Exhibit 4.1
Proprietary and Confidential
INVESTMENT AGREEMENT
Between
ADVANCED TISSUE SCIENCES, INC.
And
RAMIUS HATTERAS PARTNERS, L.P.
Dated as of February 9, 1996
INVESTMENT AGREEMENT dated as of February 9, 1996 between Ramius Hatteras
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, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $50,000,000 in
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, up to $50,000,000 of the
Common Stock.
Section 1.2 Delivery of Put Notices.
(a) At any time prior to the earlier of (i) the date which is two
years from the date hereof or (ii) termination of this Agreement in accordance
with Article V herein, the Company may deliver written notices to the Investor
(each such notice hereinafter referred to as a "Put Notice") stating a dollar
amount (the "Dollar Amount") of Common Stock which the Company intends to sell
to the Investor five business days following the date (the "Put Notice Date")
on which the Put Notice is given to the Investor by the Company in accordance
with Section 6.4 herein. "Business day" shall mean any day on which the New
York Stock Exchange is open for trading. The Dollar Amount designated by the
Company in any given Put Notice shall be an amount equal to at least
$1,000,000, shall be in increments of $500,000, and shall not exceed
$15,000,000, provided that the Investor, in its sole discretion, may refuse
to invest all or any portion of a Dollar Amount designated by the Company in a
Put Notice if the investment by the Investor of the entire Dollar Amount would
result in the Investor purchasing, at the closing associated with such Put
Notice, shares of Common Stock at a price determined in accordance with
Section 1.3(a) herein, which, when aggregated with the shares of Common Stock
beneficially or deemed beneficially owned by Investor pursuant to the Warrants
(as defined in Section 6.1(b) below) ("Warrant Shares") and all other shares
of Common Stock acquired by the Investor pursuant to this Agreement in the
three months preceding the applicable closing (after giving effect to all
adjustments made pursuant to Section 1.3 herein), would result in the Investor
owning more than 4.9% of the Common Stock outstanding on the Put Notice Date,
as determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations promulgated thereunder. The
Put Notice shall include a representation of the Company as to the Common
Stock outstanding on the Put Notice Date as determined in accordance
-1-
with Section 13(d) of the Exchange Act. In the event that the amount of
Common Stock outstanding as determined in accordance with Section 13(d) of the
Exchange Act and the regulations promulgated thereunder is different on a
closing date than on the Put Notice Date associated with such closing date,
the amount of Common Stock outstanding on such closing date shall govern for
purposes of determining whether the Investor, when aggregating all purchases
of Common Stock made pursuant to this Agreement in the three months preceding
such closing date and Warrant Shares, would own more than 4.9% of the Common
Stock following such closing date.
(b) Notwithstanding any of the foregoing, the Company may not
deliver a Put Notice if (i) the closing trading price of the Common Stock on
the NASDAQ National Market, American Stock Exchange or New York Stock Exchange
(whichever is the principal trading exchange for the Common Stock, the
"Principal Market"), as reported by the Principal Market, on the day prior to
delivery of such Put Notice was less than $2.00 or (ii) if trading of the
Common Stock on the Principal Market is suspended or the Common Stock is
delisted from the Principal Market, or (iii) if the Common Stock is not
registered under the Exchange Act or if the Registration Statement (as defined
below) is no longer effective or is subject to a stop order or is otherwise
suspended, or (iv) if a Valuation Period (as defined below) is in progress.
If any of the events described in clauses (i) to (iii) above occurs after a
Put Notice is delivered but prior to the Closing associated with such Put
Notice, such Put Notice shall be null, void and of no force and effect and a
new Put Notice shall be required following the termination of any such events.
Section 1.3 Determination of Share Number; Valuation Period.
(a) The initial number of shares (an "Initial Share Number") that the
Company shall be obligated to issue and sell and the Investor shall be
obligated to purchase in connection with a Put Notice shall be equal to the
number obtained by (i) dividing (x) the Dollar Amount designated in such Put
Notice by (y) 95% of the closing trading price of the Common Stock on the
Principal Market on the Put Notice Date, as reported by the Principal Market
(such closing trading price hereby defined as the "Initial Share Price") and
(ii) rounding to the nearest whole number.
(b) The "Valuation Period" in connection with each purchase of Common
Stock shall commence on the Closing Date with respect to such purchase and
shall continue for such number of days as is determined by (i) dividing (x)
the Initial Share Number applicable to such purchase by (y) 8% to 12% (as
determined by the Company in the Put Notice applicable to such purchase
provided that if the Company does not so determine, such percentage shall be
10%) of the Average Daily Trading Volume of the Common Stock during the thirty
Trading Days immediately preceding the Put Notice Date applicable to such
purchase and (ii) rounding to the nearest full Trading Day. For purposes of
this Agreement "Average Daily Trading Volume" shall mean, with respect to any
measuring period, the average of the daily trading volumes, as published in
the Wall Street Journal, of the Common Stock on the Principal Market during
such measuring
-2-
period. For purposes of this section "Trading Days" shall mean days on which
the Common Stock was traded on the Principal Market.
(c) If the Average Daily Trading Volume during any Valuation Period as
determined for the period commencing on the first day of each Valuation Period
and ending on the day (rounded to the nearest full day) on which 67% of such
Valuation Period has occurred, after giving effect to any and all adjustments
made pursuant to Section 1.5(b)(iv) herein (a "Mid-Period Calculation Date")
is less than 67% of the Average Daily Trading Volume for the thirty Trading
Days immediately preceding the Put Notice Date associated with such Valuation
Period, the Investor shall have a one-time option with respect to each Put
Notice, exercisable at its sole discretion, to extend such Valuation Period by
fifteen Trading Days. Such election shall be made by notifying the Company in
writing, no later than twenty four hours following the close of business,
E.S.T. or E.D.T. (whichever is applicable) on the Mid-Period Calculation Date,
of its election to so extend such Valuation Period.
(d) Notwithstanding Section 1.3(a) (above), and except as hereinafter
provided, if the Average Share Price (hereinafter defined) during any
Valuation Period is less than the Initial Share Price of the Common Stock
purchased in connection with such Valuation Period, then the Company shall
deliver to the Investor, at no additional cost to the Investor, and in
addition to the Initial Share Number associated with such Valuation Period,
the number of shares of Common Stock ("Additional Shares") that is obtained by
subtracting (x) such Initial Share Number from (y) the quotient obtained by
dividing the Dollar Amount by 95% of the Average Share Price (rounded to the
nearest whole number); provided that if such issuance of Additional Shares
would result in the Investor being the beneficial owner of 10% or more of the
outstanding shares of Common Stock after taking into account all Warrant
Shares, then in lieu of issuing such portion of Additional Shares as would
cause the Investor to meet or exceed the 10% limit, the Company shall promptly
pay in cash to Investor an amount equal to the product of (i) the Average
Share Price and (ii) the Excess Additional Shares. For purposes of this
Section 1.3(d), "Excess Additional Shares" shall mean, at the time of
calculation, the difference between the amount of Additional Shares to which
the Investor would otherwise be entitled pursuant to this subsection 1.3(d) at
such time and the amount of Additional Shares which, when added to all other
shares of Common Stock beneficially owned by the Investor at such time, taking
into account the Warrant Shares, would equal 10% or more of the outstanding
shares of Common Stock at the time of calculation.
(e) Notwithstanding Section 1.3(a) above, and except as hereinafter
provided, if the Average Share Price during any Valuation Period is greater
than the Initial Share Price of the Common Stock purchased in connection with
such Valuation Period, the Investor shall pay to the Company the dollar amount
by which (x) the product of 95% of the Average Share Price and the Initial
Share Number exceeds (y) the product of 95% of the Initial Share Price and the
Initial Share Number rounded to the nearest whole number.
