company's Quarterly Report on
Form 10-Q as of March 31, 1995 to June 13, 1995.
Common Options and
Stock Warrants
Outstanding Outstanding
------------- -------------
Outstanding per Form 10-Q 30,570,993 4,186,957
Options and warrants exercised 561,200 (561,200)
Options and warrants granted - 125,000
Options and warrants canceled - (139,209)
---------- ---------
Outstanding as of June 13, 1995 31,132,193 3,611,548
========== =========
As of June 13, 1995, the Company had 1,900,462 remaining available for grant
under its 1992 Stock Option/Stock Issuance Plan.
The Company will issue warrants to purchase 135,000 shares of Common Stock
to the placement agents involved in this transaction on the Closing Date at
an initial exercise price of $6.86 per share.
On January 5, 1995, the Company's Board of Directors (the "Board") adopted
a Shareholder Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan,
the Board declared a dividend of one preferred share purchase right (the
"Right") for each share of Common Stock outstanding on January 20, 1995.
Each Right entitles the registered holder to purchase from the Company
one-hundredth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $55 per one-hundredth share, subject to adjustment.
<PAGE>
EXHIBIT B
June 23, 1995
S.P. Investors International S.A.
Steinhardt Overseas Fund Ltd.
c/o Bank of Bermuda Ltd.
Corporate Trust Services Department
129 Front Street
Hamilton 5-31
Bermuda
Attention: Stewart Bent
Gershon Partners L.P.
Royal Trust Bank Cayman Ltd.
2nd Floor
Royal Bank of Canada Building
Cardinal Avenue
Grand Cayman, Cayman Island
Attention: Frank Boers
Re: Advanced Tissue Sciences, Inc.
Ladies and Gentlemen:
We have acted as counsel for Advanced Tissue Sciences, Inc., a
Delaware corporation (the "Company"), in connection with the issuance and
sale of shares of its Common Stock pursuant to those certain Investment
Agreements dated as of June 23, 1995 (the "Purchase Agreement") by and
between the Company and each of S.P. Investors International S.A.,
Steinhardt Overseas Fund Ltd. and Gershon Partners L.P. (collectively the
"Purchasers"). This opinion is being rendered to you pursuant to
Section 4.2(e) of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined herein shall have the meanings given to such terms in
the Purchase Agreement.
In connection with the opinions expressed herein we have made
such examination of matters of law and of fact as we considered appropriate
or advisable for purposes hereof. As to matters of fact material to the
opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by the Company
pursuant to the Purchase Agreement and upon certificates and statements of
government officials and of officers of the Company. We have also examined
originals or copies of such corporate documents or records of the Company as
we have considered appropriate for the opinions expressed herein. We have
assumed for the purposes of this opinion that the signatures on documents
and instruments examined by us are authentic, that each document is what it
purports to be, and that all documents submitted to us as copies conform
with the originals, which facts we have not independently verified.
<PAGE>
S.P. Investors International S.A. Page 2
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
In rendering this opinion we have also assumed: (A) that the
Purchase Agreement has been duly and validly executed and delivered by you
or on your behalf and constitute valid, binding and enforceable obligations
upon you; (B) that the representations and warranties made in the Purchase
Agreement by you are true and correct; (C) that any wire transfers, drafts
or checks tendered by you will be honored; (D) if you are a corporation or
other entity, that you have filed any required state franchise, income or
similar taxes; and (E) that there are no extrinsic agreements or
understandings among the parties to the Purchase Agreement that would
modify or interpret the terms of the Purchase Agreement or the respective
rights or obligations of the parties thereunder, other than as set forth on
Exhibit C thereto.
As used in this opinion, the expression "we are not aware" or
the phrase "to our knowledge" means as to matters of fact that, based on
the actual knowledge of individual attorneys within the firm principally
responsible for handling current matters for the Company and after an
examination of documents referred to herein and after inquiries of certain
officers of the Company, we find no reason to believe that the opinions
expressed are factually incorrect; but beyond that we have made no factual
made no inquiries of securities holders or employees of the Company.
This opinion relates solely to the general corporate laws of the
State of Delaware and the federal law of the United States (except that our
opinion in paragraphs 5 and 6 below also pertains to the laws of the State
of California), and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering
such laws or opinions of other counsel have not been sought or obtained.
Based upon our examination of and reliance upon the foregoing and
subject to the limitations, exceptions, qualifications and assumptions set
forth below and except as set forth in the Purchase Agreement thereto, we
are of the opinion that as of the date hereof:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
the Company has the requisite corporate power and authority to own its
properties and to conduct its business as presently conducted.
<PAGE>
S.P. Investors International S.A. Page 3
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
2. To our knowledge, the Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to so qualify does not have a Material Adverse Effect.
3. The Company has the requisite corporate power and authority
to execute, deliver and perform the Purchase Agreement. The Purchase
Agreement has been duly and validly authorized by the Company, duly executed
and delivered by an authorized officer of the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company according to its terms.
4. The capitalization of the Company is as stated in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, as amended and supplemented by Exhibit A to the Purchase Agreement
(collectively, the "Supplemented 10-Q"). No shares of Common Stock are
entitled to preemptive rights, and except as described in the Supplemented
10-Q, there are no preemptive rights or, to our knowledge, options,
warrants, conversion privileges or other rights (or agreements for any such
rights or, to our knowledge, options, warrants, conversion privileges or
other rights (or agreements for any such rights) outstanding to purchase
or otherwise obtain from the Company any of the Company's securities.
5. The execution, delivery, performance and compliance with
the terms of the Purchase Agreement do not violate any provision of any
federal, California state or Delaware corporate law, rule or regulation
applicable to the Company, or by which any property or asset of the Company
is bound or affected, or the Company's Certificate or Bylaws, or conflict
with, or constitute a default under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement or
in the Company is a party and which has been filed as a material agreement
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
6. All consents, approvals, permits, orders or authorizations
of, and all qualifications, registrations, designations, declarations or
filings with, any federal, California state or Delaware general corporate
governmental authority on the part of the Company required in connection
with the execution and delivery of the Purchase Agreement and consummation
at the Closing of the transactions contemplated by the Purchase Agreement
have been obtained, and are effective, except the additional listing application
required to be filed with the National Association of Securities Dealers, Inc.
and the registration statement required to
<PAGE>
S.P. Investors International S.A. Page 4
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
be filed with the Securities and Exchange Commission by Section 1.5 of the
Purchase Agreement, and we are not aware of any proceedings, or threat
thereof, that question the validity thereof.
7. The Shares have been duly authorized and, when issued and
delivered to the Purchasers against payment therefor in accordance with the
terms of the Purchase Agreement, will be validly issued, fully paid and
non-assessable.
8. The Additional Shares have been authorized and reserved for
issuance pursuant to the terms of the Purchase Agreement, and when issued
and delivered to the Purchasers in accordance with the terms of the Purchase
Agreement, will be validly issued, fully paid and non-assessable.
9. We are not aware of any action, proceeding or governmental
investigation pending or threatened against the Company which questions the
validity, or which affects the enforceability, of the Purchase Agreement or
the right of the Company to enter into such Purchase Agreement or which
would, if decided adversely to the Company, have a Material Adverse Effect.
Our opinions expressed above are specifically subject to the
following limitations, exceptions, qualifications and assumptions:
(A) For purposes of our opinions in paragraphs 5 and 6 above,
we are rendering no opinion as to the applicability of, or the Company's
compliance or non-compliance with, any federal, state or foreign securities
laws as they may relate to the transactions described in the Purchase
Agreement, the execution, delivery and performance of the Purchase
Agreement by the Company and the consummation by the Company of the
transactions contemplated thereby.
(B) The effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the relief of
debtors or the rights and remedies of creditors generally, including
without limitation the effect of statutory or other law regarding
fraudulent conveyances and preferential transfers.
(C) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust
statutes, laws, rules and regulations.
(D) Limitations imposed by general equitable principles upon
the specific enforceability of any of the remedies, covenants
<PAGE>
S.P. Investors International S.A. Page 5
Steinhardt Overseas Fund Ltd.
Gershon Partners L.P.
Agreement dated June 23, 1995
June 23, 1995
or other provisions of any applicable agreement and upon the availability
of injunctive relief or other equitable remedies, regardless of whether
enforcement of any such agreement is considered a proceeding in equity or
at law.