-3-
(f) For purposes hereof, the Average Share Price shall mean the average
of the per share daily low trading prices of the Company's Common Stock on the
Principal Market, as reported by the Principal Market during the applicable
Valuation Period.
(g) In the event that during a Valuation Period there is any stock
split, reverse split or combination, stock dividend or similar such event with
respect to the Common Stock, there shall be effected an appropriate adjustment
to the Initial Share Number, Initial Share Price, Average Share Price and
Additional Shares to place the Investor in the same position as it would have
been had such event not occurred, and in the event of any dispute in
connection with this paragraph, the adjustment shall be determined by
arbitration before a single arbitrator in New York, New York, in accordance
with the prevailing rules of the American Arbitration Association.
Section 1.4 Closing.
(a) Each closing of the purchase and sale of Common Stock (a "Closing")
shall take place at the offices of the Investor, at 10:00 a.m., local time on
the fifth business day following the Put Notice Date to which such Closing
relates, or the earliest date thereafter on which all conditions to Closing
have been satisfied. Each date on which a Closing occurs is referred to
herein as a "Closing Date."
(b) (i) On each Closing Date, the Company shall deliver to the Investor
certificates representing the Initial Share Number to be issued and sold to
the Investor on such date and registered in the name of the Investor or
deposit such Initial Share Number into the accounts designated by the Investor
and (ii) on each Closing Date, the Investor shall deliver to the Company the
Dollar Amount with respect to such closing 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 each Closing.
Section 1.5. Registration.
(a) All shares (including Additional Shares) of Common Stock issued to
the Investor pursuant to this Agreement shall, at the time of such issuance
and for so long thereafter as is required by this Agreement, be subject to an
effective registration statement on Form S-3 or an equivalent thereof,
covering both the issuance of Shares and Additional Shares by the Company to
the Investor hereunder and the resale or other disposition thereof by the
Investor at any time and from time to time after each such issuance. In
addition, all Warrant Shares issued to any Warrant Holder (such term as used
herein to be defined as in the Warrant) pursuant to the Warrant shall, on the
earlier to occur of (i) 180 days following the date of this Agreement and (ii)
delivery to the Investor of the first Put Notice hereunder, be subject to an
effective registration statement on Form S-3 or an equivalent thereof covering
both the issuance of the Warrant Shares by the Company to any Warrant Holder
and the resale or other disposition thereof by any
-4-
Warrant Holder at any time and from time to time after each such issuance.
The Initial Share Number, Additional Shares and Warrant Shares shall be
referred to collectively herein as the "Shares". The registration statements
described in this Section 1.5(a) (together with all amendments and supplements
thereto, the "Registration Statement") shall, in accordance with Section
1.5(b) below, remain effective pursuant to the provisions of Regulation
230.415 of the Securities Act of 1933 (the "1933 Act") or otherwise, (x) in
the case of any Registration Statement covering Shares issued pursuant to this
Agreement, at all times during the term of this Agreement and for a period of
90 days after termination of this Agreement or, if this Agreement is
terminated during a Valuation Period, for a period of 90 days following the
end of such Valuation Period, and (y) in the case of any Registration
Statement covering the Warrant Shares at all times during the term of the
Warrant and for a period of three years thereafter, but in any event not after
the Investor or any Warrant Holder, as the case may be, in the reasonable
opinion of its counsel, is free to sell such securities without compliance
with the registration provisions under the 1933 Act, and any applicable state
securities laws (as applicable, the "Registration Period").
(b) The Company shall, as expeditiously as reasonably possible and in
accordance with Section 1.5(a) herein:
(i) Prepare and file with the Securities and Exchange Commission
("SEC") such amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such Registration Statement.
(ii) Furnish to the Investor or any Warrant Holder, as the case
may be, such numbers of copies of a prospectus, in conformity with the
requirements of the Act, and such other documents as the Investor or Warrant
Holder, as the case may be, may reasonably require in order to facilitate the
disposition of shares sold pursuant to this Agreement or issued pursuant to
the Warrant and owned by such Investor or Warrant Holder.
(iii) Insure that all Shares subject to the Registration
Statement shall at all times during the applicable Registration Period be
registered and qualified under such other securities or "Blue Sky" laws of
such jurisdictions as shall be reasonably requested by the Investor or the
Warrant Holder, as the case may be, provided that the Company shall not be
required in connection herewith or as a condition hereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(iv) Notify the Investor and/or any Warrant Holder of the
happening of any event or the existence of any circumstance (without any
obligation to disclose the specific actual event or circumstance) as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of material fact or
-5-
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 and either (A) as soon as may be practicable, prepare and file with
the SEC such amendments and supplements to such Registration Statement and
prospectus used in connection therewith as may be necessary to eliminate or
correct such untrue statement or omission and otherwise to cause such
registration statement and prospectus to remain current and useable for the
purposes intended hereunder, or (B) further notify the Investor and/or the
Warrant Holder, as the case may be, at the time of any notification to
Investor and/or the Warrant Holder, as the case may be, pursuant to the
foregoing provisions of this Section 1.5(b)(iv) of the Company's election to
suspend and extend for a period of up to thirty (30) calendar days (a
"Suspension Period") the Company's obligations pursuant to the preceding
clause (A) of this Section 1.5(b)(iv); provided that the Company will, at or
before the expiration of any such Suspension Period, fully satisfy and
discharge its obligations pursuant to such preceding clause (A); and provided
further that no Suspension Period may commence less than ninety (90) days
after the expiration of the then most recent Suspension Period, and the
Company may establish no more than two (2) Suspension Periods in any twelve
(12) consecutive months during which the Registration Statement is to remain
effective pursuant to Section 1.5(a). The Company, the Investor and the
Warrant Holder understand and acknowledge that, during any Suspension Period,
the Company will be unable to sell Common Stock to the Investor in accordance
with or under the Registration Statement and that Investor and/or the Warrant
Holder may be unable to sell or otherwise dispose of Shares of Common Stock
theretofore acquired by the Investor and/or the Warrant Holder hereunder or
pursuant to the Warrant in accordance with the Registration Statement or
otherwise. The foregoing shall not, however, limit or interfere in any way
with the acquisition or disposition by the Investor and/or the Warrant Holder
of the Shares, or any other shares or securities of the Company by other
lawful means. Any Valuation Period falling within any Suspension Period, in
whole or in part, shall be suspended during such Suspension Period and shall
be extended by the entire length of that portion of the applicable Suspension
Period which occurred during the original applicable Valuation Period.