(E) The unenforceability under certain circumstances of
provisions, indemnifying a party against, or requiring contributions
toward, that party's liability for its own wrongful or negligent acts, or
where indemnification or contribution is contrary to public policy.
In this regard, we advise you that in the opinion of the Securities and
Exchange Commission indemnification of directors, officers and controlling
persons of an issuer against liabilities arising under the Securities Act
of 1933, as amended, is against public policy and is therefore unenforceable.
This opinion is rendered as of the date first written above
solely for your benefit in connection with the Purchase Agreement and may
not be delivered to, quoted or relied upon by any person other than you, or
for any other purpose, without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to
the Company. We assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and
which may alter, affect or modify the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON
<PAGE>
EXHIBIT C
June 23, 1995
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attention: Arthur Benvenuto
Re: Regulation S Offering
---------------------
Ladies and Gentlemen:
Reference is made to the Investment Agreement of even date and delivery
herewith (the "Agreement") between the undersigned ("Investor") and
Advanced Tissue Sciences, Inc. Capitalized terms contained in this letter
shall have the same meaning ascribed to them in the Agreement.
In addition to the representations and covenants of the Investor contained
in the Agreement, Investor further covenants and agrees as follows:
1. In the event the Investor engages in short sales transactions
or other hedging activities during the period from 105 days
following the Closing through 135 days following the Closing
which involve, among other things, sales of Common Stock of
the Company, Investor will, to the extent within its reasonable
control, conduct such activities so as not to complete or
effect any such sale on any trading day during such period at a
price which is lower than the lowest sale effected on such day
by persons other than the Investor;
2. Investor covenants that it will comply with all applicable
laws, rules and regulations regarding the foregoing activities
and/or the financing of the Shares and Additional Shares including,
if applicable, compliance with Regulation S.
[Signatures on next page.]
-1-
<PAGE>
Very truly yours,
GERSHON PARTNERS L.P.
By: The Palladin Group, L.P.,
its investment manager
By: Palladin Capital Management, LLC
Its General Partner
By: /s/ Jeffrey Devers
--------------------------
Title: President
Exhibit 4.4
FORM OF WARRANT AGREEMENT
ADVANCED TISSUE SCIENCES, INC.
COMMON STOCK WARRANT
--------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
This certifies that, for good and valuable consideration, receipt of
which is hereby acknowledged, -1- ("Holder") is entitled to purchase, subject
to the terms and conditions of this Warrant, from Advanced Tissue Sciences,
Inc., a Delaware corporation (the "Company"), -2- fully paid and
nonassessable shares of the Common Stock ("Common Stock") of the Company, in
accordance with Section 2 during the period commencing the date hereof and
ending at 5:00 p.m. California time, June 26, 2000 (the "Expiration Date"),
at which time this Warrant will expire and become void unless earlier
terminated as provided herein. The shares of Common Stock of the Company
for which this Warrant is exercisable as adjusted from time to time
pursuant to the terms hereof, are hereinafter referred to as the "Shares."
1. EXERCISE PRICE. The initial purchase price for the Shares is
six dollars and eighty-six cents ($6.86) per share. Such price shall be
subject to adjustment pursuant to the terms hereof (such price, as adjusted
from time to time, is hereinafter referred to as the "Exercise Price").
2. EXERCISE AND PAYMENT. At any time after October 7, 1995, this
Warrant may be exercised, in whole or in part, from time to time by the
Holder, during the term hereof, by surrender of this Warrant and the Notice
of Exercise annexed hereto duly completed and executed by the Holder to the
Company at the principal executive offices of the Company, together with
payment in the amount obtained by multiplying the Exercise Price then in
effect by the number of Shares thereby purchased, as designated in the
Notice of Exercise. Payment may be in cash or by check payable to the
order of the Company.
3. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after
exercise, in whole or in part, of this Warrant, the Company shall issue in the
name of and deliver to the Holder, a certificate or certificates for the
number of fully paid and
1.
<PAGE>
nonassessable shares of Common Stock which the Holder shall have requested
in the Notice of Exercise. If this Warrant is exercised in part, the
Company shall deliver to the Holder a new Warrant for the unexercised
portion of this Warrant at the time of delivery of such stock certificate
or certificates.
4. NO FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares will be issued upon exercise of this Warrant.
If upon any exercise of this Warrant a fraction of a share results, the
Company will pay the Holder the difference between the cash value of the
fractional share and the portion of the Exercise Price allocable to the
fractional share.
5. CHARGES, TAXES AND EXPENSES. The Holder shall pay all transfer
taxes or other incidental charges, if any, in connection with the transfer of
the Shares purchased pursuant to the exercise hereof from the Company to the
Holder.
6. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to the
Company, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant,
if mutilated, the Company will make and deliver a new Warrant of like tenor
and dated as of such cancellation, in lieu of this Warrant.
7. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or a Sunday or shall be a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding weekday which is not a legal holiday.
8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number
of and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, the number of
Shares as to which this Warrant is exercisable as of the date of such
subdivision, split-up or combination shall forthwith be proportionately
increased in the case of a subdivision, or proportionately decreased in the
case of a combination. Appropriate adjustments shall also be made to the
purchase price payable per share, but the aggregate purchase price payable
for the
2.
<PAGE>
total number of Shares purchasable under this Warrant as of such date shall
remain the same.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into Common Stock
("Common Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
exercise or conversion thereof), then the number of shares of Common Stock
for which this Warrant may be exercised shall be increased as of the record
date (or the date of such dividend distribution if no record date is set)
for determining which holders of Common Stock shall be entitled to receive
such dividend, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of
such dividend, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Shares issuable
hereunder immediately after the record date (or on the date of such
distribution, if applicable), for such dividend shall equal the aggregate
amount so payable immediately before such record date (or on the date of
such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date
hereof the Company distributes to holders of its Common Stock, other than as
part of its dissolution or liquidation or the winding up of its affairs,
any shares of its capital stock, any evidence of indebtedness or any of
its assets (other than cash, Common Stock or securities convertible into
Common Stock), then the Company may, at its option, either (i) decrease the
per share Exercise Price of this Warrant by an appropriate amount based
upon the value distributed on each share of Common Stock as determined in
good faith by the Company's Board of Directors or (ii) provide by
resolution of the Company's Board of Directors that on exercise of this
Warrant, the Holder hereof shall thereafter be entitled to receive, in
addition to the shares of Common Stock otherwise receivable on exercise
hereof, the number of shares or other securities or property which would
have been received had this Warrant at the time been exercised.
(d) MERGER. If at any time after the date hereof there shall
be a merger or consolidation of the Company with or into another corporation
when the Company is not the surviving corporation then the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares or other securities or property of the
successor corporation resulting from such merger or consolidation, which
would have been received by Holder for the shares of stock subject to this
Warrant had this Warrant at such time been exercised.
3.
<PAGE>
(e) RECLASSIFICATION, ETC. If at any time after the date
hereof there shall be a change or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property resulting from
such change or reclassification, which would have been received by Holder
for the shares of stock subject to this Warrant had this Warrant at such
time been exercised.
(f) OTHER ADJUSTMENTS. If at any time after the date hereof
through October 7, 1995 any adjustment in the number of Shares or Purchase
Price (as such terms are defined in the Investment Agreements defined below)
occurs pursuant to Section 1.3 of those certain Investment Agreements of even
date herewith between the Company and the Investors identified therein (the
"Investment Agreements"), copies of which have been previously provided to
the Holder, then the number of Shares for which this Warrant is exercisable
and the Exercise Price shall be adjusted in the same manner and on the same
terms as set forth in Sections 1.3(c), (d) and (e) of such Investment
Agreements.
9. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Exercise Price or
number of Shares purchasable hereunder shall be adjusted pursuant to Section 8
hereof, the Company shall execute and deliver to the Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
and the Exercise Price and number of shares purchasable hereunder after
giving effect to such adjustment, and shall cause a copy of such certificate
to be mailed (by first class mail, postage prepaid) to the Holder.
10. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights as a stockholder of the Company with
respect to the Shares, including (without limitation) the right to vote such
Shares, receive dividends or other distributions thereon, or be notified of
stockholder meetings, and the Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.
However, in the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Company shall mail to each Holder of this
Warrant, at least 10 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
4.