(v) Make available for inspection by the Investor's designated
representatives (which shall be one or more organizations which are
unaffiliated with Investor, are experienced in corporate finance and are
reasonably acceptable to the Company), upon request from time to time, all SEC
Documents (as hereinafter defined), require the Company's officers and, to the
extent reasonably necessary to enable the Investor's designated
representatives to conduct reasonably appropriate due diligence with respect
to each Put Notice, and, in each case, subject to the prior consent of the
Company's Chief Executive Officer or President, which consent shall not be
unreasonably delayed or denied, the Company's employees to supply all
information reasonably requested by the Investor's designated representatives
in connection with the Registration Statement, require the Company's officers
and, to the extent reasonably necessary to enable the Investor's designated
representatives to conduct reasonably appropriate due diligence and, in each
case, subject to the prior consent of the Company's Chief Executive Officer or
President which consent shall not be unreasonably delayed or
-6-
denied, the Company's employees to meet with representatives of the Investor's
designated representatives, during normal business hours and on such basis as
the Investor's designated representatives may reasonably request, invite the
Investor's designated representatives to attend any and all meetings organized
by the Company for purposes of disseminating information about the Company to
securities analysts generally and make available to the Investor's designated
representatives, contemporaneously with the provision of such information, any
and all information about the Company provided by the Company to securities
analysts. In addition, the Company will permit Investor's designated
representatives access to the Company's premises and, in each case, subject to
the prior consent of the Company's Chief Executive Officer or President which
consent shall not be unreasonably delayed or denied, personnel, consultants,
agents, attorneys, accountants, customers, suppliers, bankers, and others who
have significant relationships or agreements with the Company and the
Company's assets, books and records and the Company will provide Investor's
designated representatives with information (financial and otherwise)
concerning the Company to enable Investor's designated representatives to
conduct reasonably appropriate ongoing due diligence review of the Company.
The Company will disseminate to the Investor's designated representatives all
press releases and public information disseminated by the Company at the same
time it disseminates such releases and information to others. Nothing herein
shall require the Company to disclose non-public information to the Investor
and the Company represents that it does not disseminate non-public information
to any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, and in any event prior to any
Closing, the Company will notify the Investor's designated representatives of
any event or the existence of any circumstance (without any obligation to
disclose the specific event or circumstance) constituting non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by the Investor's designated
representatives) which, if not disclosed in the prospectus included in the
Registration Statement required to be effective at the time of each Closing
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 1.5(b)(v) shall be construed to
mean that the Investor's designated representatives may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent the Investor from
notifying the Company that the Investor believes, based on its designated
representatives' due diligence, that the Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading, provided, however, that in no event shall the Investor's
designated representatives disclose to the Investor the nature of the specific
event or circumstance constituting any non-public information discovered by
the Investor's designated representatives in the course of their due
diligence. The Investor's designated representatives shall make complete
disclosure to the Investor's independent counsel of all events or
circumstances, including any non public information,
-7-
discovered by the Investor's designated representatives in the course of their
due diligence and upon which the Investor's designated representatives form
the opinion that the Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein,
in light of the circumstances in which they were made, not misleading. Upon
receipt of such disclosure, the Investor's independent counsel shall
communicate with the Company's independent counsel, requesting that such
material facts be included in the Registration Statement. If the Company
disputes that some or all of such material facts are material, the Investor's
independent counsel shall be free to disclose to and discuss with the Investor
such material facts deemed by the Company not to be material, including,
without limitation, non public information.
As a condition to the Company's obligations under this subparagraph (v),
Investor's designated representatives shall enter into a confidentiality
agreement with the Company in form and substance satisfactory to the Company.
If the Company's Chief Executive Officer or President shall unreasonably
delay or deny consent as to any matter in this subparagraph (v) for which his
consent is required, the Investor shall not be obligated to purchase the
Initial Share Number which is the subject of the respective Put Notice.
(vi) Except as required, in the opinion of the Company's counsel,
by law or consented to in advance by Investor (which consent shall not be
unreasonably withheld) refrain from using the name of Investor in the
Registration Statement or other regulatory filings (including SEC Documents).
(c) (i) The Company shall indemnify, defend and hold
harmless the Investor and Warrant Holder from and against, and shall reimburse
such Investor and any Warrant Holder with respect to, any and all claims, suits,
demands, causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which such Investor or any Warrant Holder may become
subject under the 1933 Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or any prospectus contained therein, 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 (i) an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by the Investor or any Warrant Holder of the Shares
issued pursuant to this Agreement or the Warrant in writing specifically for
use in the preparation thereof and (ii) any sale or disposition of Shares by
the Investor or any Warrant Holder, as the case may be, pursuant to the
Registration Statement during any Suspension Period, provided Investor or any
Warrant Holder, as the case may be, is notified of such Suspension Period in
advance of any such sale or disposition.
-8-
(ii) Promptly after receipt by the Investor and/or any
Warrant Holder of notice of the commencement of any action, the Investor and/or
the Warrant Holder, as the case may be, 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 Investor and/or any Warrant
Holder other than under this section and shall only relieve it from any
Liability which it may have to the Investor and/or any Warrant Holder 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 Investor and/or any
Warrant Holder and the Investor and/or any Warrant Holder 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 Investor and/or the
Warrant Holder, as the case may be, and, after notice from the Company to the
Investor and/or any Warrant Holder, as the case may be, of its election so to
assume and undertake the defense thereof, the Company shall not be liable to
the Investor and/or any Warrant Holder under this section for any legal
expenses subsequently incurred by the Investor and/or any Warrant Holder 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 Investor
and/or any Warrant Holder and the Investor and/or any Warrant Holder shall
have reasonably concluded that there may be reasonable defenses available to
them which are different from or additional to those available to the Company
or if the interests of the Investor and/or any Warrant Holder reasonably may
be deemed to conflict with the interests of the Company, the Investor and/or
any Warrant Holder, as the case may be, 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 reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be ▇▇▇▇-
bursed by the Company as incurred. If the Investor is a defendant in such
action, the Investor shall select such separate counsel to represent the
Investor and all Warrant Holders; however, if the Investor is not a
defendant, such separate counsel shall be selected by the majority of the
Warrant Holders named as defendants. The legal fees and expenses of any
Warrant Holder choosing not to be represented by such separate counsel
selected by the Investor or the majority of the Warrant Holders, as the case
may be, shall be borne by such Warrant Holders.
(d) If the indemnification provided for in Section 1.5(c)
above is unavailable to the Investor or any Warrant Holder in respect of any
Liabilities (as defined above), then the Company, in lieu of indemnifying the
Investor or any Warrant Holder, as the case may be, shall contribute to the
amount paid or payable by such Investor or any Warrant Holder as a result of
such Liabilities, such proportion of such Liabilities as is appropriate to
reflect the relative fault of the Company and of the Investor or any Warrant
Holder, as the case may be, in connection with such statements or omissions
described in Section 1.5(c)(i) above, as well as any other relevant equitable
considerations. The relative fault of the Company and of the Investor or any
Warrant Holder, as the case may be, shall be determined by reference to, among
other things, whether the untrue or alleged
-9-
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Investor or any Warrant Holder, as the case may be, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. "Liabilities" pursuant to this Section 1.5(d) and
Section 1.5(c) shall be deemed to include without limitation any legal or
other expenses reasonably incurred by the Investor and any Warrant Holder in
connection with investigating or defending any action or claim by a third
party and in connection with any enforcement of this Section 1.5(d) and
Section 1.5(c).
(e) (i) All fees, costs and expenses of and incidental to
the Registration Statement shall be borne by the Company (other than such fees,
costs and expenses as are in the nature of commissions incurred in connection
with the sale of Shares by the Investor or any Warrant Holder).
(ii) The fees, costs and expenses of registration to be
borne by the Company as provided in this subsection (e) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, (other than with
respect to the comfort letter referred to in Section 4.2(h)) 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 registered and qualified.
Section 1.6. Adjustments. Each time the Investor shall be entitled to
the issuance of Additional Shares as provided in Section 1.3(d), 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 applicable to the
issuance of such Additional Shares 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. Each time the Company or the Investor
shall be entitled to an additional dollar payment as provided in Section
1.3(e) or 1.3(d), as the case may be, the Company or the Investor, as the case
may be, shall make such payment on the third (3rd) business day after the end
of the Valuation Period applicable to such payment by cashier's check or wire
transfer in immediately available funds to such account as shall be designated
in writing by the Company or the Investor, as the case may be.