<PAGE>
11. RESTRICTED SECURITIES. The Holder understands that this
Warrant and the Shares purchasable hereunder constitute "restricted securities"
under the federal securities laws inasmuch as they are, or will be, acquired
from the Company in transactions not involving a public offering and
accordingly may not, under such laws and applicable regulations, be resold
or transferred without registration under the Securities Act of 1933, as
amended (the "1933 Act") or an applicable exemption from such registration.
In this connection, the Holder acknowledges that Rule 144 of the Securities
and Exchange Commission is not now, and may not in the future be, available
for resales of the Warrant and the Shares purchasable hereunder. Unless
the Shares are subsequently registered pursuant to Section 14, the Holder
further acknowledges that the securities legend on Exhibit A to the Notice
of Exercise attached hereto shall be placed on any Shares issued to the
Holder upon exercise of this Warrant.
12. CERTIFICATION OF INVESTMENT PURPOSE. Unless a current
registration statement under the 1933 Act shall be in effect with respect
to the securities to be issued upon exercise of this Warrant, the Holder
covenants and agrees that, at the time of exercise hereof, it will deliver
to the Company a written certification executed by the holder that the
securities acquired by him upon exercise hereof are for the account of
such Holder and acquired for investment purposes only and that such
securities are not acquired with a view to, or for sale in connection with,
any distribution thereof.
13. DISPOSITION OF SHARES. Holder hereby agrees not to make any
disposition of any Shares purchased hereunder unless and until:
(a) Holder shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Holder shall have complied with all requirements of this
Warrant applicable to the disposition of the Shares; and
(c) Holder shall have provided the Company with written
assurances, in form and substance satisfactory to legal counsel of the Company,
that (i) the proposed disposition does not require registration of the Shares
under the 1933 Act or (ii) all appropriate action necessary for compliance
with the registration requirements of the 1933 Act or of any exemption from
registration available under the 1933 Act has been taken.
The Company shall NOT be required (i) to transfer on its books any
Shares which have been sold or transferred in violation of the provisions of
this Section 13 or (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to,
5.
<PAGE>
any transferee to whom the Shares have been transferred in contravention of
the terms of this Warrant.
14. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. If at any time the Company shall
determine to register for its own account or the account of others under the
1933 Act any of its equity securities, other than on Form S-4 or Form S-8 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, the Company shall send to each Holder of Warrants or Shares,
who is entitled to registration rights under this Section 14(a) written
notice of such determination and, if within twenty (20) days after receipt
of such notice, such Holder shall so request in writing (hereafter a
"Selling Holder"), the Company shall include in such Registration Statement
all or any part of the Shares issuable upon exercise of the Warrants (the
"Registrable Securities") such Selling Holder requests to be registered,
except that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of Registrable Securities which may be included
in the Registration Statement because, in such underwriter(s)' judgment,
such limitation is necessary to effect an orderly public distribution, then
the Company shall be obligated to include in such Registration Statement
only such limited portion of the Registrable Securities. The obligations
of the Company under this Section 14(a) may be waived by Holders holding a
majority in interest of the Registrable Securities and shall expire after
the Company has afforded the opportunity for the Holders to exercise
registration rights for a period of five years from the date hereof under
this Section 14(a).
(b) OBLIGATIONS OF THE HOLDERS. In connection with the
registration of the Registrable Securities, the Selling Holders shall have the
following obligations:
i. It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Agreement with respect to
each Selling Holder that such Selling Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall be reasonably required to effect the registration of the Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least fifteen (15)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Selling Holder of the information
the Company requires from each such Selling Holder (the "Requested
Information") if such Selling Holder elects to have any of such Selling
Holder's Registrable Securities included in the Registration Statement. If
6.