Section 1.7 Rescheduling. If after the date of any Put Notice and
prior to the expiration of the Valuation Period relating to such Put Notice
(a) the Company shall distribute to its shareholders any property or assets
outside the ordinary course of business (including without limitation
spin-offs and the like) or (b) any person shall (x) publicly announce a tender
offer or exchange offer for the Company's Common Stock, or (y) 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 relating to such Put Notice so
as to end on a
-10-
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 a Valuation Period pursuant to this Section 1.7.
Section 1.8 Delisting/Deregistration. If, during any Valuation Period
or within thirty (30) days after the end of such Valuation Period, (i) the
Common Stock is delisted from the Principal Market or (ii) the Common Stock is
not registered under the Exchange Act, Investor shall have the right, at its
option in its sole discretion, which right shall be exercised within thirty
(30) days of such delisting or deregistration, to sell to the Company, and the
Company agrees to buy, promptly upon the exercise of such right by Investor,
all or any part of the Initial Share Number and Additional Shares issued to
and then held by the Investor in connection with the most recent Put Notice at
a price equal to the Initial Share Price (if prior to the end of the Valuation
Period) and at a price equal to the Average Share Price (if subsequent to the
Valuation Period) for each such Share and Additional Share.
Section 1.9 Suspension. In addition to, and not in any way in
limitation of the provisions contained in Section 1.5(b)(iv), if during any
Valuation Period or within thirty (30) days after the end of such Valuation
Period trading of the Common Stock on the Principal Market is suspended or if
any registration statement with respect to the Shares or Additional Shares
(including the Registration Statement) is no longer effective or subject to a
stop order or otherwise suspended by the Company or as a result of action or
inaction by the Company, then (i) the Valuation Period shall be suspended as
described in Section 1.5(b)(iv), (ii) with respect to Shares then held by the
Investor (exclusive of the Warrant Shares) the following figures shall be
substituted for the 95% figure contained in Section 1.3(a)(y) above and (iii)
the Company shall deliver to the Investor within two (2) Business days of
Investor providing documentation of Shares (other than Warrant Shares) then
held by Investor, an amount in cash equal to the difference between that
portion of the total amount previously paid by the Investor to the Company for
Shares (other than any Warrant Shares) issued to and then held by the Investor
in connection with such Valuation Period and the total amount which the
Investor should have paid to the Company for such Shares, based on the figures
listed below, after giving effect to all prior payments made by the Company to
the Investor pursuant to this Section 1.9.
TIME PERIOD FROM SUSPENSION DATE PERCENT
-------------------------------- -------
31-60 days after date of suspension 93%
61-90 days after date of suspension 91%
91-120 days after date of suspension 89%
-11-
In addition to the foregoing, in the event of any suspension for more
than 120 days, on the 120th day of such suspension either (i) the Company
shall deliver to the Investor, pursuant to Section 1.3(d), such number of
Additional Shares as is equal to the number of Additional Shares to which the
Investor would be entitled pursuant to Section 1.3(d) based on (a) the Average
Share Price of the Common Stock for the originally scheduled Valuation Period,
assuming trading occurred on the Principal Market during each day of such
Valuation Period or (b) if trading did not occur on the Principal Market on
each day of the originally scheduled Valuation Period, the Average Share Price
for the number of days in the originally scheduled Valuation Period on which
trading on the Principal Market did occur (in either case, a "Determination
Date") or (ii) the Investor shall deliver to the Company the additional dollar
amount to which the Company would be entitled pursuant to Section 1.3(e) based
on the Average Share Price of the Common Stock on the Determination Date,
whichever is applicable. In the event that trading of the Common Stock
recommences after a suspension of 120 days or more, the Valuation Period in
progress at the time of such suspension shall recommence and shall be
redefined as the period (the "Post Suspension Valuation Period") consisting of
the number of days in the originally scheduled Valuation Period which occurred
prior to the relevant suspension plus the number of days in the originally
scheduled Valuation Period which occurred following the end of the relevant
suspension. Furthermore, on the 120th day of said suspension, for purposes
of determining the Average Share Price, the Investor shall elect, at its
option, to utilize either (a) the originally scheduled Valuation Period, or in
the event that trading did not occur on the Principal Market on each day of
the originally scheduled Valuation Period, the number of days of the
originally scheduled Valuation Period on which trading on the Principal Market
did occur, or (b) the Post Suspension Valuation Period. If the Investor
elects option (b) above, and if, based on the Average Share Price during the
Post Suspension Valuation Period, the Investor would be entitled, pursuant to
Section 1.3(d), to receive an amount of Additional Shares in excess of any
Additional Shares issued to the Investor on the 120th day following the
relevant suspension, Company shall deliver to the Investor, within two
business days of the last day of the Post-Suspension Valuation Period such
excess amount of Additional Shares. If, however, based on the Average Share
Price during the Post Suspension Valuation Period, the Investor would be
entitled, pursuant to Section 1.3(d) to fewer Additional Shares than the
number of Additional Shares issued to the Investor on the 120th day of the
relevant suspension, or if Investor would be required, based on the Average
Share Price during the Post Suspension Valuation Period, to pay an additional
dollar amount to the Company, pursuant to Section 1.3(e), which is greater
than any dollar amount paid by the Investor to the Company on the 120th day of
the relevant suspension, then the Investor shall make a payment in cash to the
Company such that the total dollar amount paid to the Company with respect to
the Shares issued in connection with the relevant Put Notice equals the
product of (a) 89% of the Average Share Price for the relevant Post Suspension
Valuation Period and (b) the Shares issued in connection with the relevant Put
Notice, such payment to be made within two Business days of the last day of
the Post Suspension Valuation Period.
-12-
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 Agree-
ment and the Warrants and to issue all Shares and Additional Shares in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement and the Warrants by the Company and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action, and no further consent or authorization of
the Company or its Board of Directors or Stockholder(s) is required, (iii) this
Agreement and the Warrants have been duly executed and delivered by the
Company, and (iv) this Agreement and the Warrants constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their 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. As of September 30, 1995 the authorized
capital stock of the Company and the shares thereof currently issued and
outstanding are as described in the Company's quarterly report on Form 10-Q
for the period then ended. All of the outstanding shares of the Company's
Common Stock have been validly issued and are fully paid and nonassessable.
No shares of Common Stock are entitled to preemptive rights. 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").
-13-
(d) Issuance of Shares. The issuance of all Shares and
Additional Shares has been duly authorized and all such Shares, when paid for
or issued in accordance with the terms hereof and pursuant to the Warrants,
shall be validly issued, fully paid and non-assessable. The Company has
authorized and reserved for issuance to Investor the requisite number of shares
of Common Stock to be issued pursuant to the Warrants.
(e) Agreements. As of the date of this Agreement, except as may
be set forth in the SEC Documents, there has been no breach or default by the
Company, or to the best of the Company's knowledge, by any other party
thereto, of any provisions of any material agreements to which the Company is
a party, and nothing has occurred which, with lapse of time or the giving of
notice of both, would constitute a breach or default by the Company, or to the
best of the Company's knowledge, by any other party thereto.
(f) Brokers. The Investor shall not be responsible for any fees
of any broker, finder, commission agent or other person incurred by the Company
in connection with this Agreement and the transactions contemplated hereby.
(g) 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 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 any Shares or
Additional Shares in accordance with the terms hereof and under the Warrants
(other than any NASD filings which may be required to be made by the Company
subsequent to any Closing, and the Registration Statement and compliance with
applicable state securities or "blue sky" laws); provided that, for purposes
of the
-14-
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
(h) (i) SEC Documents, Financial Statements. The Common Stock
of the Company is registered pursuant to Section 12(g) of the Exchange Act and
the Company has filed all reports, schedules, forms, statements and other
documents, together with all exhibits, financial statements and schedules
thereto 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), (all of the foregoing, whether heretofore or hereafter filed
with the SEC, and the Registration Statement, when declared effective, being
hereinafter referred to herein as the "SEC Documents"). 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 or the 1933 Act, as the case may be, 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. As of the date of delivery by the
Investor of the prospectus contained in the Registration Statement in
connection with sales of Shares by the Investor, such prospectus will comply
in all material respects with the requirements of the 1933 Act and the rules
and regulations of the SEC promulgated thereunder, and other federal, state
and local laws, rules and regulations applicable to such prospectus. 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 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).
(ii) The SEC has not issued an order preventing or
suspending the use of any prospectus relating to the offering of any Shares
nor instituted proceedings for that purpose.
(i) No Material Adverse Change. No Material Adverse Effect has
occurred or exists with respect to the Company since (i) in the case of the
first Closing hereunder, the last day of the period to which the Company's
most recent Form 10-K or
-15-
10-Q, as the case may be, filed by the Company with the SEC relates and (ii)
in the case of subsequent Closings hereunder, the date of the Registration
Statement and the prospectus delivered in connection therewith.
(j) No Undisclosed Liabilities. The Company has no liabilities
or obligations not disclosed in (i) in the case of the first Closing hereunder,
the Company's most recent Form 10-K or 10-Q, as the case may be, filed by the
Company with the SEC and (ii) in the case of subsequent Closings hereunder,
the Registration Statement and the prospectus delivered in connection
therewith, other than those incurred in the ordinary course of the Company's
business and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect on the Company.
(k) No Undisclosed Events or Circumstances. No event or circum-
stance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial condition, which, would be
required to be disclosed by the Company under either the 1933 Act or the
Exchange Act or other applicable law but which has not been so publicly
announced or disclosed.
(l) Litigation. Except as may be set forth in the SEC Documents,
there are no lawsuits or proceedings pending or to the best knowledge of the
Company threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which might have a Material Adverse Effect on the Company. Except as set
forth in the SEC Documents no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of
any court, arbitrator or governmental agency which might result in a Material
Adverse Effect on the Company or which might materially adversely affect the
transactions contemplated by this Agreement.
(m) Intellectual Property. To the best of its knowledge, the
Company and its subsidiaries validly own or have the right to use all material
copyrights, trademarks, patents and other intellectual property rights
(collectively, "Intellectual Property") material to the operation of their
business, and such Intellectual Property is not subject to any material
infringement known to the Company, except as otherwise disclosed in the SEC
Documents. Except as disclosed in the SEC Documents, to the best of the
Company's knowledge, the Company is not in any way making any unlawful or
wrongful use of any Intellectual Property of any third party which might
result in a Material Adverse Effect on the Company or which might materially
adversely affect the transactions contemplated by this Agreement.
(n) Principal Market. As of the date of this Agreement, the
Principal Market on which the shares of Common Stock are traded is the NASDAQ
National Market.
Section 2.2 Representations and Warranties of the Investor. The
Investor hereby makes the following representations and warranties to the
Company:
-16-
(a) Authorization; Enforcement. (i) The Investor has the
requisite power and authority and has sufficient capital to enter into and
perform this Agreement and to purchase the Shares to be 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 or partnership action, as the case may
be, and no further consent or authorization of the Investor or its Board of
Directors, stockholder(s), 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, By-Laws, Partnership Agreement
or Certificate of Limited Partnership, as the case may be, 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 or a
material adverse effect on the Company or the transactions contemplated
hereunder). 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 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 State of Delaware and 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 for its own account. Investor has no present intention to sell any
Shares, and the Investor has no present arrangement (whether or not legally
binding) at any time to sell
-17-
Shares to or through any person or entity; provided, however, that by making
the representations herein, the Investor does not agree to hold the Shares for
any minimum or other specific term and reserves the right to dispose of all
Shares at any time in accordance with Federal securities laws applicable to
such disposition.
ARTICLE III
Covenants
---------
Section 3.1 Securities Compliance.
(a) The Company shall notify the SEC and the Principal Market and
any other applicable market in accordance with their 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, for the legal and valid issuance of all
Shares to the Investor.
(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 the Registration Statement, 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
Statement or to terminate or suspend its reporting and filing obligations
under the Exchange Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock
(including the Shares) on the Principal Market; and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market.
Section 3.2 Preliminary Put Notice. In order to provide the
Investor's designated representatives adequate opportunity to conduct
appropriate due diligence in connection with each Put Notice, the Company
shall deliver to the Investor, at least seventeen (17) calendar days prior to
the delivery of each Put Notice, a Preliminary Put Notice which Notice shall
state that the Company is considering delivery of a Put Notice to the Investor
seventeen (17) or more calendar days following delivery of the Preliminary Put
Notice. In no event shall delivery of a Preliminary Put Notice to the
Investor obligate the Company to deliver any Put Notice to the Investor,
provided, however that if the Company fails on more than two occasions in any
12 month period to deliver a Put Notice within thirty days of delivery of a
Preliminary Put Notice, then the Company shall pay the reasonable due
diligence costs of the Investor with respect to each subsequent Preliminary
Put Notice delivered during such twelve month period, not to exceed $15,000.
-18-
ARTICLE IV
Conditions
----------
Section 4.1 Conditions Precedent to the Obligation of the Company
to Sell Shares. The obligation hereunder of the Company to issue and/or sell
the Shares (other than the Warrant 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.
Section 4.2 Conditions Precedent to the Obligation of the Investor to
Purchase any Shares. The obligation of the Investor hereunder to acquire and
pay for Shares other than Warrant Shares is subject to the satisfaction, at or
before each 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 each Closing Date,
as though made at that time (except for representations and warranties that
speak as of a particular date or refer to a particular point in time), provided
that for purposes hereof, the representations and warranties made in Section
2.1(i) and (j), shall be deemed to be true and correct if the existence of a
Material Adverse Effect on the Company referred to therein was publicly
disclosed by the Company and widely disseminated at least five (5) Trading Days
before the date of the applicable Put Notice.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
-19-
and conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to such Closing.
(c) Principal Market. From the date hereof to each Closing
Date, as to the Shares to be issued and delivered on such Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
or the Principal Market, (except for any suspension of trading of limited
duration agreed to between the Company and the Principal Market, solely to
permit dissemination of material information regarding the Company), and
trading in securities generally as reported by the Principal Market, shall not
have been suspended or limited or minimum prices shall not have been
established on securities whose trades are reported by the Principal Market.
(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.
(e) Opinion of Counsel, Etc. At each Closing the Investor shall
have received an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Company,
(in substantially the form of Exhibit A hereto), dated the effective date of
such Closing, and such other certificates, opinions of other counsel, and
documents as the Investor or its counsel shall reasonably require incident to
such Closing.
(f) Effectiveness of Registration Statement. The Registration
Statement shall be effective at the time of each Closing and no stop order
suspending the effectiveness of the Registration Statement shall have been
instituted or shall be pending.
(g) Accuracy of Registration Statement. At the time of each
Closing, the Registration Statement (including information or documents
incorporated by reference therein) and any amendments or supplements thereto
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(h) Comfort Letter. Investor, at its expense, shall have
received a comfort letter from the Company's independent auditors generally
in the form of Exhibit B hereto.