<PAGE>
within five (5) business days prior to the filing date the Company has not
received the Requested Information from an Selling Holder (a "Non-Responsive
Holder"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Holder;
ii. Each Selling Holder by such Selling Holder's
acceptance of the Registrable Securities agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation
and filing of the Registration Statement hereunder, unless such Selling
Holder has notified the Company in writing of such Selling Holder's election
to exclude all of such Selling Holder's Registrable Securities from the
Registration Statement; and
iii. No Selling Holder may participate in any
underwritten registration hereunder unless such Selling Holder (i) agrees to
sell such Selling Holder's Registrable Securities on the basis provided in
any underwriting arrangements approved by the Selling Holders entitled
hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and other fees and expenses of investment bankers
and any manager or managers of such underwriting and legal expenses of the
underwriter applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
(c) EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in
connection with registrations, filings or qualifications pursuant to
Section 14(a), including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, shall be borne by the Company;
PROVIDED, HOWEVER, that the Selling Holders shall bear the fees and out-of-
pocket expenses of the any legal counsel selected by the Selling Holders in
connection with such registration.
(d) INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
i. To the extent permitted by law, the Company will
indemnify and hold harmless each Selling Holder who holds such Registrable
Securities, the directors, if any, of such Selling Holder, the officers, if
any, of such Selling Holder, each person, if any, who controls any Selling
Holder within the meaning of the 1933 Act, any underwriter (as defined in the
1933 Act) for the Selling Holders, the directors, if any, of such underwriter
and
7.
<PAGE>
the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the 1933 Act (each, an
"Indemnified Person"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively, "Claims") to which any of them
may become subject under the 1933 Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
when it first became effective, or any related final prospectus, amendment
or supplement thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading (a "Violation"). The Company shall
reimburse the Selling Holders and each such underwriter or controlling
person, promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained
in this Section 14(d)(i) shall not apply in such case to the extent any
such Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company
by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, and shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld.
ii. In connection with any Registration Statement in
which a Selling Holder is participating, each such Selling Holder agrees to
indemnify and hold harmless, to the same extent and in the same manner set
forth in Section 14(d)(i), the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter and
any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls
such stockholder or underwriter within the meaning of the 1933 Act
(collectively and together with an Indemnified Person, an "Indemnified
Party"), against any Claim to which any of them may become subject,
under the 1933 Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Selling Holder
expressly for use in connection with such Registration Statement, and such
Selling Holder will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
Claim; PROVIDED, HOWEVER, that the indemnity agreement
8.
<PAGE>
contained in this Section 14(d)(ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of such Selling Holder, which consent shall not be
unreasonably withheld.
iii. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution to the
same extent as provided above, with respect to information such persons so
furnished in writing by such persons expressly for inclusion in the
Registration Statement.
iv. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 14 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is made against any
indemnifying party under this Section 14, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying parties; PROVIDED, HOWEVER, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party
and any other party represented by such counsel in such proceeding. The
Company shall pay for only one separate legal counsel for the Selling
Holders; such legal counsel shall be selected by the Selling Holders holding
a majority in interest of the Registrable Securities. The failure to
deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under
this Section 14, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action. The indemnification required
by this Section 14 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss,
damage or liability is incurred and is due and payable.
(e) CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 14 to the fullest extent permitted
by law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in
9.
<PAGE>
Section 14, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (c) contribution
by any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
(f) REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the 1933
Act or any other similar rule or regulation of the SEC that may at any time
permit the Holders to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
i. make and keep public information available, as those
terms are understood and defined in Rule 144; and
ii. file with the SEC in a timely manner all reports
and other documents required of the Company under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
iii. furnish to each Holder so long as such Holder owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Holders to sell such
securities without registration pursuant to Rule 144.
(g) ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to
have the Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Holders to transferees or assignees of
all or any portion of such securities only if: (a) the Holder agrees in
writing with the transferee or assignee to assign such rights, (b) the Company
is, within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee,
(ii) a copy of the agreement between Holder and the transferee regarding the
assignment, and (iii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, (d) such assignment is in accordance with and permitted by
law and all other agreements between the transferor or assignor and the
Company, including without limitation, stockholder's agreements, warrants
and subscription agreements, and the transferor or assignor otherwise is
not in material default of
10.
<PAGE>
any obligation to the Company under any such other agreement, and (d) at or
before the time the Company received the written notice contemplated by clause
(b) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein.
(h) TERMINATION OF REGISTRATION RIGHTS. No Holder of
Warrants or Shares shall be entitled to exercise any right provided for in
this Section 14 at such time as such holder would be able to dispose of all of
its Registrable Securities in any six (6) month period under SEC Rule 144.