(i) Officer's Certificate. At each Closing the Investor shall
have received a certificate(s) from the CEO and/or CFO of the Company in
substantially the form of Exhibit C hereto.
(j) No Bankruptcy Filing. There shall have been no filing of a
petition in bankruptcy, either voluntarily or involuntarily with respect to
the Company and there shall not have commenced any proceedings under any
bankruptcy or insolvency
-20-
laws, or any laws relating to the relief of debtors, readjustment of
indebtedness or reorganization of debtors, and there shall have been no
calling of a meeting of creditors of the Company or appointment of a committee
of creditors or liquidating agents or offering of a composition or extension
to creditors by, for, with or without the consent or acquiescence of the
Company.
(k) No Adverse Opinion of Counsel. During the seventeen calendar
day period following a Preliminary Put Notice, the Investor's counsel shall not
have delivered to the Company a copy of an opinion addressed to the Investor
stating Investor's counsel's belief that there is a reasonable likelihood that
the Registration Statement contains an untrue statement of material fact or
omits a material fact required to make the statements contained therein, in
light of the circumstances in which they were made, not misleading. If any
such opinion is delivered, copies of the same shall be delivered to the
Company's counsel and Investor's counsel shall communicate the basis for such
opinion to the Company's counsel promptly after rendering such opinion to
Investor. The Company shall have no right or claim against Investor's counsel
with respect to any such opinion.
(l) The Company shall not have notified the Investor's designated
representatives in accordance with Section 1.5(b)(v) of the existence of any
non-public information of the kind described in Section 1.5(b)(v).
ARTICLE V
Termination
-----------
Section 5.1 Optional Termination. This Agreement may be terminated at
any time by the mutual consent of the Company and the Investor, or at any time
upon written notice delivered to the Investor by the Company, provided that
the provisions of Sections 1.3, 1.5, 1.8 and 1.9 and Article VI and the
representations, warranties and covenants contained in this Agreement shall
survive its termination for the period of any applicable statute of
limitations, and provided further that if a decision to terminate the
Agreement is made during any Valuation Period (including, without limitation,
any suspended Valuation Period), such termination shall not be effective until
thirty (30) days after such Valuation Period has elapsed.
Section 5.2 Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto when (a) the
Investor has invested an aggregate of $50,000,000 in the Common Stock of the
Company pursuant to this Agreement, excluding any amounts paid pursuant to
Section 1.3(e) herein and (b) all Valuation Periods with respect to all Put
Notices have expired, and no further adjustments or payments must be made
pursuant to Section 1.3 herein provided that the provisions of Sections 1.3,
1.5, 1.8, and 1.9 and Article VI and the representations, warranties and
covenants contained in this Agreement shall survive the termination of this
Agreement for the period of any applicable statute of limitations.
-21-
All representations, warranties and covenants shall survive each Closing
and termination of this Agreement.
Section 5.3 Change in Control. From and after the date hereof, upon
any Change of Control (as defined below), the Company shall no longer have the
right to deliver any Put Notice to the Investor. A "Change of Control" shall
mean any transaction or series of transactions which results in any person or
affiliated group of persons gaining control of 50% or more of the voting stock
of the Company or 50% or more of the Company's Board of Directors.
ARTICLE VI
Miscellaneous
-------------
Section 6.1 Fees and Expenses.
(a) 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, upon
execution of this Agreement, $20,000 of attorneys' fees and expenses incurred
by the Investor in connection with the preparation, negotiation, execution
and delivery of this Agreement and the transactions contemplated hereunder.
The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of any Shares issued pursuant hereto.
(b) Upon execution hereof, the Investor shall purchase from the
Company, and the Company shall deliver to the Investor warrants (the
"Warrants") to purchase 175,000 shares of the Common Stock which Warrants
shall have a term of seven years and an exercise price of $10.50 per share.
The purchase price for the Warrants shall be $10,000. In the event that the
Investor for any reason does not fulfill its commitment to purchase Shares, or
make any additional dollar payment as provided in Section 1.3(e), in
accordance with the terms and conditions of this Agreement and assuming that
the Company is in full compliance with the terms of this Agreement and all
closing conditions have been met (a "Failure to Purchase"), the Investor shall
promptly upon such Failure to Purchase deliver to the Company, (i) that
percentage of the total number of Warrant Shares as is equal to that
percentage of $50,000,000 which the Investor failed to deliver to the Company
at the time of the Failure to Purchase, or (ii) cash equal to 1-3/4% of the
amount which the Investor failed to deliver to the Company at the time of the
Failure to Purchase or (iii) Common Stock equal in value, based on the market
value of such Common Stock on the date of such Failure to Purchase, equal to
1-3/4% of the amount which the Investor failed to deliver to the Company at
the time of the Failure to Purchase. The determination as to type of
consideration to be delivered to the Company pursuant to the immediately
preceding sentence shall be made by the Investor, in its sole discretion.
Nothing in this Section 6.1(b) is intended to limit or in any way be
-22-
in lieu of any rights or remedies which the Company may have against Investor
for any breach by Investor of this Agreement or other agreements entered into
pursuant to this Agreement.
Section 6.2 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 6.3 Entire Agreement; Amendments. Other than with respect to
matters described in that certain letter between the parties dated the date
hereof and the Warrant, this Agreement contains the entire understanding of
the parties with respect to the transactions contemplated hereby and, except
as 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 6.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective
upon hand delivery or delivery by 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). The addresses for such
communications shall be:
-23-
to the Company:
Advanced Tissue Sciences, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
to the Investor:
Ramius Hatteras Partners, L.P.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Kleinberg, Kaplan, Wolf & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Promethean Investment Group, LLC
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Goulston & Storrs, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Fax (▇▇▇) ▇▇▇-▇▇▇▇
-24-
Either party hereto may from time to time change its address for notices under
this Section 6.4 by giving written notice of such changed address to the other
party hereto.
Section 6.5 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. The parties hereto waive any and
all rights to a jury trial in connection with any action or proceeding
arising under this Agreement, the Warrants or the transactions contemplated
hereby or thereby.
Section 6.6 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 6.7 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 provided that such assignment shall be subject to (i) the Change of
Control provisions contained in Section 5.3 above and (ii) Investor's prior
written consent which consent may not be unreasonably withheld. The
assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
Section 6.8 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 6.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of New York
without regard to the principles of conflict of laws.
Section 6.10 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.
-25-
Section 6.11 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.
[The rest of this page has been intentionally left blank.]
-26-
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:_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Chairman of the Board and
Chief Executive Officer
RAMIUS HATTERAS PARTNERS, L.P.
By: ▇▇▇▇▇▇▇ Capital, LLC
By:_______________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Member
-27-
[Date]
Exhibit A
Ramius Hatteras Partners
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Investment by Ramius Hatteras Partners in Advanced Tissue Sciences, Inc.
------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Advanced Tissue Sciences, Inc., a Delaware
corporation (the "Company"), in connection with the proposed sale and issuance
of authorized but previously unissued shares of the Company's common stock,
$0.01 par value per share (the "Shares"), pursuant to the Investment Agreement
("Agreement") entered into on February 9, 1996, between the Company and Ramius
Hatteras Partners, L.P. ("Investor"). Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the Agreement.
In connection with rendering the opinions set forth herein, we have
examined a copy of the Agreement, the Company's Certificate of Incorporation,
as amended to date, its By-laws, as amended to date, the proceedings of the
Company's Board of Directors taken in connection with the sale and issuance of
the Shares as defined in the Agreement issued on the date hereof (the
"Shares"), which for all purposes of this letter include Additional Shares, as
defined in the Agreement, issued in connection with the sale and issuance of
the Shares issued on the date hereof. As to certain matters of fact, we have
relied upon a certificate of the Chief Executive Officer of the Company.
In conducting our examination, we have assumed the following: (i) that
the Agreement has been executed by each of the parties thereto in the same
form as the copy which we have examined; (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and
accuracy of all documents submitted to us as originals, and the conformity to
originals of all documents submitted to us as copies; (iii) that the Agreement
has been duly and validly authorized, executed, and delivered by the party or
parties thereto other than the Company; and (iv) that the Agreement
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in
accordance with the terms of the Agreement.
With respect to matters stated herein to be to our knowledge, we have
advised you only as to the actual knowledge without independent investigation
(other than obtaining a certificate as to certain facts executed by the Chief
Executive Officer of the Company) of those lawyers in our firm who have
devoted substantive attention to this transaction on behalf of the Company.
A-1
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized 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. The
Company 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 Material Adverse Effect, as defined in
the Agreement.
2. (i) The Company has the requisite corporate power and
authority to enter into and perform the Agreement and the Warrants and to
issue the Shares and the Warrants in accordance with the terms of the
Agreement and the Warrants, (ii) the execution and delivery of the Agreement
and the Warrants by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by the Company' s Board of
Directors and no further consent or authorization of the Company or its Board
of Directors or stockholders is required, (iii) the Agreement and the Warrants
have been duly executed and delivered by the Company, and (iv) the Agreement
and the Warrants constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their 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.
3. No shares of Common Stock are entitled to preemptive rights.
4. The Shares are duly authorized and, when delivered and paid for in
accordance with the terms of the Agreement or upon exercise of the Warrants,
shall be validly issued, fully paid and non-assessable. The Company has
reserved for issuance the requisite number of shares of Common Stock to be
issued pursuant to the Warrants.
5. The execution, delivery and performance of the Agreement and the
Warrants by the Company and the consummation by the Company of the
transactions contemplated by the Agreement and the Warrants do not and will
not result in a violation of the Company's Certificate of Incorporation or
By-laws or, to our knowledge, 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 been filed as an exhibit in SEC Documents.
6. The execution, delivery and performance of the Agreement and the
Warrants by the Company and the consummation by the Company of the
transactions contemplated by the Agreement and the Warrants (i) do not and
will not result in a
A-2
violation of any federal, state, local or foreign law, rule, regulation,
order, judgment or decree 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, as defined in the Agreement), and (ii) will not require the
Company 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 the Agreement or the
Warrants or to issue and sell the Shares or the Additional Shares in
accordance with the terms thereof.
7. Other than as described in the SEC Documents, there is, to our
knowledge, no litigation pending or threatened against the Company which, if
decided adversely to the Company, would (i) have a Material Adverse Effect, as
defined in the Agreement, or (ii) adversely affect the enforceability of the
Agreement or the Warrants or interfere with the consummation of the
transactions described in the Agreement or the Warrants.
8. Based on a letter from the staff of the Securities and Exchange
Commission (the "Commission") dated ___________, the Registration Statement
has become effective under the Securities Act of 1933 (the "Act"). We do not
know of the issuance of any stop order suspending the effectiveness of the
Registration Statement by the Commission or of any proceeding for that purpose
under the Act which has been instituted or threatened.
9. We have participated in discussions with various representatives
of the Company and its independent public accountants, in which the business
and affairs of the Company and the contents of the Registration Statement and
the prospectus contained therein (the "Prospectus") were discussed. We have
also made inquiries of representatives of the Company and its accountants as
to whether there have been any material changes in the affairs of the Company
since _______________. We have not, however, except with respect to matters
expressly covered above by this opinion, independently checked or verified the
accuracy, completeness or fairness of the information contained in the
Registration Statement or the Prospectus. Based solely upon our participation
in the foregoing discussions, the foregoing inquiries and our examination of
the documents referred to above and such other documents as came to our
attention as a result of such discussions and inquiries, we may state that as
of ______________, the Registration Statement and the Prospectus complied as
to form in all material respects with the requirements of the Act and the
published rules and regulations of the Commission thereunder and we do not
know of any legal or governmental proceeding to which the Company is a party
or to which any of its property is subject required to be described in the
Prospectus which is not described as required, nor of any contract or other
document of a character required to be described in the Prospectus or to be
filed as an exhibit to the Registration Statement which is not so described or
filed. Further, we have no reason to believe that (i) as of _______________,
the Registration Statement contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements
A-3
therein not misleading, or (ii) as of _______________, the Prospectus
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) it is necessary as of this date to
supplement or amend the Registration Statement or the Prospectus. We are not
called upon to express, and do not express, any view, opinion or belief as to
(i) the statements, discussions, descriptions or references to (1) patent and
other intellectual property law matters, or (2) FDA and other regulatory
matters, and (ii) the financial statements and the notes thereto and the
schedules and other financial and statistical data included in the
Registration Statement or the Prospectus or any document incorporated therein.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(a) 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 laws regarding fraudulent transfers and
preferential transfers.
(b) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antitrust statutes, laws, rules
and regulations.
(c) Limitations imposed by general equitable principles upon the
specific enforceability of any of the remedies, covenants 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 in a proceeding in equity.
(d) The effect of court decisions, invoking statutes or principles of
equity, which have held that certain covenants and provisions of agreements
are unenforceable where enforcement of such covenants or provisions under the
circumstances would violate the enforcing party's implied covenant of good
faith and fair dealing.
(e) The unenforceability under certain circumstances of provisions
indemnifying a party against, or requiring contribution 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 United States Securities and Exchange Commission
indemnification of directors, officers and controlling persons of an issuer
against liabilities arising under the Act, is against public policy and is
therefore unenforceable.
(f) The unenforceability under certain circumstances of provisions to
the effect that rights or remedies are not exclusive, that rights or remedies
may be exercised without notice, that every right or remedy is cumulative and
may be exercised in addition to or with any other right or remedy, that
election of a particular remedy or remedies does
A-4
not preclude recourse to one or more remedies, or that failure to exercise or
delay in exercising rights or remedies will not operate as a waiver of any
such right or remedy.
(g) We express no opinion as to provisions purporting to require the
award or payment of attorneys' fees, expenses or costs, where such provisions
do not satisfy, where applicable, the requirements of California Civil Code
Section 1717 et. seq. or in any action where the Company is not the
prevailing party.
This opinion is based solely upon the laws of the United States, the laws
of the State of New York, the laws of the State of California and the Delaware
General Corporation Law, as currently in effect, and does not include an
interpretation or statement concerning the laws of any other state or
jurisdiction. Insofar as the enforceability of the Agreement may be governed
by the laws of other states, we have assumed with your consent and without
independent investigation that such laws are identical in all material
respects to the laws of the State of Delaware.
This opinion is rendered as of the date first above written solely for
your benefit in connection with the 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.
The opinions expressed herein are given to you solely for your use in
connection with the Agreement and may not be relied upon by any other person
or entity or for any other purpose without our prior consent.
Very truly yours,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
A-4
EXHIBIT B
---------
September 30, 19__
Example City
Any State Utility System
and
▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
We have audited the balance sheets of Example City, Any State Utility System
as of December 31, 19__ and 19__, and the statements of revenues, expenses,
and changes in retained earnings and cash flows for the years then ended,
included in the Official Statement for $30,000,000 of Example City, Any State
Utility System Revenue Bonds due November 30, 19__. Our report with respect
thereto is included in the official statement. This official statement, dated
August 30, 19__, is herein referred to as the Official Statement.