15. MISCELLANEOUS.
(a) ASSIGNMENT. This Warrant shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
(b) RESTRICTIONS. By receipt of this Warrant, the Holder
makes the same representations with respect to the acquisition of this
Warrant as the Holder is required to make upon the exercise of this Warrant
and acquisition of the Shares purchasable hereunder as set forth in the Form
of Investment Letter attached as Exhibit A to the Notice of Exercise attached
hereto.
(c) NOTICES. Unless otherwise provided, any notice required
or permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or three
(3) days following deposit with the United States Post Office, by registered
or certified mail, postage prepaid and addressed to the party to be notified
(or one (1) day following timely deposit with a reputable overnight courier
with next day delivery instructions) at the address indicated below or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
To Holder: 3-
To the Company: Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, CA 92037
Attention: President
With a copy to: Brobeck, Phleger & Harrison
4675 MacArthur Court, Suite 1000
Newport Beach, CA 92660
Attention: Laura M. Brower, Esq.
(d) GOVERNING LAW. This Warrant shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
11.
<PAGE>
(e) ENTIRE AGREEMENT. This Warrant, the exhibits and
schedules hereto, and the documents referred to herein, constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with
respect to the subject matter hereof.
(f) BINDING EFFECT. This Warrant and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Company and its successors and assigns, and Holder and its successors and
assigns.
(g) WAIVER; CONSENT. This Warrant may not be changed,
amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Warrant or
any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto.
(h) SEVERABILITY. If one or more provisions of this Warrant
are held to be unenforceable under applicable law, such provision shall be
excluded from this Warrant and the balance of the Warrant shall be
interpreted as if such provision were so excluded and the balance shall be
enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Common
Stock Warrant effective as of the date hereof.
DATED: June 26, 1995 THE COMPANY:
-----------
Advanced Tissue Sciences, Inc.
By:
---------------------------
Arthur J. Benvenuto
Chairman, President and
Chief Executive Officer
HOLDER:
------
---------------------------
1-
12.
<PAGE>
NOTICE OF EXERCISE
------------------
To: ADVANCED TISSUE SCIENCES, INC.
1. The undersigned hereby elects to purchase ---------- shares of
Common Stock ("Stock") of Advanced Tissue Sciences, Inc., a Delaware
corporation (the "Company") pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price pursuant to the terms of
the Warrant.
2. Attached as Exhibit A is an appropriate investment
representation letter addressed to the Company and executed by the undersigned
as required by Section 12 of the Warrant.
3. Please issue certificates representing the shares of Stock
purchased hereunder in the names and in the denominations indicated on
Exhibit A attached hereto.
4. Please issue a new Warrant for the unexercised portion of the
attached Warrant, if any, in the name of the undersigned.
Dated:
-------------------- -------------------------
1-
<PAGE>
EXHIBIT A
----------
To: ADVANCED TISSUE SCIENCES, INC.
In connection with the purchase by the undersigned of ___________
shares of the Common Stock (the "Stock") of Advanced Tissue Sciences, Inc., a
Delaware corporation (the "Company"), upon exercise of that certain Common
Stock Warrant dated as of June 26, 1995 the undersigned hereby represents and
warrants as follows:
1. The shares of Stock to be received by the undersigned upon
exercise of the Warrant are being acquired for its own account, not as a
nominee or agent, and not with a view to resale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
any participation in, or otherwise distributing the same. The undersigned
further represents that it does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to
such person or to any third person, with respect to the Stock. The
undersigned believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Stock.
2. The undersigned understands that the shares of Stock are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in transactions not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Act"), only in certain limited circumstances. In this
connection, the undersigned represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
3. Without in any way limiting the representations set forth
above, the undersigned agrees not to make any disposition of all or any
portion of the Stock unless and until:
(a) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The undersigned shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
if requested, the undersigned shall have furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company that such disposition will
not require registration of such shares under the Act. The Company
A-1
<PAGE>
will not require an opinion of counsel for sales made pursuant to Rule 144
except in unusual circumstances.
4. The undersigned understands the instruments evidencing the
Stock may bear the following legend:
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.
Dated:
------------------------- -------------------------------
1-
A-2