This letter is being furnished in reliance upon your representation to us
that:
a. You are knowledgeable with respect to the due diligence review
process that would be performed if this placement of securities
were being registered pursuant to the Securities Act of 1933
(the Act).
b. In connection with the offering of revenue bonds, the review process
you have performed is substantially consistent with the due diligence
review process that you would have performed if this placement of
securities were being registered pursuant to the Act.
In connection with the Official Statement:
1. We are independent auditors with respect to Example City, Any State
and its Utility System under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretations and rulings.
2. We have not audited any financial statements of Example City, Any
State Utility System as of any date or for any period subsequent to
December 31, 19__. The purpose (and therefore the scope) of our
audit for the year ended December 31, 19__, was to enable us to
express our opinon on the financial statements as of December 31,
199_ and for the year then ended, but not on the financial
B-1
statements for any interim period within that year. Therefore, we
are unable to and do not express any opinion on: the unaudited
balance sheet at June 30, 19__; the unaudited statements of revenues,
expenses, and changes in retained earnings and cash flows for the
six-month periods ended June 30, 19__ and 19__, included in the
Official Statement; or the financial position, results of
operations, or cash flows as of any other date or for any period
subsequent to December 31, 19__.
3. For purposes of this letter we have read the 19__ minutes of the
meetings of the City Council of Example City, Any State as set
forth in the minute books through September 25, 19__, the City
Clerk of Example City having advised us that the minutes of all
such meetings through that date were set forth therein, and have
carried out other procedures to September 25, 19__ as follows
(our work did not extend to the period from September 26, 19__
to September 30, 19__ inclusive):
a. With respect to the six-month periods ended June 30, 19__ and
19__, we have performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in
SAS 71, Interim Financial Information, on the unaudited
balance sheet at June 30, 19__ and the unaudited statements
of revenues, expenses, and changes in retained earnings and
cash flows for the six-month periods ended June 30, 19__ and
19__, included in the Official Statement.
b. With respect to the period from July 1, 19__ to August 31, 19__,
we have:
(1) read the unaudited financial statements for July and
August of both 19__ and 19__ furnished to us by City
Officials, and agreed the amounts contained therein to
the City's accounting records, City Officials having
advised us that no such financial statements as of any date
or for any period subsequent to August 31, 19__ were
available; and
(2) Inquired of City Officials who have responsibility for
financial and accounting matters as to whether the
unaudited financial statements referred to under b(1)
are stated on a basis substantially consistent with
that of the audited financial statements included in the
Official Statement.
The foregoing procedures do not constitute an audit conducted in accordance
with generally accepted auditing standards. Also, they would not necessarily
reveal matters of significance with respect to comments in the following
paragraphs. Accordingly, we make no representation as to the sufficiency of
the foregoing procedures for your purposes.
B-2
4. Nothing came to our attention as a result of the foregoing
procedures that caused us to believe that:
a. any material modifications should be made to the unaudited
financial statements described in 3.a. above, included in the
Official Statement, for them to be in conformity with
generally accepted accounting principles; or
b. at August 31, 19__, there was any increase in long-term debt
or any decrease in net current assets of Example City, Any
State, Utility system as compared with amounts shown in the
June 30, 19__ unaudited balance sheet, included in the
Official Statement, or for the period from July 1, 19__ to
August 31, 19__, there were any decreases, as compared with the
corresponding period in the preceding year, in total operating
revenues, income from operations or net income, except in all
instances for increases or decreases that the Official
Statement discloses have occurred or may occur.
5. As mentioned under 3.b. above, City Officials have advised us that
no financial statements as of any date or for any period
subsequent to August 31, 19__ are available; accordingly, the
procedures carried out by us with respect to changes in financial
statement items after August 31, 19__ have, of necessity, been
even more limited than those with respect to the periods referred
to in 3. above. We have inquired of City Officials who have
responsibility for financial and accounting matters as to whether:
(i) at September 25, 19__ there was any increase in long-term debt
or any decrease in net current assets of Example City, Any State
Utility System as compared with the amounts shown on the June 30,
19__ unaudited balance sheet included in the Official Statement,
or (ii) for the period from July 1, 19__ to September 25, 19__,
there was any decrease, as compared with the corresponding period
in the preceding year, in total operating revenues, income from
operations or net income. On the basis of these inquiries and
our reading of the minutes as described in 3. above, nothing came to
our attention that caused us to believe that there was any such
increase or decrease, except in all instances for increases or
decreases which the Official Statement discloses have occurred or
may occur.
6. This letter is solely for the information of the addressees and to
assist the investors in conducting and documenting their
investigation of the affairs of the Example City, Any State
Utility System in connection with the offering of securities
covered by the Official Statement, and it is not to be used,
circulated, quoted, or otherwise referred to for any purposes,
including but not limited to the purchase or sale of securities,
nor is it to be filed with or referred to in whole or in part in
the Official Statement or any other document, except that
reference may be made to it in the Purchase Contract or in any
list of closing documents pertaining to the offering of securities
covered by the Official Statement.
B-3
If requested, the letter could contain comments on pro forma financial
information. If requested, the letter also could contain comments on tables,
statistics and other financial information, except that negative assurance
regarding compliance with regulatory requirements would not be appropriate.
B-4
EXHIBIT C
---------
OFFICER'S CERTIFICATE
[NAME], the [OFFICE] and Chief Executive Officer of Advanced Tissue
Sciences, Inc. (the "Company"), and [NAME], the [OFFICE] and Chief Financial
Officer of the Company, do hereby certify that:
1. The representations and warranties of the Company contained in the
Investment Agreement dated February 9, 1996, between the Company and Ramius
Hatteras Partners, L.P. (the "Agreement"), are true and correct in all
material respects, as if made at and as of the date hereof (except for
representations and warranties that speak as of a particular date or refer to
a particular point in time), provided that for purposes hereof, the
representations and warranties made in Sections 2.1(i) and (j) of the
Agreement shall be deemed to be true and correct if the existence of a
Material Adverse Effect on the Company referred to therein was publicly
disclosed by the Company and widely disseminated at least five (5) Trading
Days before the date of the Put Notice to which this Certificate relates. The
Company has complied with all the agreements, has performed all the
obligations and has satisfied all the conditions on its part to be complied
with, performed or satisfied at or prior to the date of this Certificate
specified in the Agreement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Agreement.
2. The Registration Statement on Form S-3 (SEC No. ___________) (the
"Registration Statement") filed by the Company with the Securities and
Exchange Commission (the "Commission") has become and is currently effective,
and to the best knowledge of the respective signers, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been initiated or is threatened by the
Commission.
3. All filings, if any, required by Rule 424(b) and Rule 415 of the
Securities Act of 1933, as amended, have been made.
4. The respective signers have each carefully examined the
Registration Statement (the "Prospectus"), and any amendments or supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contain all statements
and information required to be included therein, and all statements contained
therein are true and correct, and neither the Registration Statement nor
Prospectus, nor any amendment or supplements thereto, includes any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading
(in the case of the Prospectus, in light of the circumstances under which they
were made) and, since the effective date of the Registration Statement, there
has occurred no event
C-1
required to be set forth in an amendment or supplemental Registration
Statement or Prospectus which has not been so set forth.
IN WITNESS WHEREOF, the undersigned have executed this certificate on the
_____ day of ______________, 19___, which is a Closing Date, as such term is
defined in the Agreement.
------------------------------
Print Name:
Print Title:
------------------------------
Print Name:
Print Title:
C-2
